Rachel Eyres and Ed Charlish explain the challenge facing Distribution Network Operators as they transform into Distribution System Operators. The UK’s 2050 net-zero targets could depend on them getting it right.
We all know who our energy suppliers are, but the companies that actually distribute the electricity we use are not such household names. That may be about to change, as it is these Distribution Network Operators (DNOs) who have been tasked with developing the infrastructure for the UK’s smart grid. They will need to evolve their business plans as they make the transition to Distribution System Operators (DSO) in the coming months and years.
Across the regions of the UK, there are currently six DNOs that are licensed to convey electricity from the power stations, along the poles and cables, and into our homes and businesses. They are funded by the consumer and make up approximately 8% of a dual fuel bill. The current price control period (RIIO-ED1) is to spend £24.6bn on the network between 2015 and 2023 resulting in annual savings of £10 on each consumers bill. Consultation is currently ongoing for the next price control period RIIO-2.
Traditionally, electricity has flowed in a straight line, in one direction, from the power generator to your home with supply fluctuating to meet demand. Increasingly, there are other sources of generation such as renewable energy, with the promise of battery storage and at-home generation in the future. Demand is also becoming more personalised due to smart metering and smarter white goods.
The old linear distribution model is simply not smart enough to cope with the rise of demand-side response, energy storage, electric vehicles and distributed generation – or to help the UK drive towards 2050 net-zero. The country therefore needs a more dynamic grid with the infrastructure and personnel to encourage an energy revolution.
Think of an example in the future where everyone comes home from work and plugs in their electric car to be charged. The demand on the grid would be too large so the network will have to work dynamically to balance demand and potentially delay your energy supply to charge your car until later in the evening or overnight.
From engineers to service providers
DSO’s will need to become ‘independent market facilitators’ rather than just network operators. This will be a fast changing and (sometimes) competitive environment unlike anything the current incumbents have experienced thus far. In order to thrive in this new world, a number of new organisational capabilities will be needed.
DSOs will need to reconfigure the distribution infrastructure to allow multi-directional flow of electricity. They must establish active network management systems that can support real time balancing, backed by IoT applications for monitoring and dispatch of electricity in the field. Given that many of the operational systems used by DNO’s currently are decades old and rarely changed, this will be a major change requiring significant IT investments.
As an example UKPN are currently investing £15m in their Active Network Management system which includes a new intelligent software platform from Smarter Grid Solutions that will be integrated into the heart of its control system. The new advanced automated control system will enable over 500MW of Distributed Energy Resources (DER), mostly renewable energy like wind and solar, to connect to the network cheaper and faster. This is enough to power more than a quarter of a million homes.
DSOs will also need to devise commercial offerings that incentivise third parties to offer up flexibility services, whether interruptible power generation, battery storage or demand-side response. These new commercial models will require their own measurement and payment systems, as well as a new approach to data, if DSOs are to create functional and transparent markets.
The evolving grid market will require its DSO to be able to change business models, offerings, commercial models and systems frequently. Organisational agility will be key, as will the ability to deploy new products and offerings at speed. Obviously this needs to be balanced with ensuring that the DSO still provides its core obligations of ensuring that consumers have electricity at all times.
The new markets required for the facilitation of this new distribution system will require extensive monitoring and measurement. As the old saying goes “if you can’t measure it you can’t manage it”. The practical implication of this for a new DSO is that the volume, velocity and variety of IOT sensing and control points which need to be managed will vastly increase, from hundreds or thousands, to perhaps hundreds of thousands or even millions. Managing a vast IOT estate such as this comes with significant challenges, from device management to field maintenance, and will require new business capabilities which do not currently exist.
All of these IOT sensing and control points will produce lots of data. This data will need to be managed, shared and protected in a uniform and effective way amongst the whole energy market. DSO’s will need new data/information strategies, architectures, platforms, policies and security models to cope with this new development.
DSO’s will soon have many more customers to manage than previously. This transition has already started with distribution connected generators, but as more devices, organisations and individuals connect to the distribution grid – whether to provide flexibility and demand side response services or simply generation/storage, DSO’s will have to evolve. Customer experience will need to be a fundamental part of the design of any new proposition, product or solution, and business operating models will need to evolve to accommodate a positive customer journey.
DNO’s are predominantly resourced by engineers. All of the changes referenced above will require a massive influx of new skills, from data and technology, through business agility, IOT, Data management and customer experience. Where will these new individuals come from, and how will DSO’s attract, integrate and retain them? This is a challenge that is affecting many sectors so how can the energy sector differentiate itself to deliver the people and skills required? It surely has to play on the key role the industry will play on moving to a more sustainable future by attracting people who can be part of innovative programmes that support the delivery of carbon net zero.
The power distribution market is about to experience a period of rapid change and significant downward cost pressures introduced by the regulator. To deliver this significant change the organisations responsible for delivering the transition to DSO need to change with it in ways the industry hasn’t seen before. It will be an integral part of delivering carbon net zero.