25 September 2018

Transcription

1 25 September 2018 Dear Colleagues, S&C Electric Company response to the ENA Future Worlds Consultation S&C Electric Company welcomes the opportunity to provide a response to your Future Worlds consultation. S&C Electric Company has been supporting the operation of electricity utilities in the UK for over 60 years, while S&C Electric Company in the USA has been supporting the delivery of secure electricity systems for over 100 years. S&C Electric Company not only supports wires and poles activities but has delivered over 8 GW wind and over 1 GW of solar globally. S&C Electric Company is particularly interested in facilitating the development of secure, low carbon and efficient electricity networks and would be very happy to provide further input to the ENA on the treatment and potential of emerging technologies and approaches. If you would like to discuss the contents of this letter in more detail, please contact me on Yours sincerely, Chris Watts Director Regulatory Affairs

2 General Comments Brunel Park, Brunel Way, We are very pleased to see the detailed work that the Energy Networks Association is carrying out to consider the range of possible approaches and industry architectures to enable a smart and flexible future electricity system. We understand that your upcoming work will include further least regrets analysis and cost-benefit analysis, which will inform the decision by Ofgem and BEIS on the appropriate industry architecture. We consider that the Electricity Transmission System Operator (ESO) does not need to have a deep role looking down into distribution networks as would be the case under a World D or the total TSO model highlighted below, where the ESO would take a central role in the coordination and dispatch of flexibility services from DERs. Such an approach would be unnecessarily complex and would involve duplication of knowledge and experience that DNOs have in managing their own networks. We would favour either World A or equivalently the Total DSO approach in the diagram below where the DSO coordinates the procurement and dispatch of DERs - or a hybrid world that contains key elements of this approach. While the growth in Distributed Energy Resources (DERs) is creating system operability issues for transmission, they also create technical issues for DNOs that must be managed. For example, we are already seeing significant capacity constraints in some regions for additional DG connections. DSOs are likely to be better able to manage large volumes of DERs as they will be aware of any capacity limitations on their networks. Over time, the balance of network constraints and operability issues is likely to shift towards distribution networks and it makes sense to manage these issues closer to where they occur. Further there is strong scope for DSOs to coordinate the services that DERs provide to both transmission and distribution networks and ensure that any conflicts are managed out. Figure 1: Coordination of Distributed Energy Resources; International System Architecture Insights for Future Market Design, Newport Consortium As highlighted in the consultation, the energy system is going through rapid change with the combined drivers of decentralisation, decarbonisation and digitalisation. Over 50% of renewable capacity and over 27% of total generation capacity is now connected to the distribution networks and the costs for new technology including storage, solar and wind are quickly falling. These changes will continue with further rebalancing of both supply and demand as greater volumes of DG are connected. In its Future Energy Scenarios, National Grid estimates that up to 60% of total generation capacity could be connected to the

3 distribution networks by We want to highlight the growing importance of distribution network reliability in supporting the energy transition and ensuring there are not barriers to realising the value of network flexibility and the transition of DNOs towards an active DSO role. Making effective use of flexible DERs depends on the underlying reliability of the network to which they are connected and over which they will provide services. We consider there needs to be greater focus on both short and longer duration interruptions have on DG and other DERs. Use of System Charges We welcome the recognition of the importance of network access, connection and use of system (UoS) charging issues as part of this consultation. These will play an important role in the effective deployment and use of DERs and ensuring that network capacity is used effectively. Carefully designed UoS charges will help manage the operation of the transmission and distribution networks, reducing the need for additional services from both transmission connected resources and DERs. It is important that such charges appropriately reflect both the costs that different types of connectees impose on the networks and the benefits that they provide to the networks. Appendix Response to selected detailed questions Section 2: The Future Worlds We have set out five potential Future Worlds. Do you believe these provide a reasonable spread of potential futures? We consider that the five potential Future Worlds provide a good spread of potential future architectures. It is likely that the actual model that is adopted will be a hybrid of some of these rather than any one options. As noted above we consider that the DSOs need to have a key role in the procurement and despatch of flexibility services from DERs. Do you have any key concerns with any of the Future Worlds we have set out? World C - Price Driven Flexibility captures several features that are likely to be part of any future world rather than defining a separate world on their own. The work that Ofgem is doing with the industry on electricity network access right and forward looking charges should have significant benefits in terms of ensuring there is more effective use of network capacity. However, even with enhanced price signals both the ESO and DSOs still need to buy flexibility services to balance the system and manage constraints at a national and local level. World E Independent flexibility coordinator this seems to add another unnecessary layer of complexity into the architecture through separating out elements of the DSO role and functionality to a third party. This seems to be like the approach put forward in Dieter Helm s Cost of Energy report 2 of creating regional distribution System Operators, but it s unclear how this will help reduce costs for customers. 1 Future Energy Scenarios in 5, National Grid, July 2017, for-web.pdf 2 Cost of Energy Review, Dieter Helm, 25 October 2017, view.pdf

