Electricity Network Innovation Strategy - March 2018 - Energy Networks Association

 
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                innovation@energynetworks.org
                                                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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