Electricity Network Innovation Strategy - March 2018 - Energy Networks Association
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Electricity Network Innovation Strategy March 2018
b Electricity Network Innovation Strategy
01 Electricity Network Innovation Strategy Contents 02 Foreword 32 D elivering Benefits 04 Executive Summary from Innovation 06 Introduction 08 Innovation funding timeline 32 Improving the transfer 08 Strategy development process of innovation into BAU 08 Public stakeholder consultations 32 Realising the full value of previous innovation 09 Electricity Industry Trends 32 Improving methods of managing risk 10 1. Shifting power-generating 33 Ensuring early identification sources of useful innovations 10 2. Customer choice and 33 Increasing access for changing energy demands non-regulated businesses 10 3. Evolving policy drivers 11 4. The Smart, Flexible 34 Collaborative Innovation Energy System and the DSO transition 34 Collaboration through ENA 12 5. Uncertainty and challenges 34 Smarter Networks Portal for the electricity networks 35 Collaboration with the wider energy industry 13 Innovation Challenges 35 Network Innovation Collaboration Portal 13 Innovation themes 36 Cross-vector collaboration 14 Challenge categories 36 Open Networks Project 37 Getting involved 16 Current Level of Innovation 38 Conclusions 16 Network innovation under RIIO 17 Previous innovation projects 40 Glossary of terms 19 Evaluating innovation priorities 20 Innovation Strategy and Roadmap 22 Theme 1 – Network improvements and system operability 24 Theme 2 – Transition to a low carbon future 26 Theme 3 – New technologies and commercial evolution 28 Theme 4 – Customer and stakeholder focus 30 Theme 5 – Safety, health and environment
02 Electricity Network Innovation Strategy Foreword The publication of the gas and electricity Network Innovation Strategies is the latest chapter in Great Britain’s energy network innovation success story. Since funding was first introduced in 2007, Great Britain’s energy networks have developed a world leading reputation for innovation. A variety of transformational projects have enabled network companies to deliver greater efficiency, improved performance and respond to the challenges and opportunities presented by the decarbonisation of our energy market. Innovation projects allow network the lessons learnt from those projects operators to better understand how with other organisations. This transparency to integrate new technologies into our is key to ensuring that network companies energy networks, help them identify new continue to focus on areas for innovation opportunities for their use and speed up investment which can deliver most benefit their wider adoption. They also reflect our to the wider energy system in the most commitment to build an efficient, smarter, effective way possible. cleaner energy system fit for Britain’s homes and businesses. Network companies cannot deliver this innovation alone. We want network The current RIIO price control mechanism, infrastructure to act as a platform for new which includes the Network Innovation energy technologies and services that Allowance and the Network Innovation will put Great Britain at the forefront of the Competition, has been key to driving global low carbon transformation. Whether success forward. Continued support for they are end-users, technology developers innovation has been vital to embedding or service providers, network companies a culture of innovation within our want to work with these innovators who energy networks so that innovation have the best and the brightest ideas is a permanent fixture in the network of how we can harness the potential of landscape. Smart network solutions energy technology. These opportunities connected through the Low Carbon extend to communities and businesses Network Fund alone have already across the country, ensuring that the enabled close to £1bn of cost savings economic as well as practical benefits for customers within the electricity sector. are spread far and wide. This progress is part of a wider, As the pace of network innovation fundamental change to the way our continues to accelerate, then so will the network infrastructure operates that importance of this work. The publication is now taking place which is driven by of the first joint Network Innovation new technology. Across the country, Strategies is an important milestone innovation will help network companies and we look forward to working with our to enable new markets and provide new innovation partners to ensure our network opportunities for consumers to have infrastructure, our wider energy system greater control over their energy bills. and our customers benefit from new Projects have the potential to develop technology and approaches. a truly world-leading Whole Systems Approach that brings the way our gas and electricity networks work more closely together. This will be crucial as we find new ways to meet the UK’s carbon budgets, because if our power, Huw Sullivan heat, transport and waste sectors are all Cadent interdependent, then so must the solutions Chair, ENA Gas Innovation to their decarbonisation. Our role is to & Governance Group deliver the integrated energy infrastructure that Britain needs to underpin those essential pillars of our economy. These Strategies set out the areas of focus where network companies are Phil Swift looking to provide value to customers Western Power Distribution from the innovation projects they are Chair, ENA Electricity Networks undertaking and how they will share and Futures Group
03 Electricity Network Innovation Strategy Future Safety of gas and health Low Emergency carbon and response environment Reliability, New replacement, technologies maintenance and commercial and repair evolution Innovating to benefit customers Network improvements Security and system operability Key Common themes Electricity themes Gas themes
04 Electricity Network Innovation Strategy Executive Innovation is a key consideration for electricity network operators A rapidly changing environment requires new innovative strategies from Summary as we transition to a smarter, more economical, more flexible energy all participants, including fundamentally different approaches to business and system that can support the to serving customers, and embracing decarbonisation of heat and transport. a range of technical and commercial It is also a crucial element of the innovations to do so effectively. Key drivers Great Britain regulatory framework for for the changing energy system in this electricity networks, which includes context include: shifting power generation funding and incentives that help us sources, changes for customers in terms innovate for our customers’ benefit, of choice and demand, policy drivers as well as deliver value for the network related to decarbonisation of heat and in the long term. Since 2004, we have transport, a greater focus on sustainability, delivered more than 1,300 innovation and regulatory trends to ensure a smart, projects, and we will continue to flexible system with greater local system deliver innovation that can benefit operation responsibilities for Distribution our customers. Network Operators (DNOs). These trends will give rise to the need for further This Electricity Network Innovation innovation from us, the electricity network Strategy has been developed to set companies, and will simultaneously pose out a jointly-agreed approach as to a number of challenges, which we have how innovation can best accommodate synthesised into five themes as shown the future requirements of the energy below in Figure 1. system in its entirety, and can lead to the effective delivery of benefits in a collaborative and cost-effective way. Figure 1: Innovation themes based on industry trends and challenges Objectives 1. Identify opportunities for the continuous improvement of our networks and deliver improved value to our customers 2. Find new ways to make our service more reliable, more affordable, more accessible, cleaner and safer 3. Provide us the flexibility to better respond to the changing requirements of our customers, both today and tomorrow Industry trends Existing innovation strategies 1. Shifting power-generating sources 2. Customer choice and changing energy demands 3. Evolving policy landscape 4. The Smart, Flexible Energy System and the DSO transition 5. Uncertainty and choices for the electricity network companies Innovation themes 1. Network improvements and system operability 2. Transition to a low carbon future 3. New technologies and commercial evolution 4. Customer and stakeholder focus 5. Safety, health and environment
