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NETWORK / 12 / MARCH 2020 participation, but current pro- curement focuses on long-term commitments over a number of months. For us to meet those expectations, we have to build substantial headroom into the bidding process – the amount of flexibility available from heating systems, for example, varies with weather and is much more predictable over shorter time scales," he says. He notes that WPD's ability to forecast and as - sess requirements in its Flexible Power market on a weekly basis is the best available offer. "The market hasn't been designed with flexibility in mind. We are actively engaging with the DNOs; they recognise this is a step we need, but we want to see it happening as quickly as possible." Over at ENW, Bircham offers a different take, saying that – in his experience – flex providers haven't offered a price point that undercuts traditional investment in cables and trans - formers. "We've gone to market, but we haven't signed any con- tracts that involve new connec- tions. The offers have been too expensive, and alternative steps are more efficient. "We explicitly checked in with Ofgem over this, asking 'what's your view, should we pay a premium price in order to stimulate the market?' And their view was very clear, it would be wrong in principle to pay an inefficient price com - pared to alternative actions." Bircham agrees, though, that increased standardisation will be necessary to drive expansion in the flexibility market, by help - ing providers to structure offers. "The Open Networks Project has been helpful in facilitating this, and moving to a standardised product set. This year, there will be a set of definitions of prod - ucts that DSOs need to buy from the market. So wherever you go, you can understand what the product definition is." In the dark At the moment, the DNOs are in the early stages of writing busi- ness plans to be submitted to Ofgem ahead of the RIIO2 price control period. But, as Northern Powergrid has pointed out, they are business planning without a 'baseline' understanding of what a DSO actually is, and how Ofgem will incentivise flexibility and decarbonisation. DNOs' role is shi"ing from 'fit-and-forget' to active network management, and their assets are not so much new physical infrastructure as so"ware systems or ability to share network data and price signals, but it's not known how the price controls framework will reflect that. Meanwhile, decarbonisation is now an urgent goal, and the DSOs are widely envisaged as a key enabler in decarbonising the energy system. Nevertheless, today's regulatory environment dictates they act in a technology- agnostic way, treating high carbon-intensive diesel genera - tion the same way as biomass and solar or wind. Flexibility needed now "What societal and environmen- tal factors can be factored into our decision-making process?" asks Cardwell. "There's also a social and environmental value to electrical losses; are we al - lowed to factor that in [to invest- ment planning]? At the moment, we don't distinguish between different forms of generation." So far, Ofgem has incentivised the procurement of flexibility on the grounds that it is more cost- effective than adding network capacity. While the expectation is that this will continue in RIIO-ED2, no details have yet been published. As Scott says: "We would expect the DSOs to make a reasonable return from flexibility. It clearly has a cost, OPERATOR TRANSITION and as it grows DSOs will need to invest to deliver their digi- talisation strategies. At present we don't know how they will be remunerated for their services and what rewards and penalties might apply." He points out that there is an inherent contradic - tion between traditional cables- and-transformers companies and the fleet-footed, digitally enabled entities evoked by all the PowerPoint slides. "[Flexibil - ity] is what Ofgem wants to hear, but the way these companies currently earn their money is by installing cables and substa - tions. These are commercial entities with investors to satisfy. These investors aren't looking for fantastic entrepreneurial - ism – they typically want steady returns and the current regula- tory model serves them well." Scott says it's high time to clarify the ground rules. "Absolutely we need more clarity from Ofgem – but we've had a couple of years where they appear to have passed the microphone over to the Open Networks Project. We're now in 2020, soon we'll we heading into 2030. Will we get there only to find it's a 'DNO- plus' world when we ought to be in a DSO world?" While the DNOs themselves feel confident that the transition is happening at a good pace, the DSO imple - mentation plan from the ENA and the Open Networks Project will also give outside observers a chance to judge whether speed really has picked up enough. "We're actively managing distributed energy resources, not passively. I'm not sure there's a point you pass when you say yesterday we weren't but now we are, but we feel we are now acting as a DSO." JIM CARDWELL, HEAD OF REGULATION AND STRATEGY, NORTHERN POWERGRID "We've got a clear sense of direction overall, so the steps we need to take are pretty clear." PAUL BIRCHAM, COMMUNICATIONS DIRECTOR, ENW *This is an abridged version of Elaine Knutt's article, which originally appeared in Utility Week