Flexibility sat at the core of UK Power Networks’ (UKPN) recent RIIO-ED2 draft business plan, with the network operator planning for a decade of “transformative change”.
Current± recently sat down with Sul Alli (SA), director of strategy and customer service and Sotiris Georgiopoulos (SG), head of smart grid development at UKPN to discuss what the next price period will look like for the company, and how they are building flexibility into the plan from the start.
How do you build in the flexibility needed for the next price period?
SU: We're going to be led by data. We've looked at the different scenarios and we've modelled with Element Energy and Imperial College London what the take up of low carbon technologies could look like based on a number of factors.
We've taken the Climate Change Committee (CCC) scenarios, and calibrated a scenario which assumes high uptake of low carbon technologies, and not too much customer smart charging and the investment envelope could be between £4.5 billion and £5.6 billion.
Now we've understood what the investment envelope looks like we're able to turn money into work, and work into resources. We've estimated we will need about 1,200 extra people across that period. We're putting in place strategies now to allow us to flex our resources up should we need to, but we've got to be led by the data.
SG: There are some differentiators in our Distribution System Operator (DSO) strategy. One of our key commitments is that the DSO work and actions, to deliver £400 million of direct benefits, investment that we would have to otherwise undertake within the ED2 period that we'll either defer into the future, if it's needed, or avoid if it's not.
I've worked in this area for a long time and some of these areas can remain theoretical concepts, unless you are able to put the robust business case and show the benefits. Why would you invest in the DSO? Why would you do all the good stuff that you just said in terms of investing in systems and data and technology and people?
We have made a commitment on this benefit that we propose to be measured transparently and visibly, to track progress and metrics to hold us accountable.
We've looked at the wider benefit of the DSO, not just in terms of avoiding or deferring distribution investment, but what role it can play in avoiding transmission investment, reducing overall system costs. We did that analysis and we came up with a range, which is £1.3 billion to £5.4 billion by 2040. Although some of these benefits might not be available to us directly through the existing framework or mechanisms, it demonstrates that the DSO functionality and the DSO business unit can deliver benefits across the wider system.
How significant will emerging technologies like EVs be to RIIO-ED2?
SA: We've done a huge amount of work on flexibility already in ED1, so we're not starting from scratch. We're going to step change the amount of effort on flexibility, development of products, working with flexible providers, bringing our products closer to real time to be able to unlock the resources that are offering flexibility at real time, because that's where the markets are going.
We've worked with third party providers of marketplaces and in the UK currently there is a very dynamic scene of companies that are coming out with digital market operation capability. We'll work with those providers and companies to create a digital marketplace that will allow those who want to offer flexibility to us to do that at lowest cost, in the easiest possible way and explore this across all voltage levels.
Residential flexibility from EVs or batteries is central to this. We want to create a marketplace to get flexibility at lower and higher voltage levels. A digital marketplace with third party providers and develop it in a way that is open for other DNOs, for other providers, not only to get the information and the data that they need, but also to participate.
This is revolutionary. There isn't a rulebook we can copy. We've looked at the States, Australia, Europe and there isn't a rulebook that we can copy to unlock smart charging at scale in domestic, residential homes for the benefit of the grid. It doesn't exist; we've had to create it.
Why I have confidence in our strategy is that it's not a pipe dream. This year we have secured the largest flexibility tender that is going to be provided from aggregation of electric vehicles. It's due to go live in 2022 and we're going to learn so much from doing that about the technical and commercial challenges. We're building the confidence and the capability to be able to scale so that we're ready when we've got 2.5 million EVs, not 150,000.
Flexibility markets are not just there, you can't just switch them on. You have to nurture and develop them over time, which is what we've been doing in ED1 and now it's about how we supercharge it for ED2.
How has the flexibility market changed already for UKPN?
SA: The first time we went out for a flexibility tender a couple of years ago, we procured single digit percentages of what we advertised, but we learned a lot. We worked with providers who told us if you change these contract terms, give us a longer duration, give us better visibility so that we can prepare, you'll get a better response. And we've just put a tender out this last round, where we went out for 350MW and we procured 250MW.
We went from single digits to 250MW. We are pleased about the scale of the EV charging and smart charging capability that is going to be unlocked through our tenders, because we can't forget the consumer. 40% of the abatement in the CCC scenarios out to 2040 require some form of consumer change. When you ask consumers what they think, there's general awareness of net zero but limited awareness about what needs to happen to achieve it.
That's certainly borne out from our customer research. Unless we can build the understanding of consumers about what net zero means for them, we're not going to get to net zero as a nation. Therefore, we think there's a great overlap between [the elements of] our strategy, which is to push this smart future, work with third parties that are going to put those compelling propositions to consumers and make sure that the services are designed so they don't create any impediments or barriers. That should have a flywheel effect in that it should help consumers transition their own lifestyles to be more green. There's a wider political and societal context, we can't just sit back and wait for it to happen.
With moving towards having a digital platform for tendering, how far in advance are you going to be tendering?
SG: In terms of tendering and procurement, we're trying to develop a full set of products, from tendering six months ahead to 18 months ahead, giving quite long-term contracts. We have providers that value the certainty and value the horizon, because they need to develop capacity, recruit and get ready.
We want to bring some of our procurement closer to real time, or maybe not firm up our commitments that we might enter into six months ahead, but closer to the time, up to day ahead, and then we'll look at intraday as well, but certainly up to day ahead. We will develop a full suite of products and bring everything on the platform.