Supporting a smarter electricity system: Your response

Transcription

1 Supporting a smarter electricity system: Your response

2 Introduction Following SSEN s publication of the Supporting a Smarter Electricity System report, which set out the priorities and principles guiding the transition to DSO, SSEN issued a consultation to receive feedback on key aspects of the report from stakeholders. Responses were received from a diverse set of stakeholders including the System Operator, Technology companies, as well as Renewable and Storage groups. Broadly, respondents agreed with the five principles outlined in our report. In terms of prioritisation, the three themes that respondents wanted DSOs to focus on the most were: neutrality, transparency and the removal of local barriers. This will help guide our strategy and investments. SSEN received positive feedback on its DSO related engagement, however we recognise that we must build momentum by continuing to engage with our customers. SSEN has collated all the feedback received so far and summarised it in this document. Importantly, we have taken on board what has been said to us and issued a list of actions alongside a summary of the consultation responses. Supporting a smarter electricity system: Your response Page 3

3 Question 1 Thoughts from the experts As we transition to DSO we will look to build fairness into everything we do, and encourage policy-makers to do the same. Q. What additional measures should be introduced to ensure the transition is fair to all customers? At each of the two events we asked prominent experts from across the industry to give their view on the DSO transition challenge and the best way to tackle it. Here's what they had to say... There s an urgency around these issues, a need to rapidly learn by doing, invest in innovation, scale up success which are, incidentally exactly the tactics proposed by SSEN. SSEN writes that learning by doing will give the best outcomes, and this has to be bang on right. Now is not the time to overthink: the energy sector is moving too fast. It s time to act. The question that network planners are tasked with answering is how much network is needed? Build too little and consumers suffer less reliable supplies and inefficient markets; build too much and those billions build up. With the advent of smart smart devices, meters, monitoring and (hopefully) smart DSOs, there is the opportunity for the answer to be smaller than in the past, but achieving this will involve a significant increase in coordination Tomorrows network planner has a fundamentally different problem to solve. Respondents agreed that fairness is an important principle for DSOs and there was recognition that customers are increasingly differentiating themselves e.g. through DSR and new technology. There were calls to clarify what the definition of a customer is in a DSO world and the need to move away from focusing on consumers. Data was a key theme in responses to this question, with calls for DSOs to provide clear and structured data to underpin and govern the new processes and actors in the energy market. It was believed that data transparency would ensure all actors had the same obligations to support the continued operation of the market. About promoting fairness, several respondents said that existing arrangements needed reform. For example, it was felt that speculative connection applications can be costly, are unfair and that under-utilised connections were blocking off other applicants; making them socially undesirable. There were calls for the DSO to resolve this as part of developing a fairer charging methodology. While recognising that there is a lot of change happening in the energy market, one respondent said that stakeholders require as much certainty as possible to manage investment and therefore it is important that a clear roadmap for change is established. Respondents appeared to agree that greater consistency was required. One respondee said that every customer should receive the same level of service, whether that is reliability of supply or governance requirements for service providers. Another respondee said it was important that the DSO ensured all actors experienced the same regulations. Felicity Jones (Everoze) The growth of decentralised generation, electric cars, storage and smart digital technology all point to the edge of the network as the new energy frontier. Getting the role of the DSO right will be a critical step in transforming our energy system. Merlin Hymen (Regen) At the Low Carbon Hub, we are very interested in the transition of DNO s to DSOs because we see that this change could support the development of local energy networks with a high level of communityowned infrastructure feeding into them and a high-level of community engagement helping to organise local customers into being both producers and consumers. Barbara Hammond (Low Carbon Hub) Simon Gill (University of Strathclyde) Engaging with key stakeholders particularly through learning by doing is a fantastic way to develop new approaches as opposed to consultations which can take many years to implement, thereby stifling deployment and losing momentum. Chris Clark (Solar Trade Association) Learning by doing is the only way to truly incorporate feedback from customers on what does and doesn t work. Top down architecting and policy directives are important but need to be complemented with bottom up design and implementation in the real world. This allows the solutions to evolve, making the future DSO ecosystem and architecture truly fit for purpose. James Johnston (Open Utility/Piclo) Page 4 Supporting a smarter electricity system: Your response Supporting a smarter electricity system: Your response Page 5

