October 2017

Just a few years ago European power generation was dominated by large centralised fossil fuel and nuclear power plants. Recent years have seen a dramatic rise in distributed energy. In the UK there are now nearly one million renewable energy generators largely connected at the edge of the grid. Power regularly flows up the distribution network to the national transmission grid. A key step in Europe transitioning to a smart energy system is flexibility in how we generate, store and use power at a local level on the distribution network.

In the UK, the government has set out its “Upgrading our Energy System: Smart Systems and Flexibility Plan”. A key part of the Plan is to task the UK’s distribution network operators (DNOs) to become distribution system operators (DSOs). This change in role is a huge shift from running a passive network that carries power from large generators to electricity users, to operating an active system that balances supply and demand at a local level and enables households, businesses & networks the ability to take advantage of new energy technologies to take control of their energy and lower their costs.

I recently chaired four stakeholder events the UK’s largest DNO, Western Power Distribution, held to discuss its DSO strategy. This provided me an opportunity to get insights into how customers view the shift to a more actively managed network. I have picked out five themes that are likely to be relevant to those working on the shift to a smart energy system.

  1. There is interest in the opportunity for energy users to take more control of their energy use and to be rewarded for being more flexible in how and when they use power. Large energy users in particular see opportunities in changing some of their process schedules to avoid peak prices and support the network.
  2. However, there are limits to this flexibility and there needs to be very simple ways of accessing the value in the flexible use of power. Fundamentally, large and small energy users expect the system to be able to provide whatever power they need whenever they want it at a reasonable price.
  3. Balancing supply and demand at a local level will need clear price signals to incentivise switching away from peak demand/generation times. However, it will also need some kind of local energy market where contractual arrangements can be put in place to enable distributed energy resources to respond to particular constraints on the network – avoiding the need for expensive reinforcement.
  4. There is a thriving ecosystem of innovators who want to enable energy users to use power more flexibly and generators to produce power when it is needed: from smart technology that can reduce power demand on non-essential uses at time of high prices; to platforms than can aggregate small changes in demand to provide a significant service to the network. Their key ask is open data on power flows around the energy network.
  5. There is a risk at a domestic level that vulnerable customers who aren’t able to use the latest digital technology to reduce their bills lose out in the shift to a smart energy system. Their needs will be need to be considered at each stage of changes to the energy system.

Merlin Hyman