Utility Week

UTILITY WEEK | OCTOBER 2022 | 19 Electricity dispersed between organisations, depending on which would be best suited to ful l them. On a related note, Fletcher questions whether the Energy Networks Association (ENA), which is leading the Open Networks project, is able to deliver the changes that are needed: "I'm sure the ENA are doing their very best in running the Open Networks project and we are thankful for all the pro- gress made so far, but as these local markets develop and grow, there is a more funda- mental question about whether a trade body is the right organisation to drive and govern progress. "They lack authority over their members so there's a risk that things move at the pace of the slowest, whereas Ofgem has got the ability to crack the whip a bit." "We think there's probably quite a lot that could be done with a bit of leadership from Ofgem in terms of forcing the pace of some of the things that have been talked about for years within the Open Networks programme, including issues of primacy between the ESO and the DNOs," she adds. "At the very least, they could be upping the pace on the standardisation of ‡ ex products and the transparency of those requirements." The search for consensus Fletcher says discussions around primacy between the ESO and DNOs have been going for about a decade and are still yet to be resolved. "Some of these issues you could discuss until the cows come home and I'm not sure you're going to reach consensus across the industry on these things," she says. "At some point you need the regulator to step in and say, 'this is just the way it's going to be'." She welcomes Ofgem's plans to introduce ex ante incentives around DSO functions for the ED2 price controls beginning in April next year, but adds: "What we'd really like is continued regulatory attention on perfor- mance within the price control period, and for Ofgem to be convening, annually per- haps, meetings between the DNOs and rel- evant stakeholders to discuss whether we're getting the progress that is really needed." In addition to market operation, Fletcher says another function for which there may be a case for some form of separation is around network planning, in particular in relation to decisions over the future of gas distribution. Although Ofgem's third model envisioned the creation of a series of regional system operators that would take on some or all of the DSO functions, as well as cross-vector planning roles, Fletcher says the call for input fails to address this issue directly. "It does feel to us that in that area of plan- ning, and that function of planning, there is a need to at least rethink it," she explains. "A, there's a good argument for having more separation between the network owner and the network planner, and B, there seems to be quite a lot of value in thinking about who has got the authority to make these multi- vector decisions and how these decisions are made. "I'm not sure you would ever just hand over to an energy planner a decision about switching oŒ gas because that feels like quite a political decision. But you could see how, if you had a local energy planner – a local FSO [Future System Operator]-equivalent on the planning side, then they might be able to provide technical advice to a political deci- sion-maker, for example, or that could all sit with the FSO at some point down the line." Fletcher says the changes she would most like to see could be achieved with or without the wider separation of DSO functions from DNOs, which to a certain extent she regards as "putting lines on a piece of paper". Having said that, Fletcher does think this could still be helpful, "because when it comes to making the decision about whether your requirements are met through copper or through ‡ exibility in one form or another, a neutral body – i.e. not the one that is owning – does seem to be a good way forward". She continues: "We're already beginning to see some diŒ erent degrees of separation within the DNOs and that direction of travel feels almost inevitable." Above all, Fletcher wants things to move quickly and does not want to see a repeat of the years-long saga of the separation of the ESO from National Grid, which has become a "running sore". She says if people continue to raise poten- tial con‡ icts of interest as an issue then "you'd be better just biting the bullet and saying, let's just do it, because otherwise we're constantly going to be talking about this thing". Dr Helen Poulter, a research fellow at the University of Edinburgh focusing on local energy systems governance, agrees with Fletcher that market operation should be separated out from both DNOs and other DSO functions. "The bit I really struggled with in the call for input is why on Earth the DSO is also the market operator," she says. "I think the DNOs can become DSOs – they do system operating anyway, they do system planning anyway – as long as they're told to think about ‡ exibility rst, but that can be put into codes, that can be put into incentives. That's not a di— cult thing to make them do." She says it makes "zero sense" for them to also act as market operators: "It could be done as part of the new FSO. If you go down the route where you have regional system planners, each of those could perhaps have a regional market. You could have either a few regional markets dotted around, or you could have it just from a central platform very much like it is at the moment with the wholesale market." Local variation One issue she notes is the non-alignment of DNOs' licence areas with national bor- ders: "If you think about where the DNOs are based, you've got companies like WPD, which is partly based in Wales and partly in England, and Wales have got a slightly diŒ er- ent net zero strategy than England. The same thing happens in Scotland. You've got SSEN (Scottish and Southern Electricity Networks), which is in Scotland and southern England." "Having something done regionally or centrally for a distribution market makes a lot more sense than having a DNO which is trying to operate between these diŒ erent markets, diŒ erent rules, diŒ erent focuses." "I think giving them more work, it becomes more expensive, and then that's the customer paying yet again," she adds. More broadly, Poulter says there is enor- mous locational variation in net zero poli- cies, not just between the diŒ erent nations in Great Britain but also between urban and rural areas and between diŒ erent local authorities, with those in larger cities o› en taking more ambitious positions. She says there is a need for greater coor- dination in this regard and therefore prefers the regional system operators proposed in Ofgem's third model: "What needs to happen really, at the local level, is we need a local ‡ exibility market, we need regional system planning, we need government to start actu- ally putting money into local councils so that they can come up with their local area energy planning, and all this stuŒ needs to happen." Poulter is least enthusiastic about the rst model, in which there would be internal sep- aration of DSO functions within companies. She says this is the "easy" option because it wouldn't require any legislation, but it also wouldn't solve the problems that need to be addressed. "What you need is certainty. And certainty doesn't come from just doing something quickly. It comes from everybody knowing exactly what is going to happen and when," she says. Maxine Frerk, director at Grid Edge Policy, associate at the thinktank Sustainability First continued overleaf

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