Energy network companies, and their assets, have been doing much the same thing for the past 50 years. Now they have to help facilitate the decarbonisation of the energy sector. The required change is massive. How everything comes together on a national scale, with many interacting variables, is unknown. In effect, distribution network operators (DNOs) have to start building a nervous system from scratch to deliver the smart grid. To do that will require new skills, a different mentality and a system that is far more technology-driven.
The challenge will require traditionally risk-averse DNOs to take punts on technology, and this has been recognised by Ofgem. The companies have universally praised the regulator for allowing hundreds of millions of pounds of customer money to be set aside for innovation under programmes such as the Innovation Funding Initiative (IFI), the Low Carbon Networks Fund (LCNF) and in future the Network Innovation Competition (NIC).
It is difficult for DNOs to identify which technologies they will need to transform their businesses, or where to find them. Even when they do find them – often in the form of small companies with a good idea – there are intellectual property wrangles, legal issues and other hurdles to clear before they can start making products or platforms that fit within the network. Dealing with third-party technology developers has yet to bed in as part of the core pipes and wires business.
That is where the Energy Innovation Centre (EIC) comes in, according to its director Denise Massey. The EIC brings together later stage technology developers and network companies to develop smart grid technologies. It helps small companies access funds such as the IFI and LCNF and, together with the DNOs, helps them commercialise their technology. Some of the resulting solutions are now being deployed across UK networks and beyond (see box). The EIC has also developed a standard set of commercial documents – or “legals” – to simplify the process.
Yet despite having a strategic vision of where DNOs need to go, there is no list of specific problems to solve – partly because the DNOs themselves do not know exactly what they are looking for. So the networks and the EIC are looking for easy wins from other sectors.
“Smart doesn’t necessarily mean complicated,” says Stewart Reid, future networks and policy manager at SSE. ”In the same way as Sainsbury’s can tell roughly how many loaves of bread it will need the next morning, we tell roughly where the next cluster of electric vehicles is going to appear.”
That would help avoid the problems being caused today by solar panels “appearing everywhere as a blanket – and you have no control over where”, says Mike Kay, director of engineering and planning at Electricity North West (ENW). ”With heat pumps and electric vehicles, the further ahead of the curve we can get the better.”
While in that sense the horse has bolted when it comes to photovoltaics (PV), there are problems within problems. For example, DNOs are keen to find technology developers who can solve the harmonic issues that PV is beginning to cause.
Another known challenge is demand-side response (DSR) and how to develop the commercial arrangements alongside the enabling technology. “How much would you have to pay someone not to cook their turkey on Christmas Day?” offers SSE’s Reid, by way of example. “That’s a classic challenge for the sector as a whole: come up with an oven that allows you to cook your turkey but can still be demand-side managed. Some off-the-wall stuff could come from other sectors and could really get people thinking in a different way.”
Reid says DSR is all about “inertia in the system”. For example, “a fridge that can be switched off for 24 hours without requiring electricity has a value”.
One thing SSE has learned through its Thames Valley LCNF project is “how little demand you can manage for any length of time in commercial buildings … And once a customer works out what they can switch off, they will switch it off anyway, so the things to work out are around the edge of our sector”.
DNOs know they are going to have to go beyond the meter and into customer services. “That’s one of the continuing challenges,” says ENW’s Kay. ”Doing things on the customer side of the meter is very hard for us, but that boundary has to disappear.”
Chris Goodhand, innovation manager at CE Electric, agrees. ”When you get quite radical innovations, you have to start to alter things at the architectural level. A lot of what we’ve done thus far has been at individual systems and components level. When you have to start to think about how all those things combine – the smart grid – then those issues of where the boundaries lie become very important.” Goodhand warns that those boundaries can become “barriers to moving forward”. He says: “We have to really think across and operate across those … Otherwise we are just not going to get there.”
That said, competitions such as the LCNF are making DNOs think creatively to get around those barriers.
SSE’s Reid cites an energy storage project in Orkney. The storage park was tendered to third parties to avoid falling foul of the Utilities Act in terms of the DNO requiring a supply licence to trade its output.
“Because they are third parties and won’t own it, they are free to trade, arbitrage, do power purchase agreements with individual generators … whatever they want to do within the constraints of the contract we’ve given them,” says Reid. ”From Ofgem’s perspective, that commercially gives you another model. You now have an energy storage provider, a new entity in the market that DNOs can encourage to locate in locations where we have a constraint. It might not work, but that is what we are about to start doing and it shows there are ways around .”
Collaborative ventures such as the EIC also better disseminate knowledge, which is a key requirement of the LCNF. But so far companies are too busy setting up projects to worry much about sharing, according to ENW’s Kay. The DNOs agree more needs to be done in terms of sharing knowledge than just an annual conference.
“We’re thinking about the next eight-year price control – whether we go fast track or not, we have to put our bids in by 2013. We probably can’t wait until a conference next summer to see where that is going,” says Kay.
CE’s Goodhand agrees. “The annual event is about headlines. The real learning is when you sit down here and we are sharing papers and calls outside the meeting,” he says. “The value of Ofgem saying ‘you will share’ is that we are actively looking for ways to do so, and that will increase as the process becomes more mature.”
For now, though, DNOs are probably more concerned about finding the right partners to help them discover what they need to do to deliver the smart grid. They are pinning a lot of their hopes on initiatives such as the EIC to bring those innovators to the table.
Boxed text: From prototype to global product
Mike McCormack, managing director of FMC Tech, has been through the process of bringing a prototype to the EIC and making it a commercial reality. The company and its powerline monitoring platform were this year acquired by GE’s Digital Energy division. “The next stage is to get installed globally, which is where it is heading,” says McCormack.
“It is an amazing time for entrepreneurs in this area. In the distribution network, you have the substation – mission critical devices, relays protecting circuits, etc – and you’ve got millions of smart meters at the other end. Between the two you have over 20 million kilometres of network globally that is unmonitored. If you listen to these guys and translate their needs into products, you have major markets.”
The companies spoke to Utility Week at a roundtable organised by the Energy Innovation Centre