Utility Week

18 | OCTOBER 2022 | UTILITY WEEK Electricity Analysis Degrees of separation: the future of DSOs In the fi rst part of this deep dive, we looked at the diff erent models being proposed by Ofgem for a future DSO and the reaction of DNOs. In the concluding part, we gather wider industry opinion. E arlier this year, Ofgem issued a call for input on the future of local energy sys- tem institutions in which it proposed four possible models, ranging from the inter- nal separation of distribution system opera- tion (DSO) functions within distribution network operators (DNOs) to the creation of a series of regional system operators. The regu- lator is now evaluating the responses before issuing its conclusions early next year. We previously explored the views of DNOs on these proposals (Utility Week, July); in this second part of that deep dive we take a look at what others have been saying. "We are, in the ED2 price control process, pushing very, very hard for a focus on e€ ec- tive DSO activities, whether they're separate or not," says Rachel Fletcher, director of regulation and economics at Octopus Energy. "What really matters to us is that the DNOs make much better use of † exibility than they have historically, and that the right incentives are in place to encourage DNOs to consider † exibility ‡ rst before traditional reinforcement." Octopus has been at the forefront of the development of domestic † exibility, launch- ing Britain's ‡ rst half-hourly domestic energy tari€ – Agile Octopus – and winning con- tracts for more than 150MW of capacity in recent tenders by Western Power Distribu- tion (WPD) and UK Power Networks (UKPN). Fletcher says the "real prize" on o€ er from fundamental institutional reform is in the facilitation of † exibility markets. "The one thing we should seriously consider is creating a single market platform that would deliver † exibility both at a national and local level," she says. "So rather than each DSO having its own local market and using di€ erent platforms to procure and dispatch services, and then on top of that the ESO [Electricity System Opera- tor] having its own platform, why not create a single market platform?" "There's obviously a lot of work going on in the Open Networks project to harmonise the DNOs' † exibility speci‡ cations," she acknowledges, "but we don't have anything close to harmonisation. And on top of that, as an industry, the skill set that we're most scarce in is digital and data management. "The path we're going down at the moment requires seven-plus teams with those skills so why not as an industry create a single market platform? "Why not start asking the DSOs and the ESO to work together on a single market plat- form rather than using legislation to change roles and responsibilities in that way?" This idea of separating o€ market opera- tion ‡ ts most closely with the last of Ofgem's four proposed models, with DSO roles being

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