Utility Week

24 | AUGUST 2021 | UTILITY WEEK Policy & Regulation Analysis Imagining the system operator ofthe future A shake-up is coming in the way our energy system is operated, but how big will it be and how far will the ramifi cations reach? O fgem's decision back in January this year to back the creation of a fully independent system operator (ISO), was interpreted by many as a pivotal moment for the energy sector. It is certainly one which holds the potential to break open many of the certainties and assumptions around how today's system functions. But just how do industry leaders and wider system stakeholders imagine that a net zero-ready, independent system opera- tor of the future might di• er from what we know today? What remit should it hold and what characteristics or capabilities should it display? These questions are explored in a recent major report, Imagining the System Opera- tor of the Future, published by Utility Week in association with engineering consultancy Mott MacDonald, before the recent launch of BEIS and Ofgem's system operation consultation. Using commentary from a varied range of commentators the report explores: • Expectations around how the future ISO should Š t into the industry governance landscape. • What responsibilities it should have in relation to the integration of markets, facilitating o• shore transmission growth, Most commentators in the Utility Week/Mott MacDonald Imagining the System Operator of the Future report agree with the Ofgem pro- posal that a new ISO should operate across energy vectors, to release e‹ ciencies and improve resilience. Already there are many pilot projects underway across the energy industry which have started to chip away at the thorny ques- tion of how to optimise interactions between our power and gas systems. These projects look at issues like joint planning by electric- ity and gas DNOs (distribution network oper- ators), or prototype domestic heat units that combine gas boilers and electric heat pumps. But these initiatives are progressing with- out much in the way of central direction or incentives – a new ISO would be expected to use its contractual clout to change that. "We're going to have increasing sector coupling and cross-vector projects, so we should start to coordinate them at that high level," says one representative from the renewables"sector. This is well and good as far as it goes, but for the ISO and other decision-makers in the sector the prospect of a major shi• to a hydrogen grid presents a huge challenge. While the ISO's activities as electricity sys- tem operator will involve making assets run at maximum e‹ ciency, hydrogen doesn't yet have any infrastructure assets. "Hydrogen means taking big decisions about big capital builds that take a very long time to bring to realisation," says Mott MacDonald's Harrison. Multi-vector solu- tions can o• er appealing — ow diagrams: for instance, excess renewable electricity can drive electrolysers to produce hydrogen as a storable and transportable energy medium that can be used in place of natural gas for zero-carbon heating and transport fuel. But not every — ow diagram stacks up economi- cally, Harrison warns. "Hydrogen is brilliant, once you have made it, as a storage medium. By compari- son storing energy within the electricity system, especially at scale and over longer Report excerpt: Integrating "Don't forget that as we move towards a decentralised energy system, there is an increasing imperative to balance energy supply and demand that can only really be optimised at the local level. From my perspective, we need to better understand how the national energy system can take account of local targets for carbon reduction." Mark Atherton, director of envi- ronment, Great Manchester City Authority Quoted in the report: "There is an inherent confl ict in the DNOs' position as network owner and market facilitator, and we want to see more advanced thinking about competition. If we're all agreed that there is a need for independence in order to facilitate fair markets, then the move towards a transmission ISO must be mirrored at DNO level." Alastair Martin, chief strategy o cer, Flexitricty

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