Innovation is needed ‘now more than ever’ according to National Grid ESO as it makes digital transformation its top priority for the next year.
This comes as part of its Innovation Strategy for 2021/22, with its priority league table seeing future markets and constraint management move up to take second and third spots respectively.
The ESO said its reasoning for placing digital transformation at the top was due to it being a critical enabler for other innovation, adding that almost everything it does is driven by data and modelling and that if it is to achieve its goal of operating a zero-carbon system by 2025 it must significantly step up these capabilities as well as facilitate the digital transformation of the wider energy industry with open data and collaborative innovation.
When it comes to future markets, the ESO outlined how it is becoming “increasingly clear that current market structures are not yet fully fit for purpose in a net-zero world”. It pointed to how low demand due to COVID-19 has given it a glimpse into the future, with the ESO having seen in the past year “worrying levels” of volatility and high costs in wholesale, balancing and ancillary services markets.
In spring last year, in the height of the first UK lockdown, demand stayed consistently low as it broke records, meanwhile prices continued to spike throughout 2020 and into 2021, with the Balancing Mechanism reaching £3,000/MWh and £4,000/MWh in January of this year, the same month that saw day ahead power prices jump to almost £1,500/MWh.
The low demand caused by COVID-19 has also resulted in constraint management moving up the priority table, with the volume of generation the ESO had to turn down to resolve constraints in summer 2020 being 50% higher than the same period in 2019. It said it wants to explore ways over the next regulatory period that it can start to introduce new mechanisms, markets or approaches that aim to reduce the congestion costs ahead of the new boundary reinforcements.
Meanwhile, whole energy systems takes the fourth priority spot – marking the halfway point of the table – with the ESO explaining there has been limited whole system innovation in the energy industry, despite strong signals from Ofgem and BEIS that this should be a focus.
In the innovation strategy, National Grid ESO also pointed to improvements made within the last year, including working with distribution network operators to find market solutions to whole system operability issues such as starting real-world trials in both its Power Potential and Distributed Restart projects with UK Power Networks and SP Energy Networks respectively.
It also started to look more seriously at novel ways to manage rising constraint costs, embrace digital and virtual ways of working, and progress its journey towards its digital transformation.
In the foreword, Carolina Tortora, head of innovation strategy at National Grid ESO, said that the impact of COVID-19 on the electricity system has been "stark" but that the past year has also seen "a fantastic acceleration in decarbonisation".
"It goes without saying that innovation is needed now more than ever, to make sure that we manage the safe transition to zero-carbon operation at the lowest possible cost to consumers, now and in the future."