Has a tipping point been reached in the smart utility era?

As networks wrestle with the challenge of modernising the UK's power system to encompass all future aspirations, are we witnessing a tipping point in our own industry, questions Global Smart Transformation's managing director Duncan Botting.

29th March 2017 by Networks

Has a tipping point been reached in the smart utility era?

Remember Hoover and Electrolux? Maybe you are too young, but for those with greying hair these were brands synonymous with vacuum cleaners that had a vice like grip on the market for decades. Hoover even became the verb to do the hoovering!

“We are at a tipping point and the fate of the future power system is sitting with the market designers BEIS and Ofgem the regulator.”

Then along came Dyson – a name nobody had ever heard of and the idea that we needed a twin-cyclone system to pick up our dirt without a bag to collect it in was taken almost as a joke. But then something amazing happened…Hoover and Electrolux were almost obliterated from the market place for vacuum cleaners and the new kids on the block Dyson and Henry were the new normal.

There are multiple examples from different sectors of the sudden (usually a decade in the making) change of guard from one traditional incumbent being usurped by another young upstart or upstarts…and the cycle continues.

As we wrestle with the challenge of modernising our power system to encompass all our future aspirations, are we witnessing a tipping point in our own industry?

This week sees the reduction of incentives for renewables, the confirmation from National Grid control room that for the very first time transmission system demand was lower in the afternoon than overnight due to large amounts of solar on the system, the report from UKERC that flexibility in the power network is essential if integration costs for new renewables is not to spiral out of control.

The Institution of Engineering and Technology and Energy Systems Catapult Future Power System Architecture Project highlights the need for an inclusive, agile and whole system approach to the power system challenge inclusive of new governance and iterative learning. The BEIS/Ofgem Smart Energy consultation is confirming the markets hunger for less regulatory barriers and greater market opportunity. The Smart Energy Market conference held in Exeter confirms the community energy revolution is no longer a case of when, but what impact this is now having – local markets are happening…the tempo of change has quickened and the impact is now very visible.

Stakeholders that were once onlookers in the power system are now at the centre of discussions about its future. We are at a tipping point and the fate of the future power system is sitting with the market designers BEIS and Ofgem the regulator. It will be interesting to see if a continued effort to patch the 1989 Electricity Act that was designed in an analogue and quiescent world is considered appropriate for the 21st Century digital transformational world that we now find ourselves in.

Everyone is in complete agreement that the whole systems approach along with inclusive stakeholder participation and agile and timely delivery of legislation and regulation is needed. The question is how will this be achieved? The current process of consultation and review is no longer fit for purpose, it is too slow and the regulatory process to silo based…distribution and transmission and the demand side assumed to follow the system if given enough stimulus!

As National Grid changes its strategy from balancing by generation alone to requiring demand to be involved in the balancing act, it has been pushed towards an ever more independent role of System Operator. While Distribution Network Operators see their role now as Distribution System Operators providing regional balancing. Community Energy groups now openly discuss the opportunity to become Local System Operators. The realisation of local peer-to-peer operators has brought this a step closer to reality.

Every meeting, conference or workshop I attend the first statement that is made is the customer needs to be at the centre of the system and the decisions we make. The discussion then moves immediately to the needs of the system, flexibility to save the system from collapse, the failure of regulation to recognise the contribution of storage, the ROI for this project or that, the list goes on. Somehow the needs of the customer are neatly tied up by saying if we get the system efficiencies right the customer will be the winner! The customer is a very complex beast – anything from a residential fuel poor person to a multimillion pound corporate company. It may be a generator or an aggregator. It may be a city dweller or a rural cottage. The list is again very long. What does a tipping point mean for these different customer classes – will the benefits be the same for all?

The consideration of policy, legislation, commercial, technical and societal whole system analysis is a very complex challenge. We do not have the tools or expertise to manage these, nor do we really know the requirements that each of these different consumer groups aspire to in the future.

What is certain is that the decisions we are making now will define the way consumers interface with the power system for the next 20 to 30 years. If we cannot predict the future requirements we need to provide the adaptability and inclusivity into the whole system design to allow different options to be enabled as the market and customer needs solidify. To achieve this requires a new mindset for both governance and deployment of regulation. A light touch regulation, rather than a detailed micro-management is needed so it can be understood and monitored for compliance.

Community Energy and grid edge disruptions are not part of the regulated environment, their ability to surprise is evident. The key is to ensure that the regulated incumbents are part of the future and not consigned to the past by outdated, slow and cumbersome processes of governance and regulation. Lessons must be learnt. Innovation in policy and regulation is just as important as technology and commercial innovation – derogations and authority will have to be part of the ongoing iterative learning trials for new policy and regulation trials. This will enable new and untested approaches to be trialled while building credibility and ownership for those that take part.

Tipping points are seldom identified at the time but by looking back and identifying the trend. The trend is clear, the outcome is not. There are always winners and losers when tipping points are identified, the question is who will be the winner and who will be the loser. Let’s hope the winner is the customer…only time will tell!