In 2019, the UK became the first major economy to pass a net zero emission law and committed to reach net zero emissions by 2050 (2045 in Scotland). Decarbonization is one of the greatest challenges of this generation and translates to a series of actions including increased penetration of renewable energy sources, electrification of heat and transport, energy efficiency schemes, creation of local energy markets, and greener gas.
Electricity networks are the backbone of this revolution. Most of these technologies will continue to put great pressure on these networks, particularly at distribution level where many technologies are expected to connect. As decarbonization progresses, electricity networks will therefore need to adapt and at the same time steer through the uncertainty of when these technologies will come online.
Traditionally, networks were designed with a top-down approach, as electricity was generated centrally and distributed to consumers. Over the last decade, the number of distributed and local renewable energy sources has surged (Figure 1), which in turn has changed the dynamics and put an immense pressure on power grids. This saw the rise of new and innovative ways of managing the network—such as flexible and managed customer connections—and the rise of smart grids.
Volume of low carbon technologies
Although there is a lot of uncertainty and it is impossible to accurately predict actual numbers, the volume of low carbon technologies will continue to rise in the future as electric vehicles (EV), heat pumps, and renewable energy sources such as wind and solar experience significant growth (Figure 2, Figure 3, Figure 4 show the predicted range in volumes based on the different Future Energy Scenarios (FES) for 2021).
Traditionally, network reinforcement was an economic and efficient solution to accommodate these connections, especially given the long depreciation period such capital investments experience. Despite the Office of Gas and Electricity Markets’ (Ofgem) recent announcement of a £300m green recovery investment for new hard assets "to support over 200 low carbon projects to get Britain ready for more electric transport and heat," this is only part of the solution.
Although targeted reinforcement will still be necessary and effective, managing demand and generation more flexibly could reduce the investment requirements in new assets and network infrastructure, and save customers billions. Such flexibility services include managed and shifting electric vehicle charging at off-peak times or when local renewable generation is abundant; demand side response from large consumers to local grid owners at times when they least need it to help reduce the need for building new infrastructure; and use of battery storage to help grid operators with rapidly changing grid conditions.
To achieve this, a revolution in how networks are managed and used is required. Distribution network operators (DNO) need to transition to a smart and flexible distribution system operation (DSO). A set of functions and services must be developed that will allow DSO and create pockets of value for customers and network owners. The transition from network to system operation has already begun, evident by the fact that Britain's electricity networks are recognized around the world for their smartness. Network companies are testing technologies and solutions through innovative projects and collaboration with academia, industry, government, and regulators through the Open Networks Project to support and accelerate this transition. A joint DSO transition roadmap was published that identified a set of collective actions they need to undertake.
Ofgem has set the direction but is yet to decide
According to Ofgem, DSO is not one activity or entity, but a set of coordinated functions and services that need to happen to run a smart electricity distribution system efficiently. Although they are yet to decide on how this will evolve (as they believe it is too early to implement institutional reform as DSO functions are still developing), they have set the direction as to what the material improvement requirements should be to facilitate such transition. In their recent business plan guidance they asked DNOs to submit their proposed approach to deliver capabilities that meet certain expectations against the three DSO roles they envisage: planning and developing the network; network operation; and market development.
Ofgem is the government regulator for the electricity and downstream natural gas markets in Great Britain. Britain's six electricity distribution network operators own and operate the infrastructure that distributes electricity across the country. These companies are regulated monopolies and are responsible for the economic and efficient management of the electricity infrastructure in their respective area. Since there is no direct competition, the activities each company undertakes and the amount of money they spend—which is later recovered from customers through energy suppliers—are regulated by Ofgem through price control periods.
Enhancing capabilities to enable decarbonization
To achieve DSO, a range of activities are required to develop new capabilities and transition to a new operating mode. Given the interaction between many of the building blocks that underpin them, the boundaries between these activities are blurred. However, these can be grouped into a set of primary and supporting activities that will create this new offering (see Figure 5).
Activities that will add value by transforming operations and enhance offerings include:
Improve and enhance data coming in by capturing and storing more network, customer, and third-party data which in turn will inform decisions. This includes dynamic network data by installing low voltage (LV) monitoring equipment; capturing and storing more static and dynamic asset data; more information on customer assets and their operational behavior; and procuring and linking third party datasets such as weather data and data from aggregators.
Enhanced processes and systems
Enhance processes and put systems in place to enable this transition. This may include soft and/or hard delineation of responsibilities as well as other measures to ensure perceived conflict of interest between market facilitation and network ownership roles or other business interests are addressed; enhanced data and information sharing capabilities to avoid conflicts and maximize synergies; and enhanced information technology (IT) systems to allow cleansing, processing, and modelling of high-volume data.
Enabling and facilitating flexibility servicesDevelopment of existing and new integrated IT and operation technology (OT) systems to enhance network management capabilities as well as enable and facilitate the procurement, provision, dispatching and settlement of flexibility services and manage conflicting operations.
Openness and transparencyData sharing capabilities that align with Energy Data Taskforce recommendations and allow customers examine and query decisions, make informed decisions through the use of online tools as well as stimulate third-party data innovation initiatives.
Activities that play a role in a way that enhances primary activities and enables them to be delivered include:
There will be significant upskilling and recruitment needed to improve and develop new data, digital, technology and commercial skills required to support the delivery of the primary activities. Skills include data analytics; modelling and programming capabilities; IT and OT system architects, developers, and operators; commercial analysts; and product developers.
A mixture of fully integrated IT and OT systems will be required to enable and link primary activities. These include LV monitoring hardware, storage and analytics, analytics engines for modelling and forecasting, energy resource, and network management systems for monitoring and control that are suitable for the levels of flexibility the future network will demand. For example, systems to allow network management, procurement, dispatching, and settlement of flexibility service.
Steering through the fog
As decarbonization progresses, electricity networks will need to adapt and continue to shift from the current mode of operation to an even more active and dynamic model. Given the uncertainty in demand pickup, the transition should happen with a least regrets approach to ensure efficiency, economic viability, and coordination.