Lessons for the DSO transition

Over the years, CGI has written a number of ‘for Dummies’ guides to help make some of the major changes in the utilities sector more accessible to people.

It should be no surprise, then, that we have taken a look at the energy transition.  Or, more precisely, at the transition towards distribution system operation (DSO).

This was quite a challenge. This area is rapidly evolving, so judging when to finish writing a book was impossible. There was always another important report or piece of analysis just around the corner!

One of the most popular sections in the ‘For Dummies’ books is the ‘Top Tips’ – building on the experience of others who, if they haven’t exactly been there before, have at least faced similar challenges. Here’s my Magic 7 for the DSO Transition.

1. Avoid trying to predict the future based on the past

Over the next decade, the electricity sector will have to do the heavy lifting in terms of decarbonisation as other sectors look to reduce their climate impact through electrification.

Just because the current level of change has been accommodated without much drama doesn’t mean that the DNO-to-DSO transition will continue to go so smoothly. The laws of physics (or at least of electrical engineering) may not be changing, but the dynamics of how the electricity system operates are changing fundamentally. At some point, we should expect more of a revolution than the current evolution.

2. Remember a DSO operates a system within a system (within a system….)

Understanding how the distribution system interacts within the context of the wider systems is important, be that the interface with the transmission system, the competitive energy retail market, the wider electricity system or the energy system (including gas and heat).

Consider the following:

• decarbonisation of heat through electrification places different demands on a DSO when compared with an energy system where decarbonised gas plays a role in decarbonising heat.
• the impact on a DSO of decarbonisation of transport through electrification will be different if hydrogen starts to play a more significant role.
• there are important questions about a DSO’s ability to reliably and economically access flexibility within its distribution infrastructure. The Smart Systems and Flexibility Plan’s success in making markets work for flexibility will mean that the DSO will be competing against a multitude of actors in the electricity system for access to flexibility services. And,
• don’t forget about the reliability of flexibility services when called. The use of flexibility services in system operations changes the risk profile.

3. Be optimistic, stay realistic

How often have we heard people say that something has been tried before and it didn’t work then, so it won’t work now? Just because something didn’t take off in the past doesn’t mean that it won’t now. Maybe that something was ahead of its time.

Be realistic about what has or needs to change that will mean that a particular solution or course of action will work today when it didn’t in the past.  Consider:

• have its costs come down (think about solar PV costs approaching grid parity)?
• have the costs of alternative solutions gone up (think about the fossil fuel price fundamentals)?
• how have people’s attitudes changed (think about the growing concern about climate change)?

Or….

• how have the rules of the game have changed (think about the new policies, regulation and incentives)?

4. Know why!

Do you view the energy transition and the move to distribution system operation as a cost or a benefit? It’s important to understand the investment case. Looking to minimise costs will drive different decisions and behaviours compared to seeking to maximise value and, therefore, ultimately the scope of the benefits realised by the customers.

With that clarity of understanding, communicate and take people with you, which leads neatly to the next tip…

5. Get good at engaging stakeholders

A DSO will play an increasingly active role in the successful operation of the whole electricity system. That means that the DSO will be dealing with an ever-growing set of stakeholders with a diverse range of interests. Hence, excellent stakeholder engagement will become an essential corporate capability.

6. Collaborate wisely

The move to net zero isn’t just about supporting the adoption of no-and-low carbon technologies.  With those technologies comes more embedded digital technologies and the need to make effective use of the ever-growing volumes of data generated by a more federated and democratised energy system.

That’s going to require access to new skills and corporate capabilities. So choose your partners wisely. Look to collaborate with those who are able and willing to manage risks and who understand what drives value for them.

7. Get on with it

With the increasing complexity of the electricity system and the accelerating pace of innovation, good options are becoming cheaper and better options are always just around the corner. And you know no one will thank you for making a decision that can leave investment stranded when a pause may provide more certainty.

The problem is that something cheaper or better is always just around the corner. So, no one will thank you for doing nothing when you should have done something.

Keep moving forward, but follow a strong innovation process that controls your risk as you adopt successful innovations into business as usual.

And remember that a decision to do nothing isn’t risk free. Of course, there’s no one magic solution which will work for all; so you’ll need to manage diverse mix of solutions at any given time, helping to spread your risk.

The energy sector is going to be one interesting place to work over the coming decades, so I hope you view interesting times as a blessing rather than a curse. Who wouldn’t want to be involved at the vanguard of helping to solve the biggest issue of our time, the climate crisis?