Electricity distribution networks were designed and constructed to operate passively and deliver uni-directional power flows from a relatively small number of large thermal generation plant through transmission and distribution networks to homes and businesses.
The DNOs that own and operate the electricity distribution networks are regulated natural monopolies. They are remunerated through network charges which retailers pass on to end customers as part of their electricity bill. DNOs operate under licence from the regulator, which comes with certain obligations. Their primary obligation is to provide reliable power supplies to customers; this is further incentivised by rewarding (or penalising) performance criteria, such as volume and length of system outages. To ensure reliable supplies the DNOs invest in replacing assets when they come to the end of their useful life and upgrading assets when growth in demand approaches the capacity of the equipment. These investments are scrutinised and approved by the regulator with allowances agreed through price control processes. Flexibility Services are increasingly used by DNOs to procure services, such as demand turn down, from DER owners and operators to reduce the need for such demand driven upgrades to reduce the overall cost for consumers.
A second licence obligation of DNOs is a requirement to provide connections to all new customers whether they are demand, generation, or storage. While processes are in place to allow smaller, residential customers to connect new assets and then notify the utility, new connections over a certain size must obtain permission in advance. This is to ensure that the network can support the step change increase in import to, or export from, the relevant customer site.
As each new connection application is received it is studied to identify whether, under worst case conditions, such as minimum demand and maximum generation, the new connecting customer could, in theory at least, cause a violation of network operating parameters such as equipment thermal ratings or statutory voltage limits. If no constraints are identified then the customer is granted full access under all conditions; known as ‘firm’ access rights. If, during the network studies, a potential violation is identified then the grid upgrades required to remove the constraints, and thus provide ‘firm’ access, are designed and costed; this applies even if the potential violation is for only 1 hour in a year.
Most networks around the world allocate grid capacity on a first come, first served basis and within certain policies or standards. The UK operates a ‘shallowish’ connections policy. This means that the next connecting customer that triggers the need for a network upgrade must pay for both the sole use assets to their point of connection and a portion of the network reinforcement costs at their connecting voltage level and the next voltage level up, to achieve ‘firm’ access (subject to a maximum cost per MW). The cost of these network reinforcements can make projects unviable and the time for reinforcements to be planned and the subsequent construction projects can take many years. The consequence is that investment in Distributed Energy Resources (DER) and the low carbon technologies required to deliver a net zero energy system stops and governmental targets are not met.