With the introduction of the IEC 61850 standard, the path is set for a single communication topology covering all substation levels. The standard has the potential to change the way substations are designed, build, tested and maintained. This means that the key segment of the substation, its protection system, will go through a transition period with the end goal of having a digitalized substation where all information exchange is performed over an Ethernet communication bus. The goal of this paper is to analyse the performance impact of the IEC 61850-9-2LE on the protection system. To do this, a laboratory hardware-in-the-loop test setup is developed representing traditional, hybrid and digital substation topology. This setup served to simulate faults and create transient waveforms in an extended IEEE 123 node test system, which were then used to detect the reaction times of protection relay devices. To verify protection relay results significant number of tests are performed clearly showing benefits which can be gained by distribution system digitalization.