4 Question 2 Question 3 Question 4 Question 5 Q. What steps do you think SSEN, government and the industry should take to ensure customers without a smart meter are not left behind in the transition? Respondents to this question agreed that this was an issue that required attention. There were several suggestions as how this can be tackled; ranging from major reforms to energy policy to smaller steps such as customer trials. Several responders called for government to transfer the obligation of rolling out smart meters to DSOs, who they argued are better placed than Suppliers to manage this. There was a perception that DSOs could be better incentivised to install smart meters and help customers to realise their benefits. Other suggestions included educating customers without smart meters on energy efficiency resources (such as LED lightbulbs), or on the use of other mechanisms to facilitate demand shifting without a smart meter and heralding a negative consumer impact. It was believed that these mechanisms could ensure non-smart metered users are not excluded from or hinder the transition for the DSO. As a principle one respondee called for, SSEN government and industry to be looking to ensure rules, standards and process are applicable across smart and legacy meters without compromising the valuable functionality of smart meters. Another respondee said that to find equitable solutions to this issue the DSO must engage with representatives of these customers to better understand their requirements. Q. Smart meters and time-of-use tariffs will enable costs to be distributed in a more reflective way. How should SSEN protect vulnerable customers from higher prices? In line with responses to other questions, responders said it was important that DSOs use the information available to them to make economic and efficient decisions regarding the operation of their networks and the costs subsequently incurred. On cost allocation, one respondee said that it was important that the most vulnerable customers are not exposed to an unfair level of network costs. However, a different respondee claimed it should be the suppliers' responsibility to protect the vulnerable, rather than DSOs. Several responses mentioned the role of charging arrangements and recommend that SSEN and the industry in general should study alternative charging methodologies, so that the most vulnerable customers are protected from price increases. More specific recommendations included the idea that SSEN produces a customer impact assessment. This would enable understanding of the proportion of peak demand that is potentially transferable (by customer type) to assess the impact of time-of-use tariffs on different individuals and the system. This could then be used to help target interventions for vulnerable customers. SSEN believes in learning by doing and has a track record of delivering innovative solutions into its business as usual operations. Q. In the context of ensuring a smooth transition to DSO and with reference to our action plan, are there any other projects or initiatives SSEN should be prioritising in the next five years? There was broad support for the principle of learning by doing and respondents were keen for SSEN to carry out new initiatives and trials. A respondee emphasised the need for learning points gained from these initiatives to be reviewed, shared and ultimately incorporated into the relevant industry processes and applications. It was recommended that the ENA working with wider industry was the best way to achieve this. Whilst there was support for DSOs to be bolder and more progressive, one respondee said the transition also needs to be flexible and ready to be deployed in stages, if the best whole system outcome is to be delivered. There were several specific suggestions for SSEN to consider undertaking over the next five years, these included: Carrying out further work to improve both short and longer duration interruption performance with higher proportions of low carbon technologies; enabling trading between customers through new P2P platforms at a range of voltage levels; establishing the core data requirements allowing different actors to interact with a common language. SSEN believes that peer-to-peer platforms have the potential to allow flexibility to be traded locally in a way that reduces network constraints. Q. Do you agree with this? If so, what are the next steps SSEN should be taking in order to support peer-to-peer trading? Of those that responded to this question there was a split between responders who favoured a focus on a DSO unlocking peer-to-peer services and others who believed this was only one of many solutions and therefore they preferred a DSO to let the market lead on these developments. One respondee said it was imperative that industry understands the existing frameworks that would be utilised to support peer-to-peer and whether any barriers exist. It would then be possible to see if and how those barriers can be removed. It was also recognised that consideration is required of the necessary supporting interactions between DSOs, peer-to-peer trading facilitators and other industry participants such as suppliers and the TSO. Of those that supported Peer-to-Peer developments, there were requests for establishing a DSO-model that facilitates trading between small energy cooperatives and community schemes that can empower communities to take responsibility for and own their energy futures. It was also said that factors such as ability to stack revenues, consistency of approach across GB, and certainty of arrangements all need to be considered. In line with other stakeholder feedback, there were calls for interoperability to be a key feature of any system to ensure that the systems work across all DSOs. Page 6 Supporting a smarter electricity system: Your response Supporting a smarter electricity system: Your response Page 7

