The government cannot sit back and leave the power sector to transform itself. That was the core message from the second phase of the Future Power System Architecture (FPSA) programme which reported towards the end of last month.
Describing the latest findings, FPSA project delivery board chair Simon Harrison warned there could be dire consequences if ministers failed to act. He noted that the sector is already evolving rapidly with the emergence of a wide array of new players and technologies.
“Without the necessary co-ordination, there is a real risk that these developments will have adverse impacts on the power system, leading to lost whole-system opportunities, and potential incompatibilities in the way that technology is implemented and the way that markets operate.
“There is currently no shared vision or even shared understanding of how to bring all the elements together in a way that addresses whole-system issues and is efficient, effective, secure and reliable,” he added.
“All parties, including customer representatives, now need to come together as a whole to create that vision and, with the catalyst of government, put in place the mechanisms that will make it a reality.”
The government-sponsored FPSA programme is developing a blueprint for the delivery of the power system that will be needed by 2030. The ambitious project was commissioned by BEIS in its first phase and Innovate UK in its second. It is being produced collaboratively by the Institution of Engineering and Technology and the Energy Systems Catapult.
Published last year, the first chapter outlined 35 distinct functions the power system will need to fulfil, grouped into eight broad categories.
The second chapter has, among other things, identified four main obstacles to delivering those functions: industry governance; the regulatory framework; commercial arrangements; and technical challenges.
Industry governance
According to one of a series of reports produced for the second phase of the FPSA programme, the current code governance process, which involves an array of industry panels recommending modifications to Ofgem, “is not sufficiently agile or flexible to respond to the degree and pace of future change envisaged”.
It says the delivery of the 35 functions will require “significant interaction” with technical market codes. The transition of distribution network operators (DNOs) into distribution system operators (DSOs), for example, may require the introduction of a balancing code at the distribution level.
Future code changes will need to involve a greater number of stakeholders and consider a wider range of factors. “The existing process may not support a system-wide perspective,” the report cautions. Codes risk having to be repeatedly adapted when the full implications of previous changes become apparent.
Regulatory framework
The current licensing and regulatory arrangements “do not account for new parties and new business models”. Local suppliers, for instance, can apply for a licence restricted to a certain geographic area but only where they can demonstrate an “overriding public interest rationale”.
The regulatory framework also fails to reflect whole-system thinking. Most obviously, the RIIO price controls for electricity distribution are misaligned with those for transmission and gas distribution. While this does not by itself prevent cross-sector investments, new mechanisms or incentives are needed to bring them forward.
The delivery of many system functions will require new players to have access to the growing volume of data produced across the sector, including information about customers. This will introduce risks around commercial sensitivity, security and anonymity, “particularly if sharing of data between multiple parties is required… Data accessibility may be particularly challenging in instances where non-regulated parties could benefit”.
Commercial arrangements
The existing commercial arrangements have “unintended consequences that sometimes act counter to core policy objectives”. The capacity market has awarded contracts to diesel generators to meet one objective – security of supply – but in doing so has compromised another – decarbonisation. Contractual arrangements may be difficult to reverse, “resulting in a commercial inertia that acts as a barrier to reforms”.
Market participants often struggle to achieve the market access needed to realise whole-system benefits, particularly those that are highly regulated. The procurement of balancing services is mostly left to National Grid in its system operator role, because licensing arrangements largely prohibit the involvement of DNOs. This could lead to sub-optimal outcomes through “conflicts and loss of synergies”.
Entirely new commercial models will need to be developed, and often this will only require regulatory obstacles to be removed. However, some will be “complex to design and implement”, especially where they require co-ordination between different parties.
Technical challenges
“Future networks will be associated with increasing complexity, stakeholders and interaction with other vectors,” the report states.
“However, there is currently a lack of a whole-system modelling approach in sufficient granularity to support cost-effective co-ordination of planning and operation.”
There is a “capability gap” for real-time forecasting between the system operator and other parties such as DNOs. Some will struggle to close the gap because of limited access to historical data.
Monitoring, control and communications systems lack the sturdiness and sophistication required for many future functions, particularly at lower voltage levels on distribution networks. Control strategies are not robust enough for future complex power flows and balancing actions, and there is limited integration of controllable distributed energy into network management software.
To ensure interoperability, standardisation is needed at both the network and customer level for control, protection and automation solutions.
Overcoming the barriers
To overcome these barriers, another report produced for the programme calls for the creation of a raft of “enabling frameworks” to deliver the 35 functions, either individually or in groups.
These enabling frameworks would be overseen and co-ordinated by an “enablement” organisation but delivered by comprehensive networks of stakeholders. “Common enabling frameworks” would be set up to deal with broad issues that affect multiple enabling frameworks, such as legislation or regulation.
The formation of an enablement framework would begin with the enablement organisation “briefly assessing the function and undertaking pre-structuring activities”. Following on from this work, a corresponding stakeholder network would be established.
“A comprehensive grouping of all the necessary stakeholders is important, along with the linkages and interactions between these stakeholders,” according to the document.
With the help of the enablement organisation, the stakeholder network would then “activate” the enabling framework before specifying its requirements for any common enabling frameworks and setting up links with other enabling frameworks and functions.
The third stage of the FPSA programme will now seek to validate this model by developing prototype enabling frameworks for one or more of the 35 functions.
“The policy challenge for us is to recognise what we don’t know and create a policy and regulatory framework which is agile enough to deal with that and also helps to us to horizon scan, particularly what the most disruptive technologies might look like in terms of how we not just make policy but also operate the system.”
Craig Lucas, director of science and innovation for climate and energy, Department for Business, Energy and Industrial Strategy
“There is a big transition underway. We know there’s a lot of change. But the reality is we do not know where we are heading in the next 10 or 15 years, and therefore we have to, as regulators, policymakers and indeed those running the system, be adaptive and be able to respond to unexpected changes as they come up.”
Jonathan Brearley, head of network regulation, Ofgem
“We look at the industry through perspectives or lenses that reflect … our context and our personal baggage. But there are many other people who look in a completely different way and when you start to compare those different perspectives you get very different answers.”
Simon Harrison, project delivery board chair, FPSA
“We sat in a meeting with our friends at BEIS and talked about ‘beyond the meter’, and realised each of us was talking about the opposite side of the meter… It all depends where you start.”
Energy Systems Catapult, head of innovation, Eric Brown