UK energy networks are at a turning point and leaders in the sector have must some big decisions about how they want their companies to be defined in a time of transformation, according to David Rutherford, chief executive of the Power Networks Demonstration Centre (PNDC).
“We are moving to a point of excitement where those who wish to be bold and to be first movers have got the ball at their feet to do that,” says Rutherford, who met Utility Week just before Christmas in the restaurant of a London Hotel. His words, which refer to the momentous changes afoot in the energy system and the management challenge they represent, stand in odd contrast to the tinkly seasonal background music.
“The question is, are they going to be bold enough to move forward as fast as they can, or are they going to be prepared to just stand back and let the whole UK electric utility piece move forward at one time?”
Rutherford says this is the key management challenge for utility sector leaders. “They have got solutions that can make a difference to their business-as-usual proposition. How bold are they prepared to be? How brave are they prepared to be, in terms of taking forward some of the innovation initiatives they have invested in? I have no doubt that it will happen over time. The question is how fast they are prepared to make it happen.”
Rutherford, a utility sector veteran of more than 30 years, is fascinated by the transformation challenge enveloping the UK’s energy sector. He worked at Scottish Power before and after privatisation, and held a number of engineering roles on the network, rising through the ranks to become managing director of energy networks.
After time out in consulting and academia, Rutherford was offered the position of chief executive at the PNDC, a rare opportunity to get back to his hands-on engineering roots while retaining strategic influence over the evolution of the UK’s future energy system. He clearly feels he’s fallen on his feet, relishing both the highs and lows of the job. “You get all the frustrations of the inertia of the sector, all the excitement of the hope of the sector, all the sharing of success when something goes well,” he reflects with satisfaction.
The PNDC is a not-for-profit innovation centre, set up with funding from Scottish Enterprise, SSE, Scottish Power, the Scottish Funding Council and the University of Strathclyde. Its purpose is to accelerate the deployment of technologies that will enable the smart energy networks of the future. It reduces the risks associated with new products and solutions by testing prototypes for technology manufacturers, and also works with utilities to demonstrate new techniques for network management.
In short, the centre is an essential resource for the energy sector as it seeks to migrate the lessons it has learnt through extensive investment in innovation projects in recent years – largely thanks to regulatory funding incentives – into business-as-usual solutions.
Almost 40 projects have been completed since the centre opened in 2013, and Rutherford feels “there is that simmering point of technology solutions that can transform activities on the networks in a way that gives rise to massive benefit to customers”. But returning to a question that clearly preoccupies him, Rutherford reiterates that there is still significant uncertainty about how fast companies want to move to realise these changes.
The dithering is down to a lack of clarity around the competitive benefits of adopting innovation, Rutherford theorises. “At the time of privatisation there was a clear view that the ability to drive process improvement and efficiency could give rise to bottom line improvement,” he says. As such, investment decisions were enabled and companies strove to innovate to achieve those step changes in organisational performance.
“At this time,” he continues, “the freedom of leaders in industry to act in that way is somewhat constrained by the whole industry having to move forward at one time.” In other words, the same mechanisms introduced by Ofgem to incentivise investment in innovation projects – which require dissemination of lessons learnt throughout the industry to ensure maximum customer value – are acting as “a little bit of a brake” on deployment of innovation. This is because “senior leaders in the industry are very much aware of the fact that if they do something that is successful, the other companies are going to catch up very quickly”.
What can be done to elicit more competitive zeal? Rutherford is not sure, “but there might be something about stimulating benefits for those that deploy innovative solutions faster than others”. Ofgem might reasonably argue that such incentives already exist under the RIIO framework, but Rutherford is clearly not convinced companies are responding as enthusiastically as they might.
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Deployment of innovation discoveries isn’t the only element of energy system transformation that Rutherford fears is lacking in pace, however. As our conversation inevitably turns to this year’s launch of the national smart meter rollout programme and what this means for the network companies, Rutherford voices his concerns that the programme timeline is too ambitious and, more importantly, that the rollout will fail to deliver the game-changing benefits customers are being promised.
Rutherford takes time to choose his words carefully as we launch into the topic. There’s no doubt he finds fault with the way in which the rollout is being handled – it seems there are few who don’t – but he doesn’t want to appear to be a naysayer.
“The idea is right and offers a lot of potential. But we are faced with a cumbersome rollout programme and the ability to extract full benefit remains to be seen,” he comments.