05 Electricity Network Innovation Strategy Strategic focus a set of priority outcomes and a timeline, as shown in Figure 2. Given this roadmap By considering the current level and the analysis undertaken for each of innovation and future innovation innovation theme, the following represent opportunity, in consultation with our our key future focus areas: stakeholders, we have established Focus on innovation areas with maximum innovation INNOVATE opportunity which need to be addressed in the short to mid term. Maximise transition of proven innovation to Business IMPLEMENT as Usual (BAU) to realise the full potential benefit for customers. Enhance strategic collaboration by increasing project COLLABORATE partnerships, improving the sharing of knowledge, and using forums more effectively. Innovation benefits from effective For more information and to stay collaboration across the industry, engaged, please contact Energy so we have valued the feedback Networks Association at and engagement provided by many email@example.com stakeholders throughout this innovation or visit our website strategy process. www.energynetworks.org. Figure 2: Innovation strategy outcomes and roadmap Facilitate change Smarter Networks Whole System • Ensure resilience of the system • Develop forecasting methodologies • Collaborate with other energy under emergency conditions for changing behavioural patterns sectors (including gas, transport • Enable real-time visibility of the and new technologies and heat) to optimise across LV network • Develop asset inspection multiple sites and vectors • Develop solutions that interact techniques that reduce manual • Expand planning and operational with customers workload activities to incorporate heat, • Develop means to manage tighter transport and gas • Improve flexibility services to customers with mutual benefit capacity margins and develop • Manage significant penetration market signals for new investment of EVs and electrified heat • Coordinate the deployment of EV charging points • Effectively utilise all available • Increase use of artificial intelligence data to counter potential threats to make decisions on a more • Maximise benefits of network to the system dynamic network services provided by electric vehicles and storage • Provide aligned, financial incentives through innovative or flexible tariffs • Identify and counter internal and external cyber threats • Facilitate new customer-focused products and services from • Use smart technologies to maximise suppliers capacity within the power system • Make network information more readily available • Development of safer and more efficient working practices Now until 2019 2019 to 2022 2022 onwards
06 Electricity Network Innovation Strategy Introduction This Electricity Network Innovation Strategy has been produced by Innovation is a key element of the RIIO1 regulatory framework, which includes Energy Networks Association (ENA) funding and incentives to enable and the GB Electricity Licenced innovation in order to deliver customer Network Operators (LNOs), which benefit and long term network value. include all of the Distribution Network Since 2004, we have embraced Operators (DNOs), the Transmission innovation, as evidenced by the more than Network Operators (TOs) and the 1,300 projects that have been delivered. System Operator (SO). ENA is our Innovation will remain a central focus in voice, representing the ‘wires and our plans for the remainder of this price pipes’ transmission and distribution control period, as well as in the long term. network operators for gas and electricity in the UK and Ireland The independent 2016 evaluation of the (known as Member Companies). Low Carbon Networks Fund (LCNF2), which was commissioned by Ofgem, highlighted that the LCNF succeeded in encouraging us to innovate and served to move our level of innovation from a ‘low’ base to a ‘moderate’ level3. The potential future net benefit from LCNF projects is estimated to be between 4.5 and 6.5 times the funding costs. We want to further improve this. Figure 3: Electricity Network Licence Holders Electricity distribution Electricity transmission 1 Scottish & Southern 1 1 1 Scottish1 & Southern 1 Electricity Networks Electricity Networks 2 SP Energy Networks 2 SP Energy Networks 2 2 2 2 3 Scottish & Southern 3 National Grid 4 4 Electricity Networks 5 5 4 Electricity North West National Grid are also 6 the 6 System Operator 3 3 5 Northern Powergrid 7 for the 7Transmission 8 8 6 SP Energy Networks Network across GB. 3 3 7 Western Power Distribution 8 UK Power Networks 1 IIO is the current regulatory framework: Revenue = R incentives + innovation + outputs. See Ofgem website for details 2 The LCNF was a £500m fund available to the DNOs to encourage innovation, and was the precursor to Ofgem’s present innovation funding mechanisms, which are available to network companies 3 https://www.ofgem.gov.uk/system/files/ docs/2016/11/evaluation_of_the_lcnf_0.pdf
07 Electricity Network Innovation Strategy Recommendations from independent evaluation of LCNF (2016) – Ofgem should continue to fund network operator innovation with consideration given as to how support for network innovation can best accommodate the future requirements of the whole, low carbon, energy system – We, the network companies, should be required to jointly develop and publish an ‘innovation roadmap’ – There should be greater focus on the sharing of project knowledge and learning (including that from unsuccessful projects) to maximise the benefits and value of LCNF initiatives and innovation – Reporting requirements associated with any future innovation funding should be reviewed to facilitate the future assessment of quantitative benefits In addition to the success stories, coordinate innovation projects and share the evaluation also highlighted the learning, which allows us to ‘fast follow’ importance of a more joined-up approach from other networks. This ultimately leads to network innovation across the entire to bigger cost reductions and benefits industry. We have improved the way we for customers. Figure 4: Ofgem innovation funding timeline Distribution Innovation Funding Incentive (IFI) Low Carbon Networks Fund (LCNF) Network Innovation Allowance and Competition (NIA & NIC) RIIO-ED2 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Transmission Innovation Funding Incentive (IFI) Network Innovation Allowance and Competition (NIA & NIC) RIIO-T2/GD2
