Interview: David Smith, chief executive, ENA

“In the past, networks have had relationships with properties. In the future, we need to have relationships with people.”

David Smith’s got the look of a boy in a sweet shop. We’re talking about the future of energy networks and smart grids and it’s a conversation full of superlatives on the rate of technology change, capability and challenge.

“The future is just over the horizon,” says the chief executive of the Energy Networks Association, searching for the appropriate words to articulate the nature of energy networks’ relationships with customers and smart devices in the world 20 years hence, but clearly excited by the idea nonetheless.

“The world is changing rapidly, our energy use is changing rapidly and the system is changing radically. The way we use energy today is already so different from what it was 40 years ago, and I don’t see that trend being different looking out 40 years from now. Technology will lead our lives.

“We’re going through such a big learning cycle at the moment that it’s difficult to take it all in,” Smith continues. “As we hone it down – and we will – we’ll get a better idea of what the system will look like. At the moment we are wide-eyed. I don’t think anyone has pinned down quite what it will look like yet.”

Smith’s enthusiasm is engaging, but that element of uncertainty is a source of frustration for some in the industry. At a recent round-table discussion of RIIO and network transformation, hosted by Utility Week, there was a clear feeling among attendees that the UK’s distribution network operators (DNOs) are encumbered with inertia when it comes to realising the dream of smart grids and dynamic, distributed energy generation and consumption.

While DNOs’ investment in innovation projects, aided by the Low Carbon Network Innovation (LCNI) scheme, was recognised, their approach to integrating innovation into business-as-usual operations and embracing a more customer-facing role was found to be generally back-footed. It’s a view that is echoed by Robert McNamara, executive director of SmartGrid GB (see market view, p17), who comments that it is high time networks deployed market-ready technologies such as automated voltage control, self-healing grid and enhanced fault prevention.

Smith, a networks man of 12 years, is stung by these suggestions.

“No. I’d push back on that,” he says, polite but firm. “A lot of people have said the networks are failing to deliver, but look at where we are. Look at the projects. Go onto the smarter networks portal and look at what we’ve delivered, at how much value we’ve delivered. The networks have been a hidden gem for a long time.”

Smith adds that more proof of tangible progress will be displayed at the LCNI Conference in November. For 2015, the annual event will be held in Liverpool and the headline theme will be the translation of innovation into business as usual.

All that said, Smith does acknowledge that there are arguments about the requirement for an electricity or energy system architect that need to be resolved soon, and some potentially game-changing technology areas have yet to be “cracked” by the networks – including distribution-level electricity storage.

“Clearly the holy grail is battery storage – the big one at the moment is the 6MW UKPN trial at Leighton Buzzard. If we can crack [storage], then all that wind that we now have to abate, we would be able to store. There’s lots of activity through our members and others looking at this issue, and critically, what we can achieve at
distribution level.”

But while the focus of network activity on storage today is on demonstrating technology viability at scale, there are other barriers to overcome before its deployment – primarily the issue of asset ownership. Under today’s regulatory regime, DNOs are not allowed to own storage assets because of their undefined status as neither generation nor supply (see Utility Week’s ‘The Topic: Storage’, 28 November 2014).

It’s a question the DNOs are keen to have answered, admits Smith, although he is unable to do so just yet. “That’s an issue for the future. At the moment, it’s about getting the technology right.”

On all these technology points and more, Smith – still defending the progress that has been made in recent years – promises that “implementation will now gather pace. I think it will all happen over the next price review cycle”.

But this brings us to another area where the networks, and Ofgem, have recently come under fire.

On Monday, 23 February, the Environment and Climate Change Committee released a report that accused the UK’s energy networks of overcharging customers and questioned the efficacy of the current price control framework.

Committee chairman Tim Yeo said there is “clear evidence” that network companies are making higher profits than expected under the recently modified regime, which he also said is “too generous” and lacks challenging performance targets.

