Stepping up to the challenge of delivering the energy network of the future
Traditionally, the role of DNOs was to distribute a reliable and safe supply of energy, and businesses were used to dealing with a captive customer base with limited alternatives, long-term capital investment and relatively stable regulatory contexts. However, this is unlikely to remain the case for long.
The challenges of delivering the energy transition and adapting to decentralised energy markets while maintaining affordability mean that companies must adapt to remain relevant in the digitalised world of the future.
In order to be successful, DNOs must overhaul their operating and business models and take a smarter approach.
Delivering the energy transition
The energy sector has a large role to play in helping the UK meet its climate change commitments.
A large-scale decarbonisation of heat and transport will put additional pressure on electricity networks, particularly at peak times, and it’s necessary that networks learn to adapt their balancing procedures to a greater proportion of intermittent generation on the system.
The network operators are committed to creating a smarter, more flexible and more efficient system, and with pilots underway, and conversations with third-party flexibility services, it won’t be long until we start to see smart flexibility service markets as part of business as usual.
Adapting to decentralised energy markets
Electricity networks must adapt to the way that energy is produced and consumed. The change from a DNO to a DSO is well underway and is driven by innovation in how networks are operated in response to changing policy. In the ecosystem of the future, there will be a greater role for local energy networks to manage the supply and demand of decentralised energy generation. This offers both a threat and an opportunity, relieving some of the pressure that peak demand poses and successful DNOs will take advantage of the challenge.
DNOs are moving away from the traditional passive model of distribution and are taking on the role of a neutral market facilitator, ensuring that new services are reliable for all.
Public debate about the affordability of energy has a tendency to focus on the profits made by energy suppliers, but more recent attention has been put on the profit margins of DNOs.
DNOs are paid for by customers through their supply bills. A combination of investments in adapting networks to new scenarios, and increasing numbers of consumers reducing their reliance on the centralised grid means that there is a mounting pressure on customers that remain in the market to service a higher overall bill.
Digitalisation is the key to a decarbonised future, but it can be expensive. In order to ensure that electricity is affordable for all, it’s imperative then that networks streamline processes to keep costs down as they work to deliver the energy transition over the next 30 years.
Can technology offer a solution?
Change is afoot for energy networks. Technology could be the key to delivering these new demands while avoiding spiralling costs. Companies must invest in solutions to operate more efficiently. By undertaking a suite of projects, including active network management, rationalising duplication of existing software and maximising the potential of data currently available, networks can make the cost savings necessary to deliver the energy ecosystem of the future.
Seb Fox, Sector Manager – Future of Utilities
Seb Fox is the content lead for our Future of Utilities portfolio. He keeps an eye on industry developments, hot topics, and puts together our conference agendas. He’s been with the company for just over two years, having graduated from Mansfield College, University of Oxford.
Follow him on Twitter here: @Futureofutils