08 Electricity Network Innovation Strategy Innovation funding timeline There are regional variations in innovation project themes and solutions, which are Ofgem has incentivised innovation driven by regional requirements and on our networks since 2004 and difference. We therefore intend to use currently provides funding under RIIO1 this strategy to help inform the individual mechanisms. Figure 4 shows a timeline innovation strategies, which we will of how Ofgem funding mechanisms have maintain over the course of the current evolved over time. Other available industry price control period. This strategy allows funding mechanisms are described in us to have a better aligned set of Current Level of Innovation. innovation projects, so the process of learning rapidly from another project and implementing it into BAU will improve. Strategy development process There will also be ongoing scope for proactivity in our innovation, seeking views To develop the Electricity Network from stakeholders on a continuous basis Innovation Strategy, we have shared to ensure we are leading and learning from information with each other, and solicited international innovation trends. We will feedback from a wide range of review and update this strategy every stakeholders. A key consideration two years4, which will allow us to build has been to develop an inclusive strategy, in regular horizon scanning and to reflect which takes into consideration the whole the dynamic developments in the energy system and its participants. electricity sector. The methodology we used to develop the strategy is shown in Figure 5. Figure 5: The process of developing the innovation strategy 1st 2nd First Second stakeholder stakeholder consultation on the consultation and network challenges, workshops on the innovation themes draft innovation and timelines strategy Evalutate Identify Review Establish Harmonised industry trends innovation innovation innovation Electricity themes and challenges and strategy and Network catergories opportunities roadmap Innovation Strategy Public stakeholder in Figure 5, includes a first public consultations consultation to support the categorisation of challenges. A second In developing the Electricity Network consultation, together with stakeholder Innovation Strategy, we sought workshops in London, Glasgow and at stakeholder feedback to ensure that we the LCNI conference, then provided more devised a strategy that is representative in-depth opinion to further improve the 4 s required by the Electricity Act 1989, Section 11A(2) A of people who use the networks, and draft strategy and roadmap. For the available at https://www.ofgem.gov.uk/ofgem- addresses issues faced by the entire results from stakeholder consultations, publications/116068 5 http://www.energynetworks.org/electricity/futures/ industry. The process, which is shown please refer to the ENA website5. network-innovation/electricity-networks-innovation- strategy.html
09 Electricity Network Innovation Strategy Electricity Industry Trends
10 Electricity Network Innovation Strategy Electricity The drivers for innovation in electricity networks are aligned 2. Customer choice and changing energy demands Industry Trends with the energy trilemma which balances energy security, Through the deployment of a wide variety affordability6 and sustainability of new technologies, such as smart Sustainable as we transition to a low carbon thermostats, solar photovoltaic panels, energy system. Traditional network and electric vehicles, customers are management solutions, such as increasingly able to control their electricity network reinforcement, are no usage and spend, as well as the type longer considered the only viable of power they buy and when they use or most economical solution to it. Some customers want the ability to network development. A rapidly self-generate and sell that power back changing electricity sector requires to the grid. The demand profile for our new and innovative strategies customers is changing, and is expected Secure Affordable from all participants, including to change even more drastically with the fundamentally different approaches forecasted uptake in electric vehicles and to our business and the way we the decarbonisation of heat in the early are serving customers, as well parts of the next decade. as a range of technical and commercial innovations. As a result of this, we will need to develop commercial models and We have identified five trends that are technical solutions that will facilitate changing the way electricity is produced customer choice in a cost-effective way, and consumed. These trends are driving while at the same time managing the the need for us, and other players in the impact on the networks. We believe that energy value chain, to innovate. at the forefront of our ability to serve our customers’ evolving needs is increased 1. Shifting power-generating engagement and communication, sources as well as transparency and efficiency in our plans and priorities. For the first time since the 1880s, coal, once the mainstay of our generation 3. Evolving policy drivers sector, was absent from GB’s operating electricity generation mix on the 21st April In addition to the Climate Change Act, 2017. A month later, on the 26th May, whereby the government has committed solar generation was meeting nearly to reduce greenhouse gas emissions a quarter of all electricity demand in by at least 80% of 1990 levels by 2050, GB. In the near term, it is expected the Paris Climate Agreement will have that the majority of new capacity in a significant long term impact on energy the GB energy system will come from networks. The agreement, which has renewables, primarily wind and solar. been ratified by the UK government, focuses on limiting global warming In response to this, network operators to below 2°C by the year 2100. will need new tools and resources to Decarbonisation of electricity deploy and optimise flexible response generation, heat and transport are to the intermittent output of renewable all crucial components. energy sources. Although storage is becoming increasingly available, greater Other recent policy decisions include capacities will be needed to help manage plans announced by the government the inherent intermittency in renewable to ban the sale of new petrol and diesel generation. As the role of storage cars in Britain by 2040. This will clearly continues to develop, we expect more impact the growth of electric vehicle reliance in the short term on grid sales. Heat is also a critical element of interconnection and active network Britain’s Clean Growth Strategy and is management, to manage both a high priority for future decarbonisation generation and demand as we move activity, including greater use of green towards DSO. Cross-sector energy gas, potential for increased use of hybrid management and planning will be heating systems or electric heat pumps. required to efficiently manage interactions between electricity, gas and heat We will facilitate these ambitions, and networks. Furthermore, from a system manage the potential impacts on our operation perspective, we will need to customers through innovation and whole adapt ancillary services provisions to energy system-thinking. We recognise match the evolving system requirements. that energy, environment and transport policy are very closely linked, and we will ensure that we have a productive contribution to aid the implementation 6 nergy affordability has been growing in importance E of these policy objectives. for a number of years and this trend will continue as the industry needs to protect vulnerable customers and ensure value for money.
