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Future DSO and DER Flexibility Worlds: Key Issues in accelerating the transition to a low carbon electricity system.

Smarter Grid Solutions welcomes the valuable analysis of future DSO worlds by Baringa. This adds to the important assessment of the decisions required to maximise the opportunity and value to be gained from the Distribution System Operator (DSO) transition and the development of a more decentralised, flexible and smart energy system. The implications of different pathways and the development of the most appropriate means of facilitating and coordinating Distributed Energy Resources) participation and flexibility are crucial issues for the imminent changes in the sector.

Baringa’s assessment of the future DSO worlds and the pathways from today to those different DSO and flexible system models points to Distribution Network Operators (DNOs) holding the prime seat to coordinate flexibility in nearer term (Worlds A and B) but with potentially beneficial changes to roles and responsibilities as Distributed Energy Resources (DER) grow, tipping points are arrived at and as the expectation of system users changes.

We highlight some important points that emerge from this report:

  • Timing of DER growth and the need for the new DSO functionality still seems to be assumed to happen relatively slowly (e.g. 2030s growth of DER is noted). We wonder if assuming that higher DER growth could occur sooner (e.g. think of the pace of the original wind power, solar power and now emerging energy storage and Electric Vehicle growth trajectories) with accompanying more advanced DSO, ESO and other stakeholder capabilities required sooner as well. While there are some relevant wide-system DER management capabilities in place today with the Electricity System Operator (ESO), the scale required for mass DER deployment and the translation of these to DSOs and other system participants is challenging and even more so if not anticipated in adequate timeframes.
  • System flexibility and DER co-ordination emerges as a central issue. Future World A (DSO led) and World B (DSO+ESO coordination) are highlighted as the most effective current leaders of managing and coordinating high growth of DER by virtue of knowledge of the distribution network and the current system operation mechanisms. We think that real time network, system and market situation awareness will be essential in managing the greater volumes of DER and that DER management systems (DERMS) will play a crucial role for whoever manages DER and flexible system operation.
  • The issues of neutrality, independence and trust point towards to calls for an independent DSO (IDSO) in the future. It looks like independent system flexibility and DER coordination might be required or desired in the longer term through an Independent ESO (IESO), IDSO or other independent co-ordinator (see Worlds D and E). We note that the Future of Electric Utility Regulation initiative in the US drew similar conclusions that integrated utility DSOs might be the best vehicle for the DER coordination role in the near term but that their market and flexibility co-ordination roles might be independent in the long-run to enhance neutrality and ness outcomes.
  • The systems and technologies required to deliver the early years of DSO functionality (Stage 1) and how these would need to develop further to progress to more advanced, coordinated, optimised DSO operation in the future (Stage 2) is noted. Some of the required systems exist today and need to be rolled out further (e.g. Active Network Management, ANM) while other systems are emerging (e.g. Distributed Energy Resources Management Systems – DERMS) or are the focus of innovation (Flexibility Exchanges). A further aspect of control coordination of DER flexibility is where more than one control authority or flexibility services recipient exists (e.g. both DSO and ESO in World B) and the need to prioritise and arbitrate in coordinating DER operation. This can add complexity and cost and so solutions with the efficient minimum set of platforms to fully, but not ineffectively, coordinate DER is required (e.g. for planning, markets, operations and control). We note that the volume of real time operations data captured and exchanged is a significant challenge but that real time DER operational platforms already have significant application for DER management (e.g. for real time flexible Distributed Generation, DG, connections) in distribution networks today.
  • Market coordination is an important topic as new DSO business and operational models will likely be layered onto existing market mechanisms. Technical coordination and market signals oscillation are noted in the report and we note that an integrated approach to tariffs, market designs and monitoring and control is required for effective DER management. Generally, these issues are dealt with separately in the nascent DER connection, flexible DER operation and DER market participation world today.
  • Pricing mechanisms and signals (World C) are noted as foundational and deliver efficiencies in their own right to all future flexibility market worlds. While prices encourage right investment and right generation/consumption/operation decisions, the short-term flexibility markets can provide the necessary dynamic services to operate the system. Theoretically, the cost of the real-time flexibility market operation is less when market participants are price-incentivised to the right location, the right scale and are appropriately technically functional. We note that, for system and network mission critical services, the pricing and market participation must be supplemented by real time monitoring and control to ensure efficient and effective (i.e. not more or less flexibility than really required) DER flexibility management.
  • It is also clear that the costs and benefits are incurred and flow asymmetrically between DER flexibility stakeholders so regulatory action will be required to ensure fair allocation of costs and benefits under the future worlds. This is already an issue for ANM-enabled Flexible DG connections where the CAPEX reduction benefit to both connecting DG customer and the DNO (tapered over time under price control) comes with additional costs to the DNO OPEX budget (with no incentive to increase those costs). The DG owner benefits from earlier and less CAPEX intensive connection but with a trade-off in export curtailment which is uncompensated and so leaves the DNO with a weaker incentive to minimise DG curtailment. These situations should be much more carefully managed with regulatory and market incentives better aligned.
  • It is good to see the important question of new people resources and skills raised in the report. These are undoubtedly foundational to the DSO transition and a future flexible, DER-populated system. We think that new technological and platform resources complement and support the people resources and also that effective tools, systems and platforms help reduce some constraints and pressures on skilled people in several areas and so free up those people for the most important tasks and roles. It is likely that new competences in the areas of platform and data integration, analytics, forecasting and optimisation (to name a few) will require movement of people and knowledge from other sectors and supply chains where those skills already exist.
  • The report notes that there will be geographical and customer grouping DSO service delivery disparities through the DSO transition as different mechanisms with different costs and benefits are rolled out in different target areas. Communication, public engagement, wide dissemination and incentives for universal provision and opportunities will be important in achieving a fair and inclusive DSO transition.

We look forward to continuing our essential work on DER management systems and through these and our highly skilled and experienced people to play our full role in the decentralised, flexible, smart, low carbon energy system transition.

Graham Ault is a Co-Founder and Executive Director at Smarter Grid Solutions. Laura Kane is a Senior Consultant at Smarter Grid Solutions.

The ENA consultation documents can be found here and our consultation response can be found here.