ENA Future Worlds Consultation

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1 ENA Future Worlds Consultation Section 2: The Future Worlds We have set out five potential Future Worlds. Do you believe these provide a reasonable spread of potential futures? They provide us with a good starting point that tries to frame distinct possibilities, something useful to leverage the discussions on the future arrangements between DSOs, TSOs, consumers, aggregators and all the remaining stakeholders. Nonetheless, it would be helpful if the analysis could be complemented by a brief description of the main additional factors that, for now, we see as possible differentiating factors when it comes to the hypothetical worlds ahead, such as: The distinction between governance models and platforms What could be the scenarios in the short to medium term, how to outline a long-term vision and what type of changes can we expect from one point in time to another (will the worlds evolve autonomously, will they converge, could we start with A and end up with B, and so on) What is in the current situation that might influence our future choices What are the paradigms that, taking a long-term perspective, might challenge preconceptions such as the need to balance the grid at a more local level Independently of the level of certainty on current and future realities of the sector across UK, it might be also useful to raise attention to eventual distinct organisational models in the future, and how they could impact the choice of the most preferable model Summing up, a combination of benefits and risks, together with the analysis of major impacting factors could prove useful to evaluate the different worlds, their possible relations and the way they could evolve over time. Are there other areas of potential Future Worlds you would like us to consider to inform our thinking? Yes, at least the ones mentioned in the previous answer. Do you have any key concerns with any of the Future Worlds we have set out? Not necessarily, if becomes clear that they represent options for modulating a future reality that is complemented by a reasonable analysis of the major impacting factors and progress over time, whilst accompanying the evolving roles of DSOs, their interaction with TSOs and the market, and the participation of consumers in the process. This would mean, theoretically, that any world not taking into consideration the concrete requirements of future distribution system operation would become impractical in the longer term, and this risk is quite variable across the worlds. Luís Vale da Cunha 1

2 Section 3: The Smart Grid Architecture Model Is there anything missing from the SGAM methodology that has been implemented? First, it is important to acknowledge the relevant effort made so far on the smart grid architecture models which, per se, is valuable work to achieve the goals of ENA s Open Networks Project. SGAM seems to be helpful in making a static analysis of the intended scenarios. Not capturing details of market operation as well as human behaviours, as mentioned in the report, might prove a relevant limitation precisely because these two factors are amongst the main novelties in the future energy sector arrangements, where new markets for flexibility will exist and the electrification of society will provide further uncertainty to the patterns of energy use compounded by the variability of renewable energy sources and the combined use of generation, demand and storage. The quantitative analysis between the worlds might be reasonably affected by the abovementioned facts as it is becoming clear the degree of variability and uncertainty in the future power system will require a far more pro-active and agile approach from the DSO to both system operation and market interaction. It might also happen that the quantitative analysis provided by SGAM will be relevant mainly as a reference to identify and to compare, on a qualitative basis, expected main differences between models. How can SGAM modelling be used in further work to extract maximum value? The modelling process is very useful in its initial phase as a consistent way to list business, function and interactions for each one of the models. It is one of the most invaluable benefits of such an exercise. However, it does not come without important limitations, as mentioned in the report, including the absence of a way to characterise the impact of changing or combining the worlds over time. Furthermore, by focusing on compartmentalised views of future scenarios, there is a natural tendency to neglect external factors and different possibilities. As we are only starting the discussion about the evolving roles of the DSOs and the upcoming changes in the energy sector, those restrictions might be even greater. What are the limitations of using the SGAM modelling for informing the Impact Assessment? There is a potential risk of missing the real impacts of combining active system operation and active neutral market facilitation, precisely by not capturing in more detail market operation and new patterns of energy use, as well as possible evolution of the different worlds over time. Luís Vale da Cunha 2

3 Section 4: The principle of neutral market facilitation How do you believe neutral market facilitation for SOs can be achieved? First, I agree that neutrality should be achieved by SOs performing regulated core activities. Yet, the objective should be also to provide concrete means to implement it in the new environment. It will not happen by restricting DSOs in their capabilities of innovating, performing combined active system management and neutral market facilitation, and not being fairly remunerated by these key supporting activities fundamental to achieve the energy transition. Not acknowledging these active roles is a very clear limitation to any future competitive market development as it will be very difficult to achieve a feasible and cost-effective level playing field. Policy makers, regulators and the remaining stakeholders, should become aware of the intrinsic relation between system operation and neutral market facilitation. There is much to be done apart from expecting DSOs to become market makers for flexibility or replacing investments through third-party flexibility offers. It is also part of our responsibility to raise awareness by being transparent in making clear the expected impacts of the transition process, which implies opening possibilities instead of creating artificial barriers on the assumption that there will be grey areas between regulated and market activities. What are the possible conflicts of interest that SOs need to be aware of when facilitating the market? Looking at the distribution system and understanding it as an enabling platform is helpful to explain how to avoid conflicts of interest. In a complex world of interactions between consumers, market parties, distributed and central resources, it is of utmost relevance that real-time coordination exists between system and market layers. Real coordination, here, is the way to ensure proper functioning without creating unnecessary costs and overlapping of responsibilities. As for the use of flexibility for network operations, it should be considered under regulatory provisions and not be taken as a single option but instead one amongst others to be used by DSOs within the frame of their operations. What additional requirements would be appropriate to ensure the neutrality of SOs in facilitating the market? Ensuring the evolving roles of DSOs, neutral by default, are clearly known to all stakeholders, namely by improving the regulatory framework and acknowledge all the enabling functions of the DSOs instead of putting the focus on further restrictions to their activities, is key. Luís Vale da Cunha 3

