The UK energy sector is undergoing a period of major change as it transitions to net zero. At the forefront are the Distribution Network Operators (DNOs) – the licensed companies that own and operate the network of towers, transformers, cables and meters that carry electricity from the national transmission system and distribute it throughout Britain. They must grapple with emerging questions of digitalisation, data management, net-zero strategies and performance against price controls as they unfold at pace. It is a sizeable and complex task.
We brought together a panel of experts to discuss the role that regulation plays in supporting DNOs and unlocking sector-wide innovation, in our February webinar hosted by Icebreaker One Co-Founder and Programme Manager, Gea Mikic:
- Charlotte Hillenbrand, Product Strategist, Icebreaker One
- Sara Vaughan, Non Executive Director, Elexon
- Liam Bennett, Senior Manager – Data Policy and Regulation, Ofgem
The panel started by discussing what’s changed for DNOs and the wider energy market over recent decades, before exploring how the sector can work together to achieve net zero goals. Here’s a summary of the key themes.
1. The impact of transition
Increases in distributed generation require Distribution Network Operators (DNOs) to take on system operator functions; shifting their role from passive/reactive energy distribution to such as and active network management, using new technology and real-time data to make interventions on the network: to the transition from Distribution Network Operator to Distribution System Operator (DSO).
“The distribution network used to be seen as passive. It was basically a conduit for getting power from one place to another. Today is very different. In the last decade, the usage patterns of Britain’s local electricity distribution networks have changed rapidly. There’s been a sharp increase in more low carbon generation connecting to local networks, as both consumers and businesses invest in their own generation equipment” says Sara Vaughan, Non Executive Director, Elexon.
Sara explains: “In a DSO model, the very last thing that the network will be is passive. It is sitting at the centre of thousands of potential interactions, playing host to a variety of different distributed energy resources and enabling flexibility transactions as an alternative to just investing in more network capacity. The key to this, of course, is data and digitalisation. The networks need to know where the assets are, the investors and developers need to know where the opportunities are, and consumers need to know that this is all possible. Greater data visibility and open data are essential steps towards the digital transformation of the energy sector and the acceleration to net zero”.
Are we heading in the right direction?
It’s clear that this is a pivotal moment for the energy sector. How can policy and regulation provide the structural support for this shift?
“What every regulated body needs is a degree of certainty in terms of future policy. My concern, when you couple the current world situation with the cost of living crisis that we’re seeing more generally at the moment, is around political will to keep pushing forward. We know that there are some members of Parliament already who are talking about slowing down the drive to net zero. But we will never get to net zero unless we drive for it. Once we are on that path, then we reduce our dependence on gas and its volatility. So we have to keep that decarbonisation focus and investment going.”
Sara Vaughan, Elexon
We need to work collectively to keep modernising and diversifying our digitised energy systems. Liam Bennett, Senior Manager – Data Policy and Regulation at Ofgem, emphasises: “Digitalisation is the key; driving open data up through the DNOs and up through other systems to provide value. If we keep progressing in silos and we all think that in our individual parts of the system we’re building the right thing, but none of it interacts; we don’t really get that true value in the whole system and we end up either overbuilding or we just fundamentally don’t get there.
“Each DNO having its own data sharing platform is definitely a good starting position. To make data available to consumers, to stakeholders, to Ofgem, is a really positive step. My push to DNOs would be: how do we use those open data platforms? We need to take a common approach, whether it be through an open network project or a third party; making sure that stakeholders and flexibility providers can go and access each of those different data platforms and know what data they’re going to get, in the right fashion, in the right timeliness”.
2. Focus on interoperability
Interoperability is essential if the energy industry is to achieve its 2030 climate targets. Liam states: “The wider system probably needs three key points to deliver in the next 10 years. The first is common data and metadata standards. Ofgem recently published a letter on the common information model for the Long Term Development Statement for DNOs, which is a strong step for us, and we think future standards will also be valuable. Secondly, minimum standards for data quality. Everyone in the digital energy sector needs to know that the data they receive is accessible and acceptable. Thirdly, you need clearly articulated roles and responsibilities in the sector. You need to reduce risk; we need increased regulatory certainty. And we need to understand who you interact with to get what you need to operate in that future system. The operation requires interfaces between different parts.
“We’d like to see the approach DNOs are taking to engage external providers such as Open Energy to find common interfaces. We’ve been on quite a journey so far, from the Energy Data Task Force into the Energy Digitalisation Task Force. We’ve taken quite an open approach to our regulation, collaborating with the sector and with DNOS as well. We want to take that forward. Collaborative and iterative design is the only way we’ll get the energy system we all envisage. So yes, our door is open. We want to design the system with you. Come and help us.”
Liam Bennett, Ofgem
3. Getting started
With so much to navigate, it’s important just to make a start. Charlotte Hillenbrand, Product Strategist at Icebreaker One, explains: “the challenge is always: where do we start? I’ve encountered lots of clients where that conversation has been rolling for a couple of years. And the problems are somewhat known, but the starting point still evades the teams. So that’s where Open Energy is really trying to help DNOs and other players in the sector: to get started. With Open Energy you can dive in and start accessing data; start finding open and shared datasets and see who else in the community is active.
“We’ve really tried as much as we can to facilitate DNOs to operationalise the data best practice that’s laid out in their RIIO-ED2 business plans, because we recognise that this is a really complex space. We’re focussed on removing as much friction from the process as we can, in order to get to value as quickly as possible.”
Charlotte Hillenbrand, Icebreaker One
Charlotte: “We’re indexing and connecting data, not collecting data. So the data will always remain on individual systems. What we’re facilitating is the connection and transaction of datasets in a safe environment. And in that way, you can build the picture, ingest the data you need, and start to map it”.