5 Question 6 Question 7 As a universal service obligation, electricity distribution includes a number of socialised charging arrangements including non-sole use reinforcement. Due to the rise of new technologies such as electric vehicles these socialised costs may significantly rise. Q. Do you think that we should be moving away from socialisation and should the same rules apply for all customers e.g. domestic and commercial? The ENA represents network companies including SSEN and through the Open Networks Project the ENA has a key role in delivering the DSO transition. Responses to this question supported collaboration and welcomed the work that the ENA s Open Networks project was undertaking. This was summarised in a response that said the Open Networks Project has been a key driver in delivering the DSO transition and educating the wider market to ensure involvement in the transition. Q. Do you have any views on whether SSEN or the ENA can better coordinate the transition? Two responders, however, wanted to see easier access to the Open Networks Project through greater industry engagement. Many of the responders to this question recognised the tension between more cost reflective prices and the political desire to spread some costs due to social factors. However, there was a general preference for reforming charge arrangements in a way that sharpens price signals. For example, various responders felt that: the universal service obligation and the socialisation of costs leads to anomalies and distortions which are easily exploited in a competitive market place. Connection costs and use of system charges need to be cost reflective; and; moving away from socialisation of costs and using different charging regimes to deter or encourage certain behaviour should, in theory, result in the optimum allocation of assets and resources. Responders mentioned the Targeted Charging Review and work under Charging Futures, on both locational signals and access arrangements, as being the key initiatives for change. Several responses said that the development of enhanced price signals through dynamic and time-of-use charging should play an important role in improving both cost efficiency and efficient use of the network. This echoed the view that charges should be made more reflective of both the benefits that different network users provide to the network and the costs they impose. For example, it was suggested that project meetings could be made more open and transparent in terms of contributing and seeing output. One of the main reasons responders appear to favour collaboration is that it helps streamline processes and costs and avoids market participants having to deal with separate DSO systems. One respondee highlighted this by saying that if each region pursued radically different DSO models, the costs incurred by customers could increase dramatically. Instead it was recommended that the Open Networks project maximises the benefits of standardisation and provides the best outcomes for industry and customers. This was reinforced by another respondee saying that the ENA should focus on establishing a standardisation of approach, whereby they ensure all market participants are appropriately informed of flexibility actions to facilitate operational planning. A respondee also stated the importance for arrangements affecting DSOs to be fully discussed by all stakeholders through open governance measures that aligned with European regulations and developments. Page 8 Supporting a smarter electricity system: Your response Supporting a smarter electricity system: Your response Page 9

6 Question 8 Question 9 Do you agree with SSEN's view that the DSO should be a neutral facilitator? This question produced a divide in opinion between those respondents that supported the principle of neutrality in all cases, and others who believed that there should be flexibility for DSOs to make investments if they are demonstrated to be in customers interests. Several respondents believed that there may be circumstances where the DSO needs to own and operate flexibility resources, such as electricity storage, where it is the most efficient economic solution. One response said that this would then allow the most cost efficient network to emerge if both market and DSO led storage solutions are permitted, albeit with the caveat that a DSO must operate with full transparency to allow the market solutions to compete fairly. Part of the reason cited for this was that the mix of flexibility available is likely to vary significantly on a locational basis and, as such, there will be situations in which no market solution comes forward. There were also concerns raised that in some cases where there is a low or very uncertain market value a commercial tender is not proportionate, but rather the DSOs will need to be the flexibility provider. Another response said that cost efficiency and reliability were more important than neutrality, and that being strictly neutral may lead to negative unintended consequences. On the other hand, one respondee had a more cautious view, believing it is important the DSOs operate their networks in accordance with defined principles that include being technology agnostic and avoiding conflicts of interest in the options available to them in managing their systems. Q. If so, what does this mean to you? Going further, another respondee said that DSOs should not have vested interests in the provision of commercial services (i.e. they should not be commercial aggregators) and they should not create undue barriers to parties participating in multiple, complementary markets i.e. through revenue stacking. There was general agreement on the need for a DSO to provide full transparency on processes, planning, operations and procurement to help all market participants compete fairly and effectively, react and plan for the future. Feedback also suggested that giving all actors equal access to the market was a priority, and a respondee criticised current arrangements that treated actors differently depending on what size they were. To provide market access it was said the ability to access key industry data (such as consumption or connection data) is essential for market actors to invest and participate in DSO activity. Networks provide a very high level of reliability and enable a wider pool of resources to buy and sell together. However, non-network solutions such as demand side response can reduce the need for more network assets by rewarding customers who provide it. There was broad alignment between the responses received to this question. The following is a summary of recommendations by responders: DSOs should be optimising across the full range of network and non-network options, based on whole-life costs; solutions are likely to be location specific and will vary depending on the profile of existing assets, the mix of existing and prospective generation, and the mix of customers; a key advantage of the DSO model is that it can realise a range of solutions to the problem of optimal network planning. This includes balancing the need for reinforcement against other available technologies to mitigate that need; DSOs are rightly focused on community led initiatives, however care should be taken to balance these local needs with the efficiencies generated from larger regional and national markets. Q. Do you have any views on how network and non-network options can be co-optimised? The optimal mix of non-network and network solutions should be improved by market forces to yield the most cost-efficient system. To facilitate this, it is crucial for the DSO to give full visibility on these long-term options, and their associated costs, so that non-network solutions can compete effectively. With regards to sources of flexibility, one respondee claimed that the use of small scale domestic flexibility appears prohibitively expensive in terms of engagement and as a service when compared to larger resources e.g. I&C customers. It was said that evidence from DNO trials supported this view, for example UKPN's Low Carbon London project showed the high cost of domestic scale DSR. There were also suggestions for how DSOs can determine optimal solutions. For example, a respondee advocated the development of a tool that simulated network needs, with better reflection of the revenue streams for providing different services. A different respondee said that optimisation should be conducted using a transparent methodology such as the Network Options Assessment (NOA) process. Page 10 Supporting a smarter electricity system: Your response Supporting a smarter electricity system: Your response Page 11