4 Section 5: Stakeholder insights Which SGAM actor(s) best describes your future role(s)? DSO. Do you have any thoughts on the insights gained on this role(s) in each of the Worlds? Despite the chosen option, it is key to ensure the right active coordination mechanisms between system and market operation that will allow DSOs to ensure the proper, reliable and costeffective running of the system. Complexity is rising, particularly impacted by the resources connected to distribution grids. Any future option intended to limit DSO s own ability must be emphatically rejected because the safe and effective operation of the connecting grids must have precedence over any other requirement to not start any chain reaction and not affect customer service. In a new digital and smarter energy world, there will be, for certain, different ways of implementing new solutions and arrangements between parties. The feasibility of these solutions will much depend on their capacity to respect this subsidiarity principle and to implement a governance model that observes the evolving and demanding requirements of distribution system operation. Do you have any comments on the insights drawn on any of the other roles described? If you do not feel represented by any of the actors, how do you believe we should capture your role? Luís Vale da Cunha 4

5 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? Generally, yes. Please check the answer to the next questions for suggestions of improvement. 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? The proposed assessment is very complete and enough detailed taking into consideration the current stage of the process. However, there seems to be a key case that is not taking part in the assessment process, namely the way to address how well will the distribution system be capable of coping with the challenges ahead. Is there any data you could provide or suggest we collect to support the assessment? I would suggest you consider hypothetical figures and outcomes that might prove helpful to describe the impacts on distribution operations, namely those coming from research activities, European and national projects, policy papers or any other studies of relevance to these matters. Do you believe that there are any tensions between different criteria and if so how should priority be built into the assessment? It might prove useful to establish a priority system to enforce coherence between the assessment and the future realities, namely by giving evidence to the most relevant criteria, including the reliable operation of the system. Not giving enough evidence to priority requirements would probably result in a biased analysis that would give precedence to economic factors and probably pointing out to not good enough solutions. Are there any functions/roles that need to be considered as a priority area for assessment? Yes. All the functions/roles critical to ensure the right operation of the systems, particularly the connecting ones, and the way to properly coordinate their real-time interaction with the market where consumers are expected to take the key role. We are considering forming a sub-group to assist with the collation of data for the Impact Assessment; do you think this would be worthwhile and if so would you volunteer to be part of the sub-group? Luís Vale da Cunha 5

6 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? Yes. Although might be implicit from the list, Active System Management, in its capacity to coordinate system operation with markets activities, is a key enabler to be listed on top of the list, which is also highly dependent on regulatory changes. For the sake of clarity of the above comment, please consider the following definition for Active System Management: Active System Management (ASM) is a key set of strategies and tools performed and used by DSOs and TSOs for the cost-efficient and secure management of the electricity systems. It involves the use of smart and digital grids and the capacity to modulate, in different timeframes and distinct areas, generation and demand mostly through market-based flexibility instruments to tackle challenges impacting system operation, thus ensuring proper integration of Renewable Energy Sources (RES) and a high share of Distributed Energy Resources (DER), as well as the integration with energy markets. Do you agree with our short-term investment priorities relating to the key enablers of: communications, IT, and network visibility & control? Yes, and would reinforce it further together with the necessary requirements to connect system to market operation through active system management capabilities. Given our short-term priorities, what actions do you consider need to be taken now to address them? Set the right regulatory framework in place that allow DSOs to further innovate on smarter grids and digitalisation across the entire network, DER integration and smart charging, test and develop interaction with new local markets and promote new ways to engage consumers. Considering the different DSO model Worlds that Workstream 3 has considered, do you think the key enablers differ materially between the Future Worlds? From the conceptual point of view, not necessarily, considering that DSO requirements to address system and market operation in a coordinated way are to be set in place independently of the chosen model. From a more practical standpoint, there are some requirements that might be addressed differently from one world to the other. Luís Vale da Cunha 6

7 However, it seems not feasible, in the mid- to long-term approach to cope with scenarios where the real control over the impacts on distribution grid is under control of third parties, something that has a high probability of occurrence in some of the worlds under consideration. Section 8: Proposed next steps Do you agree with the proposed next steps? In general, yes. Nonetheless, there is also the need to strengthen the innovation on matters that relate to Active System Management and its connection to new market activities to successfully address the Least Regrets Analysis methodology. More than a common denominator between worlds, there is need to anticipate our long-term energy system requirements, namely by testing the most complex scenarios. This compromise between investment areas of major certainty with new areas will probably result in the most successful approach. 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? I would further develop the coordinated approach to network operation and market facilitation in a way that would help DSOs, with the cooperation of TSOs and the participation of market parties, to balance in all timeframes the energy system at its various and interconnected levels. Is there any additional work that we need to undertake? I believe there might exist room for further exploitation of the Active System Management concept, as mentioned in some of the previous answers. Luís Vale da Cunha 7