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RIIO-2 must be 'responsive' as DSO transition continues with increasing urgency

Image: Getty

Image: Getty

There is still a "long way to go" in the transition from DNOs to DSOs but if the incentives are set up right within the regulations, it will “drive the culture” of the networks.

This was the key takeaway from a panel of experts discussing the transition at Current±’s EnTech conference this week.

“The UK is leading the DSO transition along with some of the Nordic countries but make no mistake, there’s still a long way to go,” Randolph Brazier, head of innovation at the Energy Networks Association (ENA) said.

“The urgency is starting to increase now,” he added.

There is no one size fits all for the transition, which is going to be different for each DNO due to the unique challenges each service area provides, said Stew Horne, head of energy networks and systems at Citizens Advice. The pace of change is therefore going to be different as a result of the “huge amount of variation”, he said.

However, some of the fog surrounding the transition will clear with the imminent RIIO-2 price controls, the panel agreed.

Jim Cardwell, head of policy development at Northern Powergrid, said the price controls have a “massive bearing on what we as DNOs do” and what price controls do well is setting out “what you want and how that will be incentivised”.

“The key challenge for us is to make sure we’re really clear on what it is we want,” Cardwell continued.

Horne added that the price controls will need to be responsive and allow the DNOs to “pivot and flex” but must also be good value for customers.

This idea that regulation will be central to shaping the transition was echoed by Brazier.

“If the incentives are set up right inside the regulatory framework – which I think they broadly are, they might need to be tweaked in RIIO-2 - it will drive the culture inside of the networks,” he said.

There were however, warnings over the timeframe Ofgem is working in. Anna Ferguson, power systems director at WSP, said: “I think the right regulations will drive the right behavior. We’ve seen that a lot recently. . . but I think it’s a fairly short window of opportunity for Ofgem to get that right and provide the right leadership.”

RIIO-2 is set to come into effect on 1 April 2023, with the latest consultation closing on 15 October 2019.


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