11 Electricity Network Innovation Strategy 4. The Smart, Flexible Energy To achieve this, there needs to be System and the DSO transition far greater coordination between transmission and distribution, and as The requirement for a cleaner, DNOs, we must transition to become distributed, and smart energy system DSOs. This role includes active is becoming very evident. Fuelled by management of the network, and significant increases in Distributed increased communication and Energy Resources (DER) and storage, collaboration with 3rd parties, such these changes will affect policy and as the TOs, other DSOs and the SO. regulation, business models, and the way the grid is operated in the UK. We are preparing for this shift to a Figure 6 visualises the evolution to smarter electricity grid. The Open a Smart, Flexible Energy System. Networks Project has been established by ENA to enable industry-wide A central pillar of Ofgem’s and BEIS’ coordination in this transition. We see consultation and call for evidence on multiple opportunities to leverage the Smart, Flexible Energy System7 is innovation in this transition, as evidenced the suggestion that we need to focus by recent Network Innovation Allowance more on coordinated whole system (NIA) and Network Innovation planning and operations. We will Competition (NIC)-funded projects that therefore have an increased role in the focus on the future DSO arrangements. delivery of an “efficient, economical and coordinated wider system”. Figure 6: Example of evolution to a Smart, Flexible Energy System Traditional one-way Smart, Flexible Wind farm with power system Energy System energy storage Power plants Power generation Utility/Community solar Transmission Commercial & distribution offices with rooftop solar Wind farm with cogeneration Electric Homes with solar Residential Commercial vehicles PV and storage Factory with natural Hospital campus gas combined heat with microgrid and power Industrial ttps://www.ofgem.gov.uk/publications-and-updates/ h 7 smart-flexible-energy-system-call-evidence
12 Electricity Network Innovation Strategy 5. Uncertainty and challenges for The transition to a smarter grid has the electricity networks the potential to bring many benefits for customers, but this is not a given. It is As highlighted in Ofgem’s call for evidence therefore important that we have a clear on the Smart, Flexible Energy System, plan and a roadmap for the future. This we will need to change in order to make roadmap includes innovation that supports sure we meet the demands of all of our the need to act differently and seeks stakeholders in future. There is a wide new customer solutions, embracing the spectrum of possible scenarios for us, changing circumstances to set a positive which will largely be driven by external course for the energy sector in GB. It must factors over which we have limited control. be highlighted that innovation is a process that involves incremental learning by doing As DNOs and TOs, we need to make and the optimal way to transition is often significant investment decisions in the face to trial potential solutions and roll-out the of an ageing network and a historically successful ones as BAU, which allows non-flat investment profile. Our networks us to derive most benefits for customers. could evolve in different directions, such as a gradual evolution towards using smart solutions for system development, or fundamental change towards a role of a platform facilitator, able to manage and provide value-adding services for generators, electric vehicle (EV) owners, storage owners, microgrid operators, peer-to-peer traders and demand response providers.