7 Question 10 Question 11 Question 12 SSEN serves over 3.8m customers across central southern England and the north of Scotland and has supported community projects. Q. How important do you think this local relationship will be in helping communities realise their ambitions? Q. As roles and responsibilities in the emerging energy system evolve, do you expect DSOs to be more customer facing. If so, in what way? Q. Our action plan outlines some of the steps we are taking as part of the transition. In order to prioritise our efforts, we would like to hear which ones are the most important to you. The responses received were supportive of DSOs building on their local relationships and expertise to help communities deliver their plans. There were calls for the DSO to work as closely as possible with local actors to both identify opportunities and remove barriers to community energy projects. Further weight was placed on the DSOs role as a facilitator to local plans and that this could expand beyond electricity to for example mobility and heat. It was suggested that DSOs should work with local authorities, who by default have a wide reach and are trusted by customers, to help local communities realise their ambitions. Several responses highlighted the DSOs role in helping local actors interact with national aspects of the energy system and it was pointed out that in a decentralised world the DSO must constantly manage bi-directional flows with the TSO. One respondee supported community-led action but stressed the need for facilitating national solutions through a balanced and neutral approach. Whilst responders all agreed that DSOs should be customer facing, there was a mix of responses to this question. One respondee said it was important that DSOs engage effectively with the full range of customers as well as community groups, to tailor network solutions that are appropriate for local areas as well as the network more broadly. Due to the DSO transition another respondee said that DSOs needed to be much more customer facing, particularly as there will be a commercial relationship between the DSO which was previously managed by the supplier. However, a different respondee said that network companies are already incentivised through their RIIO-ED1 price control settlements to be customer focused and they did not see a driver for a DSO entity to be more customer-facing. Other points included: a request for wider access to appropriate data via a new DSO-led platform; in the medium term, it is possible that DSOs could directly contract services from customers, particularly if those services are available via open access flexibility platforms or similar; important that DSOs do more to raise public perception of their role and how they can facilitate customers to become more engaged in their energy consumption and production. This can be achieved through advertising, social media, viral campaigns, appropriately incentivised engagement events. A lot of the responses received on this question focused on the need for collaboration, particularly, through a single and accessible vehicle such as the Open Networks Project. Further, one respondee said there was danger in DSOs having different priorities that led to inconsistencies between different regions. For this reason, it was suggested that the ENA coordinates and leads a national action plan that informs local DSO plans and leads to the targeted trialling of new platforms and technologies. A respondee said that actions to deliver the most efficient and economic whole system outcome through making effective use of flexibility should have the highest priority. This was echoed in another response, which said that Active Network Management and investment into ICT systems was a priority to realise cost efficiency. There were also calls for new markets to be introduced to support the DSO transition. For example, it was suggested a new voltage support market at distribution would leverage the control available in most modern bi-direction power electronics. In contrast to other responses, one respondee said that cost should not be the main item of concern to the DSO. This was evidenced by a BEIS survey showing that concern over bills is at a historic low. It was claimed that customers are more concerned with network reliability. A respondent said that more engaged end users will stimulate markets for flexibility. However, there was concern that large industry incumbents, including aggregators, have too much influence at the moment and that DSOs should be willing to give more attention to small or new actors. Page 12 Supporting a smarter electricity system: Your response Supporting a smarter electricity system: Your response Page 13