One reason he is unsure whether the full benefits will be realised is that because consumers will be given the choice about whether to accept a smart meter. He would prefer the rollout to be mandatory.
Crucially, though, Rutherford has concerns that the set-up for network access to smart metering data will make some of the most fundamental value propositions of smart metering difficult to realise. “As a previous DNO operator I have to say that the ability of the DNOs to access data from smart meters is a fundamental flaw .”
He explains: “As a DNO, the one thing I would have wanted to know with absolute certainty from a smart meter is whether or not it has electricity. Does it have gas supply or not?
“The rollout plans have got that capability but it’s a cumbersome path to get to that point and it relies on the DCC acting as a transparent intermediary back to each of the DNOs.”
Isn’t it transparent? “I think it is questionable and lacks clarity,” Rutherford says.
From a technology perspective, Rutherford is optimistic that smart meters will bring “a big advancement” and “give customers something more than they’ve already got” – as long as they can be delivered with the necessary “speed and alacrity” to keep ahead of independent advances in connected home products. That said, as a network man, Rutherford is more excited about other technologies. Listing a range of “big ticket” areas PNDC is working on, Rutherford lights up. He talks about the success the centre has recently experienced with UKPN putting a soft open point device “through its paces and debugging its software in quick time” and about his current fascination with improving digital fault record techniques. According to Rutherford, this latter area has the potential to radically improve industry standards on customer minutes lost and make “a big difference to customer service” more generally.
Forging ahead in this area will require more experimentation with merging and automating existing approaches to detecting fault current on the network.
Similarly, automation is the key to unlocking massive value in a collaborative venture between PNDC and the European Space Agency, which aims to use satellite data with data gathered from drones to carry out detailed infrastructure mapping and monitoring. By automating the interpretation of the enormous quantity and granularity of data available from satellite applications, PNDC hopes to unlock big efficiencies for asset management.
Meanwhile, another project designed to exploit satellite communication infrastructure should demonstrate the feasibility of balancing generation with battery storage for local energy solutions, Rutherford goes on, demonstrating that PNDC’s activities are not centred on perpetuating or refining incumbent assumptions about large-scale national network infrastructure. The organisation is also ambitiously exploring the feasibility of a radically different kind of energy system featuring independent “islanded” micro-grids, even if these potentially threaten to leave traditional networks “stranded”.
What would such a development mean for DNOs? It’s not yet clear, but it’s something senior leaders in the sector are probably more worried about than they care to admit, says Rutherford. He is looking forward to seeing what light can be shed on this by a seminal investigation by the Institution of Engineering and Technology (IET) into the need for a power system architect.
The IET’s attempt to define a “whole system view” of the UK’s evolving electricity grid – and to set out the rules of engagement for new technologies and service providers joining it – kicks off in earnest this year and Rutherford is due to attend one of the preliminary workshops in February.
The project, commissioned by the Department of Energy and Climate Change, has so far been treated with an air of suspicion, if not outright hostility, by many industry leaders. But Rutherford is intrigued to see what it can do to provide more certainty about “the standards, the parameters of access, the means of system operation” for players in a range of potential electricity network scenarios.
Before this process has even begun, however, some leading energy aficionados – including Energy Systems Catapult chair Nick Winser – have said that an opportunity is being missed by not broadening the scope of the investigation to include gas and heat networks.
Rutherford doesn’t necessarily agree that this is essential now, but he does express a keen interest in the challenge of integrating different energy verticals to achieve a truly optimised whole system. In the future, he says he’d like to see PNDC expand its scope to help demonstrate integrated energy solutions. It “would be a very natural progression for the centre”, he says.
For the moment, however, PNDC is focused on establishing itself as an indispensable aid to the transformation of the UK power system. There are plans to increase the membership base in 2016 and to find new ways of engaging with the significant community of small and medium-sized enterprises in the UK that have relevant products or services with problems that need “ironing out” to get to market with confidence.
Another key thing the centre will do this year is firm up its metrics for success – which are currently a little woolly. “Our outputs are measured very much in the difference we have made to technology deployment,” says Rutherford, “though we haven’t quite got there yet to the point of testing that with our customer base. We are developing a means of measuring customer satisfaction with the pace at which we are able to accelerate their product or solution being fit for market.”
Once that’s done, it’ll just be a matter of getting the market fit to accept those products and solutions.