Can DNOs make the case for smart grids in time?

Electricity networks urgently need government to make a decision on smart grids if they are not to become a blocker to net zero, but will government award radio spectrum access without knowing how it will be implemented? Lucinda Dann looks at the progress being made on telecoms.

Distribution network operators (DNOs) say the only way they can reliably operate smart grids is if they can create their own private telecommunications network using the radio spectrum.

This will allow them to remotely control and operate distributed generation, restart the system following a power outage and also communicate with their field operatives after storm events.

However, radio spectrum is a finite resource with access carefully controlled and licenced by the telecoms regulator Ofcom. Giving to one user often requires access to be removed from another.

After five years of lobbying, government has directed Ofcom to undertake a project to understand what DNOs would need. While this is an important first step, access is still a long way off and smart grids are already being built today, forcing some DNOs to invest in alternative technologies which would be made obsolete.

DNOs need government to make a speedy decision, but will it give the green light considering there is next to no detail on how such a network would be owned, operated, and crucially, financed? Utility Week looks at what lies ahead in the decision-making process.

A strong case

DNOs need a new communications platform due to the shift from centralised generation to unmanned distributed generation which will need to be constantly monitored and controlled.

While they will utilise a mix of technologies such as satellite, commercial mobile networks and fibre to avoid a single point of failure, DNOs are set on a long-term evolution (LTE) network forming the backbone of their communication strategy. This is due to it having the best geographical coverage and reliability during a power outage.

To build a private LTE network DNOs will need access to the radio spectrum – the section of radio waves which is used by all wireless technology such as televisions, mobile phones, car key fobs, radios and satellites to communicate.

Radio spectrum is a finite resource, so access is carefully managed by the telecoms regulator Ofcom, and given only to those users it deems to have the best use cases.

To put their case to Ofcom, DNOs have first had to build bridges with the telecoms regulator and the governmental departments that sit above it, namely the department for science, innovation and technology (DSIT) and the department for culture, media and sport (DCMS).

The Energy Networks Association’s (ENA) Strategic Telecommunications Group (STG), which was formed to make the case on behalf of DNOs, has spent the last five years lobbying DSIT and DCMS while also talking to the energy regulator Ofgem and the Department for Energy Security and Net Zero (DESNZ).

Progress has been made with Ofgem as it has acknowledged spectrum in the current price control, with Storm Arwen helping to make the case for the importance of a robust telecoms platform for network operators, but it does not have the power to give access. That decision lies with DSIT, which lacks experience of energy networks.

However, in theory a decision could be straightforward as DSIT could follow the example of other countries such as Germany, Sweden, Poland and Ireland, whose governments have given access to their spectrums for the creation of smart grids.

Ian Adkins, principle at telecoms consultants Analysys Mason, says DNOs have a good case, but unfortunately the situation in the UK is different to those in countries where spectrums have already been awarded, as the desired range – between 400 and 450Hz depending on the country – is heavily utilised in the UK.

Therefore, DNOs need not just a good case but a better case than existing users. If its deemed that they don’t then they might be given access to a different, less ideal part of the spectrum.

Long waits or higher costs

As a result of lobbying by the STG, DESNZ has initiated a technical project to calculate the financial costs of a range of radio communication options to support the development of a smart grid.

A study commissioned by the Joint Radio Company (JRC), a joint venture company of National Grid and the ENA which manages the energy system’s radio spectrum access, concluded that an LTE network was the most cost effective and capable option compared to using public cellular or fibre networks.

However, the cost is dependent on which part of the spectrum is given over to the creation of smart grids. 450MHz is the preferred area of the spectrum as a lower frequency would provide better geographical coverage, meaning DNOs would need to have fewer base sites and could build them on their own land, such as at substations.

Equipment costs would also be lower due to there being an existing market. The catch of lower costs is the potential for a much longer wait time to gain access to the spectrum, if indeed DSIT decides the energy sector should take priority at all.

In June Ofcom issued a call for input on the advantages and disadvantages of potential spectrum band options for the creation of smart grids, which DNOs see as an important step forward.

While the preferred 450MHz band is one of the options, the potential wait time could be as much as 10 years as Ofcom would have to undertake a partial or full replan of the spectrum band by evicting all or some of its current users.

The other options being considered could give access in less than five years as there are no incumbent users. However, the 1900MHz spectrum being considered would be prohibitively expensive for DNOs due to a lack of existing equipment and the need for a higher number of base stations to cover the necessary geographical area.

“If you have to move to higher frequency bands, particularly post 1000MHz, we would be increasingly concerned on its suitability and overall efficiency, in terms of equipment, the need for more land to host base stations and mast sites etc. We know the lower frequency is the sweet spot in terms of geographical coverage which minimises costs,” says Ian Smith, chair of the STG.

