Utility Week

UTILITY WEEK | 20TH - 26TH JULY 2018 | 17 Finance & Investment Key findings Significance of flexibility Respondents rate the strategic significance of flexibility to their business at 6.6 out of a possible 10 presently, and expect it to grow one-third to 8.7 by 2030, which is consistent with the results of the 2017 survey. Respondents believe flexibility in the system requires a massive increase in contribution from grid-scale stor- age and demand-side flexibility. Policy and regulatory context Of the policy and regulatory initiatives in the 12 months since the previous survey, respondents were most posi- tive about Ofgem's review of network charging, rating its impact on investment, confidence and pace of change at 7.2 out of a possible 10. Drivers and opportunities While drivers for flexibility vary by business type, the capacity market is not generally considered to be a major driver. Operating the distribution system comes out as the top driver, heavily influenced by the 9.1 out of 10 and 8.7 out of 10 scores from DNOs and SO respond- ents respectively. Suppliers and traders see customer experience (8.7) and customer propositions (8.6) as primary drivers for their businesses. The main current opportunities for businesses arising from flexibility are: providing industrial and commercial demand side flexibility; utilising flexibility to avoid the need for new infrastructure; and utilising storage and demand side flexibility to balance the network. Enablers Respondents expect EVs to reach economic viability within just 3.2 years. However, the charging infrastruc- ture for EVs is expected to take longer to reach economic viability, at 4.5 years, suggesting some policy interven- tion and/or investment support may be required. Pessimism from SO respondents (9.7 years) and DNOs (5 years) is driving the longer score for the charging infrastructure being in place, in contrast with their optimism about the economic viability of EVs (2.7 and 2.6 years respectively). The smart meter rollout is not widely anticipated to unlock value from flexibility. Demand-side flexibility The most significant barrier to demand-side flexibility is the lack of a commercial or market framework to realise its value, rated at 7.1 out of a possible 10, followed by the related inability to stack value, at 6.9 out of 10. While half of respondents (50 per cent) have expe- rienced economic barriers to demand- side flexibility projects, less than one third (31.3 per cent) have experi- enced technical barriers, suggesting that the technology is more advanced than the business case. Return on investment Opinion is divided as to when respondents will see ROI for their businesses from flexibility in the power system, with 31.3 per cent already seeing ROI, and a further 25 per cent predicting ROI by 2023. However, 34.4 per cent of respondents predict never seeing ROI for their business. DNOs are sceptical about the business case for flex- ibility, with just 23.1 per cent currently seeing ROI, rising to 46.2 per cent by 2023; 46.2 per cent anticipate never seeing ROI on flexibility. Methodology Our survey was conducted on behalf of Utility Week and CGI by Insight Advantage, an independent market research consultancy, in March and April 2018. Answers were confidential, and are reported only in their aggregated form. Our online survey was completed by 41 individuals from across the power sector, who spent more than 26 minutes on the survey on average; significantly longer that the previous years' surveys. Nearly three quarters (73 per cent) of respondents were board director, director or head of department level. The research was informed by discussions at a working group held in London in March 2018, and attended by 20 senior leaders from DNOs, suppliers, traders, aggregators and providers of flexibility. Produced in association with: FACTORS AFFECTING INVESTMENT To what extent are each of the following initiatives having an impact on investment in alternative sources of flexibility; confidence and the pace of change? The Helm Review The Industrial Strategy The Clean Growth Plan The Smart Systems and Flexibility Plan Ofgem's review of network charging Average score (out of 10) Overall Systems operators Generators DNOs Suppliers and traders Aggregators and flexibility providers 4.6 4.3 3.2 3.2 3.2 4.0 5.7 6.7 4.8 6.0 5.5 5.6 5.8 7.7 4.8 6.8 5.3 6.0 6.8 6.7 6.0 6.8 7.5 7.1 7.2 6.3 8.2 7.1 7.6 8.0 To download the full report Embracing Flexibility: Transforming the Power System by 2030, go to: www.utilityweek.co.uk 6 7 8 5 4 3 2 1 EMB R ACING 2 0 1 8 E X C L U S I V E R E S E A R C H R E P O R T F L E X I B I L I T Y TRANSFORMING THE POWER SYSTEM BY 2030 I N A S S O C I A T I O N W I T H

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