Asset management in the decarbonisation era

Our recent roundtable with S&C Electric Company looked at the impact of decarbonisation on asset management. Below, we share why industry experts feel it is time for an overhaul of resilience measures and how they are using AI to help optimise asset performance in a fast-changing energy system.

The need to decarbonise the economy and increase the resilience of our networks is having a transformational impact on the British energy system, write Chris Watts and Grant McEachran, regulatory affairs directors at S&C.

While asset management is constantly evolving, the broad nature, scale, and pace of change underway is unprecedented and means a step change is inevitable. This has implications for investment and ultimately for network regulation, about which questions are often raised.

With the number and severity of major weather events and customer expectations for reliable and resilient networks rapidly increasing, network resilience is becoming more important than ever. Engaging end customers and communities in the future role of networks will be critical to understanding the full economic impact of both short and longer duration outages. New metrics for baseline performance and optimising resilience investment levels will also be necessary.

From a network investment perspective, the growing range of options includes both traditional solutions and flexibility services from distributed energy resources. To make full use of these requires consideration of a broader range of data, including both network and third-party information, to understand network demand and capacity in real time.

Asset managers will have to consider a broader range of technological solutions to address network requirements, including advanced protection for main feeders and spurs, dynamic ratings, and voltage control. Whole system thinking is another area becoming increasingly important because electricity investment decisions are becoming more interrelated with other sectors, including gas, water, transport and telecommunications.

From a regulatory perspective, the focus is evolving to longer-term strategic or anticipatory investment, which considers the whole-life benefits of assets. Ofgem has reflected this in its Accelerated Strategic Transmission Investment (ASTI) framework, its framework for Network Asset Risk Metrics, and in the design of its volume-driver and reopener mechanisms as part of the RIIO-2 price controls.

However, Ofgem is taking further action in the regulatory framework for RIIO-3 and its proposed new major projects mechanism. Hopefully, this will include an enhanced benefits framework that fully accounts for the social, economic, environmental, reliability, and resilience benefits of different investment options and reflects the areas customers and stakeholder value. Ultimately, to support the decarbonisation of the sector, regulation is a key driver to reflect the changing needs of customers and society as a whole.

Decarbonisation: Bigger, more uncertain… messier

What’s most on the mind of utility asset managers as 2024 begins? What would they like to see happen in the industry over the next 12 months?

Our recent Utility Week Intelligence roundtable with S&C Electric provided answers to these questions as attendees considered the challenges ahead:

“We need better metrics on how we translate external stakeholder impacts into financial value and how it translates into the regulatory regime.”

“I’d like to see stronger storytelling on the value of data.”

“From Great Britain plc to the individual user, we need a new benefits framework.”

“We need to change the regime around smart meter data, so we have responsibility for it and it becomes part of our asset portfolio.”

Phew. Indeed, asset managers and industry experts agree that the scale of the challenge facing the discipline is huge. One head of asset management at a power network compared the situation to the development of the grid in the 1930s, 50s and 60s. “The sheer scale of the work in the 30s to connect the grid was transformational, and the scale of rural electrification in the 50s and 60s was astonishing.”

“For what we need in 2050, our network size needs to be an order of magnitude greater, and its growth is accelerating,” confirmed the head of asset management at a TSO. “A lot of our value at the end of this decade will be new infrastructure.”

Although there are historical parallels when it comes to scale, the situation is also more complicated. “Decarbonisation is messier. There are competing technologies, a complex policy environment and many more participants in the market,” added the head of asset management at the network.

A counterpart from a transmission system operator expands on the point: “In those previous epochs there was a blank sheet; we haven’t got that. We have to make the best of what we have got already. So many more dimensions need to be considered.”

The dimensions these asset managers are now considering include resilience (of course) but also how to factor in uncertainty when it comes to investment in assets, whether for load or non-load, and how to respond to the rapidly evolving landscape for energy in a way that benefits hard-pressed customers but also combats climate change.

The uncertainty mechanisms in RIIO-ED2 have helped, but more needs to be done from a regulatory perspective to encourage anticipatory investment, delegates said (Ofgem’s ASTI framework provides a good model). The TSO head of asset management points out: “I’ve got decisions on projects I’ve made in the current regulatory period that have been overtaken by load-related investments. The regulatory system isn’t yet evolved enough in transmission to account for that.”

And then there is the wider question of how asset management relates to the big picture.  Our panel included a sustainability expert. She asked: “Is Ofgem really thinking about wider societal and environmental benefits? I wonder if, culturally, the regulator is ready for best value.

“That means not just the lowest cost, or even delivering net zero, but doing it in a sustainable way that delivers maximum benefit for societies and users in the long term. And then there is always politics when it comes to trying to keep the bills down.”

This calls into question how resilience, customer benefits, and the potential value of investments are measured. The power network asset manager explained that some people could be left behind. “You can add up individual customer effects, but there is a multiplier when an entire community is involved. How do you articulate that and get your arms around what it means – and what it is worth spending to make sure it doesn’t happen?

“There are communities that are more vulnerable to loss of electricity than others, but they don’t fit traditional metrics.”

The flexible portfolio and new types of job

As if all that wasn’t enough to contend with, new flexible energy services are a tool in the armoury that also complicates the picture. “Every time you make a load investment, you need to sense check whether you can meet that demand with flexibility.”

A better grasp and understanding of data from networks promises improved flexibility, however. “If we can understand the energy flows around LV and HV networks we could make much better decisions about flex,” said the RIIO-ED2 lead at one network company.

Automation is already enabling reconfiguration of the power system down to individual substation level. “The challenge is we use all the data we get in ways that will help us, which is why we’ve recruited a team of data scientists,” explained one asset manager.

“The role of a control engineer has changed radically because of automation.”

“There is an influx of new skills,” concurred another expert. “’Head of analytics and metadata?’ That’s not a job title we would have had a decade ago.”

Nor would AI have been anything more than a dim, distant rumble at the time. Not so today. One regulatory affairs specialist said: “There are now some utilities using advanced machine learning combined with LIDAR to identify climatic conditions to predict wildfires.”

This can make for tough conversations around job roles. The RIIO-ED2 lead said: “AI has to take an engineer’s thought process and codify it; that is the only way to get through the data set because it is so vast. You can struggle to convince people of the benefit because it seems like a threat.

“But AI will produce an output and it will be their job to analyse it.

“They will become engineering analysts.”

CTA: For more analysis of current asset management challenges, check out our article here.