Again, mildly but dogmatically, Smith denies these accusations. He points to the 17 per cent real-term reduction in the cost of the UK’s energy networks to tax payers since privatisation in the 1990s. He highlights the 30 per cent increase in reliability of the networks over the same period and the £80 billion that has been invested in them. For 81p a day, he states, British taxpayers get a network service that is “the envy of many countries”.

Responding to other points of criticism from the relentless Yeo, Smith assures that competition for connections is active and that the networks are tirelessly seeking to improve their visibility and engage with stakeholders and customers.

On competition, he says there is “lots” at “all levels”. He adds that it is growing and that the introduction of a new code of practice this summer will help all participants in the market. Smith declines to comment on the current investigation into SSE for alleged anticompetitive practices, or on the likelihood of other networks being in line for similar treatment.

Visibility and engagement are more comfortable territory. He talks happily about the local efforts of networks to improve public knowledge about their purpose and presence: “Western Power Distribution holds local surgeries and advertises on TV. Scottish Power has been advertising on the side of buses.”

Such profile raising is not just a response to the negative publicity that followed last winter’s storms, Smith explains. It’s part of a longer process that began in the last price control period and is essential if the networks are to prepare appropriately for a future involving distributed generation, more renewables, demand response and electric vehicle use.

“We’ve got to understand what communities want, expect and are planning for their localities,” Smith explains. “Are there plans for new community energy schemes, a windfarm, solar farm, an electric vehicle scheme? What does a community require in terms of social housing or business parks over the coming years?”

If the networks know these things now, they can feed them into their business plans and prepare for the technical challenges involved. Perhaps even more importantly, they can also get a better idea of where and how their customer-facing interactions will develop fastest.

“In the past, networks have had relationships with properties,” says Smith. “In the future, we need to have relationships with people. The networks will be the conduit – the gateway – for the consumer experience of smart energy. If someone charges their car at the supermarket, gets home and wants to export that energy to their house, it’s the networks they will interact with.”

On a national level, ENA is working to support its members in their outreach and planning process, he adds. It hosts meetings of the Distributed Generation Forum to bring networks and generation developers around the table and has spearheaded the creation of a three-digit emergency number for electricity networks. This number is currently out to consultation and will help visibility and engagement, Smith claims.

ENA has also published a public version of its own business plan for the first time this year. “We’ve always had one internally,” says Smith, “but we thought it was important to have a way of easily showing other people what we are doing now.”

The first section in the glossy new business plan is, unsurprisingly, focused on politics and the media. It sets out the need for ENA to “engage proactively with debates about cost and transparency” and promotes the “vital role networks have in delivering on energy policy”.

In the run-up to the general election in May, ENA’s capacity to communicate effectively on these scores will be put to the test and, as we speak, Smith says the association is in the throes of completing its election manifesto.

Giving some insight into this agenda, Smith predictably begins with a call for stability in the regulatory regime and is direct in expressing his support for continuity in the form and function of the regulator.

“If Labour comes in and wants to change Ofgem, we would hope that they would maintain that core of Ofgem which is about regulation of the networks. Because it does work,” he states. “The investment and savings that have been delivered bear that out.”

Other unsurprising priorities in the manifesto will be a focus on skills – especially science, technology, engineering and maths – and continued support for innovation, primarily via LCNI, but also through Innovate UK and the Catapult network, where Smith welcomes the appointment of Nick Winser, the former UK executive director of National Grid, as chairman of the new Energy Systems Catapult.

Smith’s final manifesto insight is less expected, but undoubtedly valid in today’s heady political environment of electricity infrastructure and supply.

“Don’t underestimate the importance of gas,” he warns, explaining that it is still the fuel of choice for many people, and without it, billions of pounds would be added to the already gargantuan investment required in the UK’s electricity infrastructure out to 2050.

Not only that, but the gas sector needs clear understanding and policy direction over the decline of North Sea gas and the potential of biogas – such as bio­methane – in supplying heat.

Smith concludes, “Gas has long been the forgotten fuel. Policymakers need to remain aware that it’s not all about electricity.”