The evolution of asset management

Asset management is at heart of everything gas and electricity network companies do to ensure their customers receive safe and reliable energy supplies at the most efficient cost. Over time, changing generation and demand profiles have impacted network use, and new techniques and technology have created opportunities as consumers’ needs and expectations have expanded.

Asset management has evolved in response to these changes. Notably, network companies have adopted approaches underpinned by whole-lifecycle approaches and condition-based risk management.

Regulation has also evolved through company measurement and incentives to achieve asset-management efficiencies and to deliver performance benefits to consumers. Ofgem’s Network Asset Risk Metric framework, which sets the outputs and incentives that will apply to network companies in RIIO-2 for asset replacement and refurbishment, is a prime example.

Now, network companies face a period of even greater change to enable the transition to net zero and to address climate change threats. In response, Ofgem is consulting on alternative options for network regulation to enable this. Individually and collectively these developments have implications for the future of asset management.

The energy transition means the need for significant anticipatory network investment to support the assets needed for a net zero power system. A balance will be required between new investment, investment to refurbish existing assets, and investment in flexibility, including services from distributed energy resources. Increased digitalisation, which offers opportunities to optimise system planning, including creating digital models of the network, “digital twins”, will also impact asset management.

At the same time, asset management must respond to the threats posed by climate change. Responses will vary. At a technology level, there is a greater focus on automation, sensors, reclosers, and smart switchgear solutions to enable outage detection and quickly recover or reconfigure the grid to provide power to the greatest number of customers. Also, climate change has impacted the economics of investment, with a trend toward undergrounding power lines, as evident in Florida in response to tropical storms and in Finland and Sweden in response to winter storms.

Taken together, approaches to asset management will continue to evolve to address the threats networks face and to maximise the opportunities offered by the transition to net zero. Evolution will be key to delivering the reliable and resilient networks upon which energy customers are increasingly dependent. And it is critical that the outcome of Ofgem’s consultation on network regulation supports that evolution.