13 Electricity Network Innovation Strategy Innovation Innovation themes identifies those challenges and presents a vision for addressing those that have Challenges The macro trends identified in the previous section will give rise to the need for further not been completely met by innovation projects to date. Figure 7 shows the innovation, and will simultaneously pose process behind identifying the overarching several challenges. The development of innovation themes. this Electricity Network Innovation Strategy Figure 7: Development of innovation themes Industry trends Existing innovation strategies 1. Shifting power-generating sources 2. Customer choice and changing energy demands 3. Evolving policy landscape 4. The Smart, Flexible Energy System and the DSO transition 5. Uncertainty and choices for the electricity network companies Innovation themes 1. Network improvements and system operability 2. Transition to a low carbon future 3. New technologies and commercial evolution 4. Customer and stakeholder focus 5. Safety, health and environment Challenge categories – All projects have a customer benefit – the projects currently listed under This section gives an overview of the customer focus are solely customer categories of challenges identified. focused projects The five innovation themes have – Customer and commercial themes been synthesised from our individual were a priority area in the stakeholder Innovation Strategy documents. consultation and may benefit from These challenges have been compiled increased innovation activity from our individual strategies and the – New technologies and commercial wider trends affecting the GB energy evolution has had a relatively low industry. We have grouped and representation in innovation projects, categorised the individual challenges so may also benefit from increased in Figure 8 below, and grouped them innovation focus by the innovation themes. – Projects categorised under the Based on the analysis of our past Network Improvements and innovation projects, and the feedback Transitioning to a Low Carbon Future from the online stakeholder consultation, themes will still play an important role, we have made the following despite the increasing emphasis on observations: customer and commercial themes – Projects often do not align to only one theme. While the main focus may be one theme, many projects impact some or all of the others, so there may be multiple themes per project and multiple projects per theme in practice
14 Electricity Network Innovation Strategy Figure 8: Key innovation themes Innovation theme Challenge categories 1.1 Improve network resilience to avoid unplanned power outages (particularly when moving towards the low carbon world) 1.2 Improve demand and generation forecasting, and network Theme 1 planning processes Network improvements 1.3 Improve network visibility and controllability and system operability 1.4 Improve asset management processes 1.5 Maximise the value and capacity of existing assets 1.6 Optimise cross-sector coordination between DNOs, TOs, and SO, as well as licensees from other sectors (e.g. gas) and other countries 2.1 Efficiently facilitate the adoption of low carbon technologies supporting the electrification of heat and transport 2.2 Enable flexibility in the GB low carbon transition (e.g. increasing role of demand side response) Theme 2 2.3 Facilitate the transition from DNO to DSO, enabling the provision of new Transition to a platforms, market participants and value streams low carbon future 2.4 Create value from the introduction of smart meters and work collectively to deliver the wider public policy and public interest benefits from data 2.5 Develop advanced whole energy system planning and forecasting methodologies
15 Electricity Network Innovation Strategy Innovation theme Challenge categories 3.1 Maximise cyber security and data protection in respect of privacy and commercial sensitivity 3.2 Maximise benefits provided by new technologies, with particular focus Theme 3 on network services provided by electric vehicles and energy storage New technologies and 3.3 Facilitate the adoption of commercial business models that leverage low carbon technologies commercial evolution 3.4 Extract value from continued growth in digital-enabled services, new and improved sources of data, and artificial intelligence 3.5 Shape and comply with evolving regulations and standards 3.6 Inform the development of, and ensure compliance with, new markets and structures that allow greater competition in the energy markets 3.7 Facilitate sharing of services and business functions between DNOs, TOs, and SO 3.8 Leverage cross-sector "smart technology" benefits and lessons 4.1 Improve involvement of customers in the delivery of the innovation work 4.2 Continuously improve customer experience and affordability, and support the fuel-poor Theme 4 4.3 Improve the understanding of future employee skill and resource requirements Customer and 4.4 Improve the understanding of changing customer needs, particularly in regard to the electrification of heat and transport stakeholder focus 4.5 Enable customer choice 4.6 Actively seek collaboration with stakeholders and partners 4.7 Maximise the transparency of information and the quality of accessible data 4.8 Facilitate community energy 4.9 Facilitate behavioural change initiatives to promote energy conservation and sustainability 5.1 Improve the safety and health of the public and workers 5.2 Further improve safety and health and reduce impact on the environment Theme 5 5.3 Reduce the visual and noise impacts of assets Safety, health and environment
16 Electricity Network Innovation Strategy Current Level Network innovation under RIIO – A specific novel operational practice directly related to the operation of of Innovation The NIA and NIC funding incentives were set up by Ofgem to fund new technical, the GB Transmission System and/or the GB Distribution System commercial, or operational projects that – A specific novel commercial have the potential to deliver a range of arrangement benefits to us and to our customers. Innovation projects must have the potential Within the GB energy industry, there to have a direct impact on our networks are a range of other bodies and funding or the operations of the SO. They involve platforms that are heavily involved in research, development, or demonstration energy industry innovation. These bodies of at least one of the following: are funding, planning, developing and – A specific piece of new (i.e. unproven rolling out innovation projects, and it in GB) equipment (including control and is critical that the Electricity Network communications systems and software) Innovation Strategy consider these and align strategies as much as possible. – A specific novel arrangement or These bodies include Innovate UK8, application of existing electricity Energy Systems Catapult9, the Industrial transmission and/or electricity Strategy Challenge Fund10, and the distribution equipment (including Engineering and Physical Sciences control and/or communications Research Council (EPSRC)11. systems and/or software) Figure 9: Number of innovation projects Innovation theme 0 20 40 60 80 100 120 140 1. Network improvements 2. Transition into a low carbon future 3. New technologies and commercial evolution 4. Customer and stakeholder focus 5. Safety, health and environment NIA NIC LCNF Figure 10: Value of innovation projects Innovation theme £0M £100M £200M £300M £400M £500M 1. Network improvements 2. Transition into a low carbon future 3. New technologies and commercial evolution 4. Customer and stakeholder focus 5. Safety, health and environment NIA NIC LCNF 8 ttps://www.gov.uk/government/organisations/ h innovate-uk 9 https://es.catapult.org.uk/ 10 https://www.gov.uk/government/collections/ industrial-strategy-challenge-fund-joint-research-and- innovation 11 https://www.epsrc.ac.uk/funding/