4 Section 5: Stakeholder insights Brunel Park, Brunel Way, Which SGAM actor(s) best describes your future role(s)? As a technology provider, we don t really fit with any of the SGAM actors that are currently described. Our principal role is to support other actors including DNO/DSOs, IDNOs, TOs, DERs and transmission connected generation rather than acting a direct market participant. Section 6: Assessing the Worlds Do you agree with the proposed approach and timescales for delivering the assessment? Are there any improvements you would suggest? We support the timescales and the approach of carrying out cost-benefit assessment of the options following the HM Treasury Green Book guidance. It is also worth considering the Ofgem CBA guidance that was developed for the RIIO-GD and ED1 price controls that built on the Green Book and the work by Joint Regulators Group (the predecessor of the UK Regulatory Network) on CBAs. This work recommended the use of the Spackman approach for CBAs. 3 Do you agree with the proposed assessment criteria and allocation into cases? What further development would you suggest to the criteria (e.g. any additional criteria) or structure and content of the Impact Assessment? We support the 5 assessment criteria that have been identified including 1. Strategic case - How well does each model address the case for change including enhanced customer experience and greater environmental sustainability 2. Economic case - How efficiently does each model address the case for change including financial costs and benefits and whole system optimisation 3. Commercial case: How deliverable is each model are the markets viable and regulation appropriate? 4. Financial case: How viable are the funding arrangements for each model? 5. Management case: How viable/achievable is each model in terms of complexity and alignment of responsibilities/actions with roles? This include both industry structure and organisation and technical performance. We consider that these criteria are broad and comprehensive, and we welcome the inclusion of safety performance, service reliability and availability performance, security of both physical and IT and Telecoms assets and resilience within the technical performance aspects of criterion 5. Do you believe that there are any tensions between different criteria and if so how should priority be built into the assessment? Are there any functions/roles that need to be considered as a priority area for assessment? There will inevitably be some tensions between the economic and funding criteria and other criteria within the assessment and there will need to be appropriate balance between these. However, given the importance of developing an appropriate long-term architecture for the industry we would recommend data/assets/pdf_file/0029/37856/jrg_statement.pdf

5 placing high weight on both the strategic criteria and the management criteria including technical performance. Section 7: Key enablers for the future This is the list of key enablers that we have identified: Regulatory changes Organisational changes Communications infrastructure IT systems Network visibility and control Market engagement Contract requirements Funding. Are there more key enablers that we should be considering? We consider that distribution network reliability in terms of reducing the impact of both short and longer duration supply interruptions is a key enabler for future DSO roles and enabling the full potential of flexible resources from DERs to be realised. With increasing volumes of generation being connected to distribution feeders, it will be vital that distribution reliability continues to improve as both short and longer duration interruptions can knock the DG offline, typically for several minutes or more before they can restart. For this several minute window, the DSO needs to fully support power to that feeder, which previously had a lower apparent load because the DG was offsetting some demand. This means the DSO still needs to provide capacity for peak demand with no DG support. The tolerance for interruptions as increasing volumes of DG penetrate the distribution feeders will become less and less over time. Do you agree with our short-term investment priorities relating to the key enablers of: communications, IT, and network visibility & control? We support the short-term investment priorities relating to communications, IT and network visibility and control expenditure. Our understanding from the September workshop at the ENA is that the latter category includes distribution automation and remote control. As we have explained earlier in our response we consider ongoing improvements in reliability covering both shorter and longer duration interruptions to be a key foundation for the transition to DSO. Considering the different DSO model Worlds that Workstream 3 has considered, do you think the key enablers differ materially between the Future Worlds? No, we think the key enablers should be similar for each of the roles as has been identified under the least regrets work that the ENA has been carrying out. Section 8: Proposed next steps Do you agree with the proposed next steps? We agree with the proposed next steps as part of this process including further work on enablers and least regrets analysis.

6 The Open Networks Project is prioritising areas of least regrets to deliver the benefits of a smart grid as soon as possible. Is there a specific activity within the functions that we have prioritised that you would like us to focus on for short-term delivery? As we have explained earlier in our response we consider ongoing improvements in reliability covering both shorter and longer duration interruptions to be a key foundation for the transition to active DSO roles.