Sotiris Georgiopoulos, DSO Director at UK Power Networks, details the reasoning behind the launch of the UK’s first independent Distribution System Operator.
We live in exciting times. Under most decarbonisation futures, electricity demand needs to double by 2050 to serve our communities.
So, how do networks manage to provide a fit for purpose electricity network that serves that demand at the lowest cost for consumers whilst delivering on time, at the pace required to be an enabler and not a blocker to the energy transition?
The traditional answer would be to build the network required to meet the peak customer demand. Put copper in the ground, reinforce ahead of need and get ready for the new demand whether it comes now or in 15 years’ time, if at all. But that won’t wash with our customers, and rightly so.
In a challenging time for our customers, UK Power Networks’ share of the bill has fallen by 7% since 2015. Regardless of the challenges of net zero, we simply cannot expect to get a blank cheque.
Security of supply, affordability and sustainability remain the three priorities of an effective energy system that need to be balanced. We need an approach to protect consumers as we electrify the transport and heating sectors of the economy that reflects today’s society we live in, rather than yesterday’s.
But what does that different approach look like?
It uses the latest advances in data, technology and consumer flexibility to ensure that we maximise use of the existing infrastructure and deliver the lowest cost energy transition.
In the areas UK Power Networks serves we have over 10GW of distributed energy resources attached; that’s enough to power more than 6 million homes. We already have more than 400,000 EVs on our network too. That gives us a lot of levers to pull if we can get the right incentives in place to motivate customers to shift their demand.
That means moving energy use away from peak times or even increasing it at times when overall demand is low, but the sun is shining, and the wind is blowing. That’s not the future, it’s happening right now.
In May, we awarded more than 1GW of contracts to flexibility providers to compete to provide a flexibility requirement of 426MW. That coupled with the digitalisation of the networks will be the next frontier of efficiency for distribution networks, we alone have committed in excess of £400 million financial savings over the next five years that directly benefit our customers. And this is not just happening in our patch, but across the UK and increasingly the globe.
But there’s an even bigger issue at play here, which is the issue of trust. Markets require transparency and trust to flourish. That is where UK Power Networks is taking a different approach.
We don’t believe it is right that it’s the network alone that decides whether to build new infrastructure, therefore adding to their asset base, or go to the market for flexibility. If we are to build confidence in the market then we need to be open and transparent about the decisions we make, which is why we’re launching the UK’s only independent Distribution System Operator (DSO).
The DSO will be overseen by a supervisory board that will act in the interests of UK Power Networks customers, both domestic and commercial. It will robustly challenge proposed solutions to new capacity, whether it is to build or go to market for flexibility. And it will publish its findings annually in a publicly available report.
Establishing the DSO as a dedicated, standalone business unit will enable us to deliver change at a pace not seen before in the industry. As Rachel Fletcher, Director of Regulation & Economics at Octopus Energy, stated at our DSO Launch, this is transformation, not just change; we aren’t turning a brown caterpillar into a green one, but into a butterfly.
We have to embrace disruption to deliver what is needed at the pace expected by our customers and communities. We strongly believe this approach will deliver the best outcomes for customers and ensure our network can manage the uncertainties of the coming decade as the UK continues its transition to net zero.