8 Question 13 Question 14 Key considerations for SSEN Q. Do you have any other views on our DSO principles, action plan or on the transition process that you would like to share? This question prompted general feedback on SSEN s work to date and led to several suggestions for how we can progress, such as: DSOs should learn from international models that demonstrate the value and savings to the end consumer of allowing DSOs to own and operate electricity storage; The DSO s three key objectives should be: to ensure the end consumer receives a stable, efficient and cost-effective energy supply; to support the UK ambition to reduce carbon emissions; and to ensure competitive provision of energy supply. There is a potential conflict with the desire to standardise and Principle 5 of empowering local solutions, which will lead to unique hubs developing. DSOs must consider how to deal with this. Q. Do you have any additional feedback that SSEN needs to consider? Similarly to Q13, and due to the nature of this question, a diversity of responses were submitted that were framed as feedback or suggestions. A lot of the feedback received was positive; for example one respondee welcome the phased DSO approach and that it had been set out in the action plan. Respondents were also encouraged by the scale of our engagement that had noticeably improved. There was also support for our principled approach and recognition of the challenges facing networks, as well as the need for whole systems approaches. There were also suggestions from respondents for where we can improve and areas of concern they had. Many of these are repeated points that have been summarised in other questions above. However, there were new issues raised, such as the concern that the DSO model advocated benefited established aggregators who may have an unfair advantage in providing DSO flexibility services over smaller new entrants and/or independent entities. It was recommended that more action is taken to promote new players by making arrangements more accessible and transparent. There were also specific calls for SSEN to improve our connections arrangements, to make them more standardised and to remove the bias on existing connectees over new ones. It was believed that this was a major barrier to innovation and distorted flexibility markets. You ve said... Unlocking local solutions and removing barriers for community-level projects is Stakeholders welcome the progress SSEN and other network operators are making 3. We will... flagged as a priority for many of those we have engaged; towards a DSO model, however, there is a desire for us to be bolder and even more progressive; While there is broad agreement that as a DSO SSEN should strive to be a neutral facilitator, a survey ranked it the lowest priority of the five principles; several stakeholders believed that DSOs should, in some cases, own and operate flexible devices such as energy storage; Continue to adhere to our Transition Principles Working for all customers Learning by doing to give the best outcomes for customers Ensuring a coordinated and cost-efficient transition Ensuring neutral facilitation There is clear support for SSEN and the ENA, via the Open Networks Project to be more engaging with industry; Many actors are looking for DSOs to provide greater transparency, particularly on data, but stakeholders also want simplification and to avoid complexity. Prioritise going forward SSEN will increase our engagement with a broader group of stakeholders, particularly those that traditionally have been under-represented. SSEN will support the development and trialling of new platforms that make it easier for customers and actors to trade flexibility; this will involve data transparency. SSEN recognises the central role of the ENA s Open Networks Project and will continue to channel efforts into this; we will also look at improving and standardising connection arrangements. SSEN will continue to issue Constraint Managed Zone tenders to stimulate local flexibility where it is required. In addition to this we will work with industry to remove barriers to entry and to make these tenders more accessible. Feedback was also received on the importance of DSO and SO coordination and it was felt that this was an area that required attention in the short-term to avoid issues for market participants. Unlocking local solutions SSEN will explore ways it can work with Local Authorities and other actors to help deliver community-level benefits from smart grids. Page 14 Supporting a smarter electricity system: Your response Supporting a smarter electricity system: Your response Page 15

9 Contact us: +44 (0) Scottish and Southern Electricity Networks is a trading name of: Scottish and Southern Energy Power Distribution Limited Registered in Scotland No. SC213459; Scottish Hydro Electric Transmission plc Registered in Scotland No. SC213461; Scottish Hydro Electric Power Distribution plc Registered in Scotland No. SC213460; (all having their Registered Offices at Inveralmond House 200 Dunkeld Road Perth PH1 3AQ); and Southern Electric Power Distribution plc Registered in England & Wales No having its Registered Office at Number One Forbury Place, 43 Forbury Road, Reading, Berkshire, RG1 3JH which are members of the SSE Group.