DNOs seek funding for heat, flexibility and local energy projects

Electricity networks are seeking £29 million of funding through Ofgem’s Network Innovation Competition for projects exploring demand from heat pumps, flexibility trading and smart local energy systems.

The regulator has published the submissions for the four out of six projects that made it through the initial screening process.

They have all been proposed by distribution network operators (DNOs), namely Electricity North West, Western Power Distribution and Northern Powergrid. The gas competition has been replaced with a new Strategic Innovation Fund as part of the RIIO2 price controls, which began in April.

Equinox

Western Power Distribution (WPD) has requested £7.2 million of funding for a £12.2 million project named Equinox (Equitable Novel Flexibility Exchange) that aims to develop novel commercial arrangements to unlock flexibility from low-carbon residential heating.

The project, which would begin in March 2022 and end in January 2026, would look to demonstrate how incentives can be used to encourage customers to alter their behaviour and establish how much flexibility can be provided by heat pumps and thermal storage.

“Until now, DNOs procure flexibility predominantly from the commercial and industrial sector as there are currently no viable solutions that enable DNOs to unlock flexibility from residential heat at scale in a reliable, cost-effective and equitable way,” WPD said in its submission.

“This ultimately results in increased costs for customers: directly, because they cannot monetize the flexibility offered by their heating systems and indirectly because this untapped flexibility increases the need for grid reinforcements.”

WPD said the project would develop and trial three new commercial arrangements:

• ‘Save and advance’ – Consumers would receive upfront payments from DNOs to allow energy suppliers to directly control their heating systems within a “customer-defined comfort envelope” based on pre and post fault network constraints. WPD said this method would likely provide increased certainty of peak demand reduction would require them to accurately forecast the value of residential flexibility to be cost effective.
• ‘Save as you go’ – Consumers would receive dynamic price signals to incentivise them to accept or decline flexibility requests. WPD said this method would give consumers more control and mean they are only paid for dispatch events but would also require a high degree of engagement.
• ‘Save in advance and boost as you go’ – This service would combine aspects of both direct load control and peak pricing, enabling consumers to commit smaller levels of flexibility upfront and provide a boost in response to price signals.

WPD said it would develop and demonstrate integration and automation between application programming interfaces for its existing Flexible Power platform and in-home smart heating controls.

The project would involve between 800 and 1,000 customers of various archetypes, including vulnerable and fuel poor customers.

Partners include SP Energy Networks, which would act as a reviewer to ensure the developed solutions could be rapidly rolled out to other networks; Octopus Energy, which would help to develop the commercial arrangements, provide technical integration, and recruit trial participants; and PassivSystems, which would support the design, development and integration of smart heating technology.

Smarter Heat

Electricity North West said it currently uses a “connect and manage” approach to accommodate the proliferation of electric vehicles and photovoltaic solar panels, which allows them to connect without the need for upfront network modification or reinforcement and be managed using network monitoring “as these devices generally operate at times of low demand with significant diversity”.

The £6 million Smarter Heat project, for which it is requesting £5.4 million of funding, would examine whether this same approach can be applied in the face of the “large and sustained” uptake of heat pumps as the government targets 600,000 installations per year by 2028.

“Owing to their method of operation, the performance characteristics of heat pumps will differ significantly from conventional boilers,” the company stated.

“However, the highest demands will still occur in the coldest conditions, when heat pumps perform least efficiently.

“Additionally, there may be limited diversity associated with heat, and absolute power values are much higher than for non-heat demands. Given this, if heat pumps run without any operating constraints, the network may eventually become overloaded.”

Electricity North West said the project would look at how increased demand can be managed by leveraging the “inherent flexibility” of both heat pumps and the network itself.

On the demand side, customers could be asked to change their behaviour or adopt energy efficiency measures to reduce consumption. Their heating could be actively controlled to store warmth within the fabric of their homes, “allowing for imperceptible adjustments of the thermostat”.  The DNO said this source of flexibility would be explored through lab simulations in partnership with test houses, in-home trials, modelling and customer engagement and research.

On the network side, the variable thermal rating of network assets could allow additional capacity to be accessed when the ambient temperature is lower, whilst voltage management could be optimised for heating loads. Electricity North West said it would hold proof of concept demonstrations or trials of network monitoring, solution algorithms and their integration into control systems.

The company said it would also trial or model combined network and demand-side solutions using real or simulated loads.

Partners on the project include the consultancies Delta-EE and Ricardo Energy. Electricity North West is also looking to involve a local authority, property develop or community group and as well as other DNOs.

BiTraDER

Flexible connections allow distribution energy resources (DER) to connect to the network provided that they curtail their usage during certain conditions to prevent the violation of constraints. The order in which they are curtailed depends on their position within a queue – or merit order stack.

“DER are placed in the merit order stack based upon a static assessment at the time the connection was made,” Electricity North West explained in its submission for the project.

“Each DER is assigned a curtailment index, which is adjusted each time the DER acts to resolve a network constraint. This has the effect of adjusting the merit order dynamically over time, ensuring that all connected DER are treated equally.”

However, the DNO said individual users may be willing, for a limited time, to pay to avoid curtailment or accept increased risk in exchanged compensation.

BiTraDER would look to develop a new market platform and accompanying rules to allow participants to trade their position within the merit order stack.

The company said this would grow the value of flexible markets, attracting new participants and creating more competition, whilst also improving transparency and avoiding potential operational conflicts between the distribution system operator (DSO) and the electricity system operator at the transmission level.

Electricity North West said: “What is unclear is how a trading market of this nature might function, whether DER would welcome its introduction, what information needs to be shared to facilitate such a market, how the market would operate, and the additional value that the operation of a bilateral trading market would bring.”

The project would simulate the operation of such a market under different trading rules and produce a model and functional specification, including technical and data requirements. It would cost £6 million and run from January 2022 to March 2025. Electricity North West has requested £5.4 million of funding.

Community DSO

Community DSO would develop and trial approaches for integrating the operation of community and other smart local energy systems into the management of lower voltage networks.

Under the approach being proposed by Northern Powergrid, the distribution network would be separated into “manageable chunks” by creating a series of interconnected hierarchical “cells”, each structured around a group of physically connected customers.

The DNO would be responsible for coordinating requirements and managing activity across groups of cells, whilst communities would take some responsibility for providing services with their own.

Northern Powergrid noted that each smart local energy systems performs “differently, potentially uniquely, in economy, technical effectiveness and how it impacts the broader network. Connection approaches are not consistent. Designs and impact studies must be constantly repeated.”

“Local management, individually and in combination, may lead to significant increased complexity and a sub-optimal system at a larger scale,” it added.

Northern Powergrid said Community DSO would standardise the approach for integrating these systems into low voltage networks. It said a key feature would be the direct integration of technical constraints and network engineering into their operation, allowing communities to reflect their needs and ambitions through decentralised, semi-autonomous decision making, whilst avoiding unintended consequences.

The company said trials would be carried out in approximately four local communities. It has requested £11 million of funding for the £12 million project, which would commence in January 2022 and conclude in April 2026.

The consultancies Delta-EE and TNEI are both partners, whilst UK Power Network is also providing support.