Smart and Flexible: a Vision

for 2020 – Distribution

Service Providers

Catherine Mitchell

Catherine.mitchell@exeter.ac.uk

28 February 2017

PRASEG

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Definitions

Innovation Not just technology, but new practices, business

models, social preferences, that lead to change on the

ground

Governancethe policies, institutions,

regulation, market & networks rules & incentives

and the process/politics behind them (including the way people are involved)

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Energy is a whole system so

governance framework (ie

policies, regulations etc) has to

be to designed to integrate the

sectors and operation, and

confront underlying politics

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Specific GB energy governance

problems to solve

Problems to do with

current institutions

Problems to do

with operation

Limited Access to Data

Uncoordinated, non-integrated &

directionless system change

SO focuses on T rather than integrated T & D

across vectors

Value/payments in system reflect

conventional system

Does not deal with losers; inherent

distributional impacts of policies; rhetoric lets ‘market’ dictate

direction not CCC budgets;

Problems to do

with transparency

& legitimacy of

decision-making

Things that

are lacking

A way to incorporate CCC budgets across

institutions

A means to coordinate value of DER & local

markets

A place for discussion and consensus building

Regulation lagging change; not nimble

Self-regulation leads to inertia

BEIS policy decision de facto delegated to

other bodies which do not have legitimacy

and ignores distributional issues

End users viewed as passive consumers,

within sectors

Uncoordinated decision making

Inflexible Demand Side

An efficient energy system

Short term nature of political decisions

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The DNO should

become a Distribution

Service Provider

(DSP) not a DSO

• A co-ordinator and market facilitator of distribution areas, across electricity, heat and EV; and S and D

• Combined energy and system services to enable granularity of value for services

• Physical, local ‘spot’ market /platform which nets off S and D

• In general, does not own resources

• Any resource sold to / bought by any customer via co-ordinated private platforms + DSP

• Regulated for different revenues• Traditional cost of service• Performance based• Transaction related

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Energy System / Distribution Challenges

and DSO / DSP Solutions

Challenges DSP

Better than now, but not much granularity

Better than now, but not much

Certain customers

Better than now but not much

Some, but complex

Some

Enables this

Enables this

Enables this

Enables this

Both government targets / goals and PBR

Yes, and helps to reduce regulatory lag

D system needs co-ordination, granularity of value and data access

Transparent and legitimate policy making, with direction

Customer / people focused

Promotes energy efficiency, DSM, integration, flexibility, LEM

Operation and regulation to minimise infrastructure cost

Regulated to meet desired outputs, simply

Regulated to encourage transactions / innovation of practice / new entrants

DSO

Greater coherence of decision-making, direction &

less delegation from BEISNot really

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Implies a number

of changes• New roles

• New operation (more

flexible and energy

efficient)

• New actors

• New balance of type

of regulation

• New balance between

direction and markets

• Confrontation of

politics of energy

• Carrot for distribution

companies, if they

meet PBR

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References • Slide pack for DSPs (updated November 2016)

http://projects.exeter.ac.uk/igov/new-thinking-distribution-service-providers/

• 2016 blog about NY REV which includes links to 2014 and 2015 blogs and

NY REV reports http://projects.exeter.ac.uk/igov/us-regulatory-reform-ny-

utility-transformation/

• For CA DER Valuation

http://www.cpuc.ca.gov/uploadedFiles/CPUC_Public_Website/Content/Abou

t_Us/Organization/Commissioners/Michael_J._Picker/2016%20DER%20Acti

on%20Plan%20FINAL.pdf

• For NY VDER

http://www3.dps.ny.gov/W/PSCWeb.nsf/All/C12C0A18F55877E785257E6F0

05D533E?OpenDocument

• IEA, 2017, Next Generation Wind and Solar: from cost to value

• IGov Framework Paper - http://projects.exeter.ac.uk/igov/paper-gb-energy-

governance-for-innovation-sustainability-and-affordability-2/

• IGov Final Conference papers - http://projects.exeter.ac.uk/igov/conference-

summary-energy-governance-new-ideas-new-institutions-new-people/

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Thankyou

For more information, please go

to the IGov website

http://projects.exeter.ac.uk/igov/

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Additional slides from DSP Pack http://projects.exeter.ac.uk/igov/new-thinking-distribution-service-providers/

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No local markets in terms of co-ordination of

energy and services in local area

Source: adapted from Vercschae, Kato, Kawashima & Matsuyam (2015) http://vision.kuee.kyoto-u.ac.jp/japanese/happyou/pdf/Rodrigo_ASN_2015.pdf

Demand Management (demand response) Co-ordinated energy management

Electricity, heat &

transport/DER

Aggregator

Supply-side Demand-side

Supply Management (operating reserve)

Top down signal

Consumers (EMS)

Electricity, heat &

transport/DER

Co-ordination

Demand Management from supply-side• Actors do not communicate

• No control feedback• Cluster of single actor best effort• Limited control ability

Demand Management from demand-side• Actors communicate to coordinate

• control feedback• Community best effort• Higher control ability

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What is a traditional network utility?

Distribution Network Operator

• Supplying energy units to customers• Maintaining certain operational standards• Making a rate of return on capital assets, so incentive to add capital assets

Maintaining a safegrid

Maximising asset infrastructure

Rate of Return Regulation

Source: Adapted from CSIRO and Energy Networks Association 2015, Electricity Network Transformation Roadmap: Interim Program Report

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What is a Distribution Service Provider?

Distribution Service Provider

• Integrating all types of DER via increased system and energy efficiency • Enabling customers to provide and be paid for services to D-grid• Facilitating services between 3rd party providers and customers• Reveal value• Becoming ‘active’

Maintaining a safe &

resilient grid

Increasing system

efficiency

Optimisinginfrastructure

Support/ enable public policies

Enabling highlyreliable & resilient energy services

Bring forwardcost-effective ways of achieving outcomes

Providetransparent data

Higher proportion of Performance Based Regulation to Revenue

Source: Adapted from CSIRO and Energy Networks Association 2015, Electricity Network Transformation Roadmap: Interim Program Report

Sources of Utility Revenue within NY

REV

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DSP Markets

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Fit-for-Purpose GB Energy Governance Framework