Open Networks project

UK electricity networks – flexibility options in a future world

The Open Networks project evaluates pathways towards the development of Britain’s smart grid.
Published: Mon 25 Mar 2019

The need for flexibility in a decarbonised and decentralised, prosumer-driven energy system is evident. But the challenge [[is how the market should be architected – and particularly at the low voltage level where the prosumers and other new distributed sources such as electric vehicles are connected – so that this flexibility can be accessed and utilised to the benefit of both the providers and users.

Given that current targets have a 2050 timeframe, the various network players, and the distribution system operators (DSOs) in particular, will need to evolve their models in line with the changing market conditions. Such models will depend very much on local conditions, but also there is likely to be multiple potential pathways towards those 2050 goals.

In the UK, where the evolution is further complicated with the need for the network operators to transition to DSOs, such pathways are being developed in the Energy Networks Association’s (ENA) Open Networks project. These were proposed following consultation last year and have now been subject to independent review by the consultancy Baringa, and are indicative of the uncertainties and complexities in such necessary modelling.

Future worlds

The five options, or ‘future worlds’ as ENA styles them, represent different market, organisational and operational structures and are differentiated primarily by the respective responsibilities of the DSO and the electricity system operator (ESO). These are as follows:

A: ‘DSO coordinates’ where the DSO takes a central role for all distribution connected parties acting as the neutral market facilitator for all distributed resources and provides services on a locational basis to the ESO.

B: ‘Coordinated DSO-ESO procurement and dispatch’ where the DSOs and ESO work together to efficiently manage networks through coordinated procurement and dispatch of flexibility resources.

C: ‘Price-driven flexibility’ where changes developed through regulatory reform of electricity network access and forward-looking charges have improved access arrangements and forward-looking price signals for customers.

D: ‘ESO coordinates’ where the ESO takes a central role in the procurement and dispatch of flexibility services as the neutral market facilitator for distributed resources, with DSOs informing the ESO of its requirements.

E: ‘Flexibility coordinators’ where a national (or potentially regional) third party acts as the neutral market facilitator for distributed resources, providing services to the ESO and DSOs as required.

These ‘worlds’ were chosen to draw out the range of options for the DSO transition. Baringa’s analysis finds, perhaps not surprisingly, that not one excels in all areas and each have relative strengths and weaknesses with trade-offs that need to be weighed against each other, particularly in the shorter term.

For example, considering the decarbonisation of heat and transport objective, worlds A or B would likely be best placed to meet it, whereas for the ease of market engagement for existing flexibility providers objective, D or E would be best placed.

With a 2050 perspective all of the models are found to perform similarly and the differences are largely based around their performance out to 2030, where the benefits that are available are lower. In this case, worlds A and B appear to be capable of performing relatively better due to their faster development and that they can exploit synergies between network and system operation at the distribution level to deliver greater benefits from access to flexibility resources. Further benefits can be gained by adding elements of the model C, which on its own does not appear to be sufficient to fully optimise the use of flexible resources.

The estimated costs of the various models are up to £500m by 2030 and £800m by 2050 while the estimated benefits are up to £3.5bn by 2030 and £20bn by 2050.

DSO transition paths

These findings that all of the models are viable confirm the availability of multiple option for the DSO evolution and Baringa also presents some of these taking as a starting point world B, which is seen to align most closely to today’s arrangements in Britain.

A continuation of this path to 2050 would be the one of least change and is considered most likely where the coordination mechanisms between the ESO and DSOs have proven to be effective and flexibility providers are able to interact with different markets and ‘stack’ revenues.

A move to DSO led coordination (A) would likely to be triggered by a high distributed energy resource uptake scenario whereby coordinated procurement across the ESO and DSOs becomes problematic, and it makes more sense to prioritise optimising the system at the distribution level. In this case there would be clear benefits in operating highly local flexibility markets to avoid or defer reinforcement on the LV levels of the distribution network

On the other hand, a move to ESO led coordination (D) would likely to be triggered when where there is little value in running local flexibility markets. Under these circumstances, the case for benefiting from the economies of scale of extending the ESO’s role to the high and extra high voltage distribution networks becomes more compelling.

Finally, the fourth transition path, a move to independent flexibility coordinators (E), would be driven primarily by concerns, real or perceived, about conflicts of interests between the network and system operator roles. An early move would see the creation of flexibility coordinators procuring flexibility from distributed resources but an ongoing role for the ESO and DSOs in dispatching it. A later move would likely involve the transition to a series of regional independent system operators.

Ultimately, many of the trigger points towards one or other of the transition paths are driven by the level of uptake of distributed energy resources, Baringa points out. Based on current targets this is expected to ramp up considerably in the late 2020s and early 2030s, which is when the paths would start to diverge, although it could be sooner or later depending on the actual uptake.

Baringa also notes that there is considerable work to do to develop new markets, platforms, operating practices and access and charging arrangements to facilitate the coordinated procurement of flexibility, if model B is the preferred pathway in the near term.