17 Electricity Network Innovation Strategy Previous innovation projects Looking forward, we expect that innovation in the Network Improvements Innovation projects Our analysis focused on innovation theme will continue. Furthermore, there projects delivered via NIA, NIC and LCNF is still an opportunity to build on the 190 mechanisms because they are the main source of funding for our innovation benefits achieved from previous innovation projects under all of the innovation themes; Network Innovation projects12. Other funding sources for new innovation opportunities will arise as Allowance projects innovation exist and we fund some technology evolves and tipping points are innovation activities from our own budgets. reached that affect our industry. 14 For this strategy, projects have been grouped per innovation theme based A review funded by HubNet and UKERC13, Network Innovation on their total number and total value. and written by the University of Competition projects Strathclyde, shows that the lessons from Figure 9 shows that the majority of innovation projects are impacting our 67 projects were conducted in the Network Improvements domain. This reflects the BAU activities in a positive way, which is helping to facilitate the Low Carbon Low Carbon Networks fact that traditionally we have been transition. The rollout of successful Fund projects essentially asset management businesses. innovation to BAU is key to the success There is a robust and well-established of the innovation programme, and this supply chain for this area, which has process is supported by ENA, the activities been able to bring best practice from of which also includes the creation of other geographies to the UK. When the new standards. The report shows we innovation funding started, the focus are making progress, but that there is was put on developing the technology still some scope for improvement. to enable innovation in other categories. This has changed over time as the Figure 10 shows the value of all conducted understanding of our requirements has innovation projects under NIA, NIC and improved. Furthermore, the bulk of our LCNF. It must be noted that a positive income is based on the management cost-benefit analysis (CBA), indicating of our network, and this area still has the benefits to customers where projects are potential to yield benefits to our customers. successful and deployed, is a requirement It will therefore continue to be a focus. for funding to be awarded. The transition to a low carbon future has also received significant attention. This reflects the emphasis that we have placed on innovation that has helped us adapt to changing customer needs. Out of all the categories, the least number of projects were conducted around the Customer and Stakeholder focus. Although we have delivered some interesting projects under this innovation theme, we see this as an area that may benefit from a greater focus in the future. 12 he Innovation Funding Incentive (IFI) was the T precursor to NIA, NIC and LCNF initiatives, however it was discontinued prior to 2010 and therefore was not included in our analysis. 13 “A Review and Synthesis of the Outcomes from Low Carbon Networks Fund Projects” Damien Frame, Keith Bell and Stephen McArthur, 17/08/2016
18 Electricity Network Innovation Strategy Figure 11: Breakdown of NIC, NIA and LCNF projects by theme14 (£M) 0 20 40 60 80 100 120 140 Network improvements No. of and system operability projects Network resilience 36 Forecasting & planning 22 Network visibility and control 38 Asset management processes 46 Value and capacity of existing assets 21 Transition into a low carbon future Low carbon technologies 20 Electric vehicles 23 Electrification of heat 01 Network flexibility 09 Transition to DSO 08 Value from smart meters 02 Whole system planning and forecasting 08 New technologies and commercial evolution Cyber security & data protection 03 New technologies 21 Commercial business models 08 Digital services & big data 07 Regulations and standards 03 Customer and stakeholder focus Customer involvement in innovation 03 Customer experience 07 Customer affordability 03 Skills and resources requirements 05 Understanding customer needs 01 Enable customer choice 03 Collaboration with stakeholders 03 Safety, health and environment Protecting public and workers 07 Safety & environment 28 Construction and design standards 10 Visual and noise impacts 04 14 ote that many projects fall across several themes. N Our analysis considers the main themes only.
19 Electricity Network Innovation Strategy Evaluating innovation priorities to overall safety of the public and staff, design standards and environmental Historically, innovation project spending protection show a relatively low has prioritised Network improvements proportion in the overall volume of and Transition into a low carbon future projects. Customer and stakeholder (as shown in Figure 10). Challenges consultation and New technologies and relating to asset management, improving commercial evolution have been the sole network resilience, improving forecasting focus of relatively few innovation projects. and maximising the value of existing assets have been the subject of several On this basis, and based on the five NIA and NIC projects. This is because electricity industry trends, we have we have been able to demonstrate that made the following observations on the projects that address these challenges innovation project coverage with respect deliver significant direct benefits to us to the innovation challenge themes. and to our customers. Projects related The utilisation of large volumes of data There is an opportunity for more activity from smart meters has become a in understanding changing customer prevalent innovation subject; however, needs and improving affordability this depends on individual approaches for customers. to LV monitoring and the availability of smart meter data15. Enabling customer choice There is an opportunity to increase has been the sole focus of activity in using new technology to few innovation projects. develop and optimise commercial business models. Cyber security is becoming an The electrification of heat is an increasingly important issue and under-represented topic in terms of more focus may be required in future practical activities, however uptake innovation projects. However, in some in this area is lower than predicted. cases, Ofgem funding mechanisms are not suitable for cyber security innovation projects due to the restricted nature of the information and learning. Given global trends, predictions, and the rapid emergence of electric vehicles, we expect to see more projects in this area. he smart meter data available to us is dependent T 15 upon the deployment roadmap and the granularity data that can be shared.
20 Electricity Network Innovation Strategy Innovation Strategy and Roadmap
21 Electricity Network Innovation Strategy Innovation For each innovation theme, we have included a description of the key We also provided a roadmap to show when innovation will be required Strategy and issues, highlighted current innovation activity, and shown the relative as a priority for each of the challenge categories. This section explains Roadmap potential for innovation projects in each of the challenge categories. the methodology behind the scoring and assessment of the aforementioned criteria. Assessment methodology The current level of innovation was against the challenges in each of the determined by mapping the innovation themes and subcategories identified. activity from NIA, NIC and LCNF projects Current level of innovation Low Medium High Emerging innovation Developing innovation Significant innovation area area to date Future innovation opportunity is an customers and the stakeholder consultation, assessment based on industry trends as well as the analysis of innovation identified, potential benefits for UK priorities in the previous section. Future innovation opportunity16 • Relevant element • Significant element • Crucial element to enable industry to enable industry to enable industry progress progress progress • Moderate potential • High potential benefits • Major potential benefits benefits17 from future from future innovation from future innovation innovation • Highlighted by • Significant focus from • Supported by stakeholders the stakeholders stakeholders The below high-level timeline was includes projects that should be planned structured such that short term projects for completion by the end of RIIO1 and are the ones that should be conducted long term means plans for the RIIO2 price immediately and adequate resources period and beyond. exist to launch them. Medium term Timeline Short Medium Long Now until 2019 2019-2022 2022 onwards 16 ll categories included in this strategy have A a notable future innovation opportunity. This rating is used to identify the relative importance of each innovation category. 17 Benefits refer to improvements for the customer such as customer service, reliability, cost and environmental impact.