“700 is quite close to the 400 so we could make it work, it still has fairly good geographical coverage and is more available than the 400 spectrum but it does have potential interference problems. We could utilise both if one is more available sooner, ” he adds, although the industry has yet to form an industry view on the options.

Dr Peter Couch, JRC chief executive, thinks the call for input is positive as most of the options being considered would fit with the needs of the DNOs. While expensive, he believes a partial or full replan of the 450MHz band could be an appealing option to Ofcom as it would allow it to rearrange the spectrum to align with Europe and help future-proof the band from potential interference.

“The extent to which existing uses of the band are understood is unclear,” says Couch. “The references to the usage of the band are twenty years old, which is well before the iPhone was launched. It will be key to understand current use and the long-term plans of existing users to inform the long term strategy for the band.”

The threat of auction

On top of requiring the right part of the spectrum to be allocated to the creation of smart grids, DNOs also need it to be allocated in the right way, or face being priced out of their own network.

Usually when Ofcom makes a band in the spectrum available, prospective buyers must compete in an auction for the licence rights. Smith says one of the industry’s concerns is that mobile operators might bid to provide a communications network for the purpose of smart grids due to it being a low-risk enterprise.

“If it goes up for auction, we as a utility industry would struggle to put in the sums of money that mobile operators can put in,” agrees Phil Rigden, telecoms manager at National Grid Telecoms.

Instead DNOs are hoping that DSIT follows the example set in Ireland where spectrum was designated for the creation of smart grids and only utility network operators were eligible to bid.

Ofcom is unlikely to award spectrum in this way on its own, as while DESNZ and Ofgem will be keen for the energy industry to get spectrum access at the lowest possible price, Ofcom may have different motivations, Adkins says.

“If the policy makers say our power networks need the resilience a private network would provide then you can see how that would immediately drive a direction of travel, it would swing the barometer. If the regulator is left to make the decision to allocate spectrum it will be much harder.”

Ownership model

While direction from government is a plausible option, one of the big questions still outstanding is who would actually be bidding for the licence, given that there are five separate DNOs, says Adkins.

“There are many options for how it could it be done. Germany is a good example, as energy companies there have created an entity backed by all the different parties who all have a financial stake so they all have vested interest in it and you effectively develop a brand-new network builder and operator.”

While DNOs stand to benefit most from a private network, gas distribution networks (GDNs) are also keen to be involved as they do not have an alternative to the Public Switched Telephone Network (PSTN) which will be switched off in 2025 in some parts of the gas network.

But given the future of the gas networks is currently uncertain, with no decision due until 2026 at the earliest, DNOs may have to push forward alone and GDNs join later if net zero targets are not going to be put at risk.

The other complication to constructing a plan is the potential involvement of other industries. DESNZ’s study into the cost of telecoms is not limited to electricity, or even gas, and is instead utility wide. Similarly, while Ofcom recognises that DNOs have the most to gain from the creation of a private network, it believes both the water and gas industries would use a private network if one was created.

Adkins says that a national network that could be used by all utilities would be a sensible option, and although DNOs would rather be in control, it could be outsourced to a service provider with utilities joining if the price was right. But how this would work in practice is yet to be considered.

“Ofcom treats all utilities as one – water, gas, electricity – the challenge is how do they join together to use that spectrum coherently. Why would Ofcom release spectrum when nobody has a plan about how to use it?”

Couch says the energy industry has agreed in principle to two different potential operating models, as the industry is aware it will need to be ready with the answers when government is ready to make a decision if it is not to delay the process.

But these plans are not finalised due to the uncertain nature of what spectrum will be released, and how it will be done. “What we don’t know yet, is if government or Ofcom believe the spectrum should service more than the energy utilities. If it does then that may completely alter the operating model,” says Smith.

They also do not contain any detail on how either model will be financed – a key area that will need addressing, says Adkins.

“Who is going to pay for it – yes, the industry is, but that’s not the answer. Where is that plan? Why wouldn’t they put one out so they can get other investors involved?” he asks.

DNO’s cannot work on the business case, as Ofgem has stated it will not trigger the necessary reopener in the current price control period until Ofcom designates spectrum. If this does not happen before January 2026 DNOs will be able to trigger the reopener themselves. GDNs will also not be able to secure financing until 2026 when their next price control starts.

Given that licences are strictly for 15 years, and networks must be half built by year seven to avoid having the licence removed – a deadline that will only just be met in Ireland despite being run by a single company – DNOs ideally need a plan in place ready for the green light.

Something will need to give in this stalemate, and fast, or it could be as much as two decades before a usable network is in place – long after the UK should be well on its way to its net zero targets.