Turning distribution network operators into system operators

The ENA’s Open Networks Project aims to chart how electricity network companies can grow into system operators. David Smith describes the project’s first milestone.

In January this year, Energy Networks Association launched a major pan-­industry initiative to set out how the roles and responsibilities of network companies are changing. The TSO-DSO Project,
also known as the ENA Open Networks Project, will underpin the delivery of the UK’s smart grid.

The Open Networks Project will give households, businesses and communities the ability to take advantage of a new range of energy technologies to take control of their energy and lower their costs. It will promote greater competition in markets, helping ensure the costs of operating and maintaining energy networks is kept down. In doing so, it will help underpin business growth, attract investment and deliver long-term economic benefits to the UK.

The project brings together all seven of the UK’s electricity network operators with officials from government and Ofgem, as well as working with respected academics, non-governmental organisations and other stakeholders that have an important contribution to make in determining the future direction of our energy networks.

From the integration of renewable and distributed generation to the greater use of storage and demand-side response services, new technologies mean that distribution network operators (DNOs) have already begun to take on the kind of system operator functions traditionally seen at a central transmission level. Technology has driven a change away from their traditionally passive role of transporting electricity in one direction from the transmission network to the end-user, to play a more active role in network control and management.

This shift has created a host of new opportunities, both for the more intelligent management of our networks and for networks to act as a platform for the greater deployment of smart energy technologies, with all the benefits they bring for customers.

However, to realise the full potential of this change requires a shift – DNOs must evolve to become distribution system operators (DSOs).

In 2017, the Open Networks Project will begin the process of delivering this change across four workstreams. It will define the transition our electricity networks must make as part of these changes; how the different parts of the network will interact during and after that transition; how that transition can best serve customers; and how network charging requirements needs to change to reflect that.

It is the first of these workstreams, defining the transition of our networks, where the Open Networks Project has reached its first milestone. While the high-level principle of the DSO transition has come to be well understood in recent years, there is a wide range of activity that could fall within its definition, and understanding what that role will entail is a vital prerequisite to delivering the transition that will ultimately have a real and tangible impact for customers.

For example, what is the scope of activity that a DSO should carry out to manage constraints on the network? What should the role of the DSO be within the energy market? And how should this new entity interact with other market participants?

The Open Networks Project’s definition of the DSO transition, now published for the first time, seeks to satisfy four key principles:

•    that a DSO is non-discriminatory and technology-neutral, favouring solutions that provide the most optimal solutions rather than particular technologies;

•    that it uses market mechanisms that are fair, transparent and competitive, providing a level playing field for providers of network services and providers of energy products and services to deploy the most efficient and effective solutions;

•    that it supports flexibility and innovation in responding to customers’ future requirements and in developing the network services they require, including enabling and facilitating innovation by others;

•    that it delivers value and service to a range of customers and communities.

The DSO, as defined, will deliver significant benefits to customers. It will not only help maintain resilience and system stability while maintaining the high performance and value for money that customers currently receive, but also support flexibility in a whole energy system, acting as a non-­discriminatory and technology-­neutral platform for new markets and services for customers. There will be exciting new opportunities for customers to engage in the energy market, and the DSO will be crucial to enabling households and businesses to have greater control over their electricity and unlock the potential from new technologies like battery storage and electric vehicles in their everyday lives.

As a cross-industry effort, the Open Networks Project is mindful of the fact that there is more to learn and that this is a fast-moving picture. Developments in the industry have progressed at a rapid rate in recent years, and we do not pretend to know, with certainty, how they will continue to unfold over the years ahead. Therefore, our definition provides a starting point for the development of the DSO with a range of potential paths. It is not an exhaustive or closed definition, but it will evolve over time as the knowledge of the networks increases and the industry develops.

With a definition in place, this summer the project will set out a roadmap to 2030 for the technical and commercial development of a framework for DSO. It will provide a range of potential pathways for the way forward, setting a clear sense of direction of how our networks will respond to the needs of our fast-changing energy market, ensuring that households, businesses and economy are able to take advantage of those changes in the best possible way.