22 Electricity Network Innovation Strategy This theme focuses on how to achieve a reliable, dynamic and adaptable network to support future electricity demand and generation requirements, and the resulting volatility in energy flows. The theme encompasses maximisation of existing capacity by increased utilisation of the network, network visibility and control. Theme 1 The goal of innovation in this area is to further develop asset management strategies to minimise the costs of managing ageing assets and network Network risk. Significant challenges lie in the activities of the SO and emerging DSOs. As networks become more highly-utilised and capacity headroom improvements decreases, it will become increasingly important to share network information and system between our companies for maintenance and construction purposes. operability Furthermore, to reduce the time required to connect new assets, we will need to develop active management of generation output based on network constraints. What our stakeholders said “Optimisation of cross coordination is the most important challenge, followed by improvements in forecasting.” “Cross-sector coordination requires effort in the medium term to enable benefits to be delivered in the long term.” Innovation potential Current level of Future innovation Timeline innovation opportunity Short Med Long 1.1 Improve network resilience to avoid unplanned power outages (particularly when moving towards the low High carbon world) 1.2 Improve demand and generation forecasting, and network High planning processes 1.3 Improve network visibility and controllability Low 1.4 Improve asset management processes Medium 1.5 Maximise the value and capacity of existing assets Low 1.6 Optimise cross-sector coordination between DNOs, TOs, and SO, as well as licensees from other sectors (e.g. Medium gas) and other countries
23 Electricity Network Innovation Strategy Case study This project explores the use of is spare capacity. The technique could Transmission Network algorithms to ‘fine tune’ the network improve thermal capacity by 5-10% by rerouting power flows away from across critical network boundaries. Topology Optimisation heavily congested circuits to the rest of the system, where there National Grid Transmission Operator Case study The principal objective of Angle-DC interconnecting circuit capacity by ANGLE-DC is to bring the benefits of HVDC to 24%, minimise wider network losses, Medium Voltage networks. As an help satisfy network constraints and active system, a Medium Voltage maximise capacity headroom for SP Energy Networks DC interconnector will increase the distributed renewable generation. Examples of planned innovation projects and ideas • LV connectivity modelling and mapping • LV operational monitoring and control • Manage the consequences • New reactive power services • System coordination of power electronics of decreasing inertia • Distribution operability framework • Develop power quality adaptive filtering • Improve fault response performance • Develop network analogues • Develop adaptive protection and control • Optimise assets specification • HV power electronics test laboratory • Manage assets throughout and performance • Primary network power quality analysis their lifecycle • Manage ageing networks Innovation strategy outcomes Facilitate change Smarter networks Whole System • Deliver solutions that maximise • Leverage communications • Expand planning activities to the use of low carbon generation infrastructure of the future incorporate heat, transport and gas at optimal overall cost • Develop forecasting methodologies • Provide mechanisms by which • Implement smart reinforcement for changing behavioural patterns planning can be coordinated solutions into BAU investment and new technologies between all appropriate parties appraisal decisions • Develop asset inspection to drive optimisation • Ensure resilience of the system techniques that reduce • Assess the impact of gas and under emergency conditions manual workload other energy vectors when (given LCT uptake) • Develop effective methods for producing forecasts • Enable real-time visibility of the system restoration and new LV network techniques for Black Start • Develop means to manage tighter capacity margins and develop market signals for new investment Now until 2019 2019 to 2022 2022 onwards
24 Electricity Network Innovation Strategy The requirement to connect more low carbon technology (LCT) and distributed generation will necessitate a more active network and provision of network access without resorting to ‘overbuilding’ assets. Innovation is aimed at providing essential flexibility as we prepare our networks for the transition to a decarbonised energy system. One of the main elements of providing flexibility is the Theme 2 demonstration of demand side response solutions to assist in allowing for faster network connections. Transition LCT will require an active role in the operation of our networks, which can to a low carbon be achieved by facilitating DNOs to become DSOs. Future DSOs will be expected to bring access to new information about network performance future close to real time, allowing whole system optimisation and establishing an interface between distribution and transmission. This can be achieved through developing new techniques and utilising enhanced data for more dynamic network control (which includes the data from smart meters). The result will provide customers with new services, enable faster response to outages and establish a more intelligent network. Crucial elements in supporting future electricity demand and generation requirements will be to develop whole system planning and forecasting methodologies. What our stakeholders said “Enabling flexibility and facilitating the DSO transition are the most important innovation areas.” “We must future-enable our systems and markets to unlock the benefits and to do that we must bring about change in a more flexible and responsive manner.” “It must be made clear to the DNOs how easily they will be able to access the data and at what level of detail.” Innovation potential Current level of Future innovation Timeline innovation opportunity Short Med Long 2.1 Efficiently facilitate the adoption of low carbon technologies supporting the Medium electrification of heat and transport 2.2 Enable flexibility in the GB low carbon transition (e.g. increasing role Medium of demand side response) 2.3 Facilitate the transition from DNO to DSO, enabling the provision of new platforms, market participants and Low value streams 2.4 Create value from the introduction of smart meters and work collectively to deliver the wider public policy and Low public interest benefits from data 2.5 Develop advanced whole energy system planning and forecasting methodologies Low
25 Electricity Network Innovation Strategy Case study The National HVDC Centre is an NIC powerful simulators. Our safe and The National HVDC Centre funded testing facility, supporting all secure modelling environment, HVDC schemes connecting to Great combined with our experience of Britain’s grid system. The centre delivering the Caithness-Moray HVDC Scottish and Southern Electricity simulates and resolves potential issues project, ensures that we can provide Networks Transmission before they impact the real network, robust solutions and practical training. using some of the world’s most Case study We launched a series of projects learning, could reduce our mean PV Monitoring to investigate whether the acquisition PV forecast error. To date, half-hourly of new and different types of PV national and regional solar output monitoring data, as well as applying feeds have reduced error by National Grid System Operator advanced analytics and machine approximately 100MW. Examples of planned innovation projects and ideas • Smart meter data for network • New constraint optimisation • Improve forecasting (generation, operations techniques supply, demand) • DSO/TSO shared services • Managing flexibility scarcity • Preparing network for LCTs and EVs • H2 energy balance • Improve long term demand profiles • Faster, easier, more efficient • Lower capacity margins • Enhance monitoring and settlement connections Innovation strategy outcomes Facilitate change Smarter networks Whole System • Develop solutions that interact • Maximise benefits from smart • Manage significant penetration with customers meter data of EVs and electrified heat • Improve flexibility services to • Effectively utilise all available data customers with mutual benefit to counter potential threats to • Coordinate the deployment of EV the system charging points • Coordinate connected resources • Introduce technical solutions that to maximise system security and allow us to quickly release capacity the use of low carbon generation in our network at optimal overall cost • Improve forecasting processes and • Improve advanced whole energy disaggregate DER system planning and forecasting Now until 2019 2019 to 2022 2022 onwards
26 Electricity Network Innovation Strategy The future electricity network will increasingly employ commercial arrangements, as customers adopt greater use of apps and smart technology to interact with us. The variety of new technologies deployed on the networks will require the system to be interoperable and adaptive such that new solutions can be readily integrated. New automation schemes on the LV Theme 3 network will allow faster restoration of customers using embedded intelligence. New technologies Leveraging new technologies such as electric vehicles, smart appliances, and commercial electricity storage, market platforms, blockchain platforms, peer-2-peer evolution transactions, and big data will require new commercial models, including flexible tariffs, new methods for settlement and market structures. All these activities will multiply the amount of data flows leading to the need for increased cyber security. Finally, innovation will focus on better processes, as well as equipment and technology that will ensure continued efficiency and performance in the new realm. Innovation potential Current level of Future innovation Timeline innovation opportunity Short Med Long 3.1 Maximise cyber security and data protection in respect of privacy and Low commercial sensitivity 3.2 Improve demand and generation, maximise benefits provided by new technologies, with particular focus on Medium network services provided by electric vehicles and energy storage 3.3 Facilitate the adoption of commercial business models that leverage low Low carbon technologies 3.4 Extract value from continued growth in digital-enabled services, new and improved sources of data, and Low artificial intelligence 3.5 Shape and comply with evolving regulations and standards Low 3.6 Inform the development of, and ensure compliance with, new markets and structures that allow greater competition Medium in the energy markets 3.7 Facilitate sharing of services and business functions between DNOs, Medium TOs, and SO 3.8 Leverage cross-sector smart technology benefits and lessons Low
27 Electricity Network Innovation Strategy Case study ENTIRE is a four-year project that address the conflicts between ENTIRE will build on the lessons learned from a DNO and the SO contractual the commercial trials within Project requirements. FALCON. The project seeks to Western Power Distribution Case study CLASS seeked to demonstrate on their networks. The goal was Customer Load Active System an innovative, easily implemented to demonstrate that demand for Services (CLASS) solution to enable DNOs to cost- electricity can be reduced, without effectively accommodate LCTs and customers noticing a difference to the changing patterns of demand their supply. Electricity North West Limited Examples of planned innovation projects and ideas • New construction techniques • Emergence of DSOs • Cyber security • Smart network islanding • Innovation in markets • Modernisation of work practices • Alternative transformer technologies • Innovation in ICT and business systems • DC network feasibility • Unlocking the potential of big data Innovation strategy outcomes Facilitate change Smarter networks Whole System • Identify and counter internal and • Provide aligned, financial incentives • Increase use of artificial intelligence external cyber threats through innovative or flexible tariffs to make decisions on a more • Use smart technologies to maximise • Enable settlement for all existing dynamic network capacity within the power system customer profile classes to support • Collaborate with other energy • Use smart technologies to flexible tariffs sectors to optimise across multiple accommodate connections • Leverage next generation mobile sites and vectors • Maximise benefits of network communications services provided by electric • Identify available other dispatchable vehicles and storage energy resources, restrictions in real time Now until 2019 2019 to 2022 2022 onwards What our stakeholders said “Cyber security is the most pressing issue; and we need significant innovation in the area of maximising the benefits provided by new technologies.” “More inflexible, distributed and micro-generative sources, electric vehicles and localised storage will exert greater pressures on the networks, and also create more opportunities.”
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