Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/398458
UtILItY WeeK | 17th - 23rd OctOber 2014 | 11 Utility Week research IT readiness Information and communications technolo- gies will inevitably have a crucial part to play in how well energy networks handle the challenges of the decade ahead and to what extent they succeed in seizing the opportuni- ties they select. Although not the be all and end all, certainly not a silver bullet, IT is a crucial enabler. Utility Week and Tata Consultancy Ser- vices asked respondents to rank their highest priorities for IT investment in the five years ahead from a list of five options. In tune with the earlier business priority afforded to customer services, IT to support better customer service emerged as the top priority, with 42 per cent placing it top of the pile. It will be interesting to see as future IT investments are made whether this is to support essential but fairly basic customer service improvements – for example, to limit supply interruptions and minimise the time supply is down – or more ambitious projects – for example to encourage customer behav- ioural change. Second tier IT priorities were in tradi- tional utility areas –namely, asset manage- ment and field service systems. Little priority was attached to investment in Big Data. Only 17 per cent put it as their top priority, while a third ranked it their lowest priority. At the very bottom of the priority list was cloud computing investments, where over half said this was lowest in the pecking order. Over a 20-year horizon, around half of respondents considered Big Data and analyt- ics, condition monitoring through wireless sensors, and semi-automatic inspection of and its consumer agenda rather than just complying with the letter of its law. It is true that technology is only one part of the solution, but it is an important part. Responding now to industry and technology developments that can already be seen on the horizon would be wise and would help companies in a host of ways, including: deal- ing better with the new regulatory regime; reaping greater benefit from smart metering; improving the connections experience; deliv- ering on customer service ambitions; and raising the priority of delivering what RIIO has ultimately been introduced to ensure – the transition to a low-carbon economy. Download full report at: http://bit.ly/1njeIRr RIIO in brief RIIO aims to focus energy companies' atten- tion on connecting low-carbon technologies in a timely and cost-effective way and uses incentives to drive the innovation needed to deliver sustainable energy networks that offer value for money to existing and future consumers. Moreover, RIIO is designed to encourage network companies to: • put stakeholders at the heart of their decision-making process; • invest efficiently to ensure continued safe and reliable services; • innovate to reduce network costs for cur- rent and future consumers; • play a full role in delivering a low-carbon economy and wider environmental objectives. Three price control reviews, each running for an eight-year period, are taking place under RIIO's auspices. RIIOT1 sets out what the transmission network companies are expected to deliver and details of the regulatory framework that supports both effective and efficient delivery for energy consumers over the eight years from 2013 – 2021. RIIOGD1 sets out the outputs that the eight gas distribution networks (GDNs) need to deliver for their consumers and the associ- ated revenues they are allowed to collect for the eight-year period from 1 April 2013 until 31 March 2021. RIIOED1 (which is underway currently – final decisions are due in November) will set the outputs that the 14 DNOs need to deliver for their consumers and the associated revenues they are allowed to collect for the eight-year period from 1 April 2015 to 31 March 2023. Ofgem's dra determinations, issued late July, propose slicing £1.4 billion from power networks' business plans for the eight years from 2015, on top of the £700 million savings the companies proposed in their business plans. The average annual consumer charge for energy distribution will be £12 lower than today's prices. infrastructure would have an impact or sig- nificant impact on the business. In terms of the implementation of specific technologies among DNOs, the survey found intelligent switches with distribution auto- mation were widely implemented. Half had implemented new sensors and communica- tion technologies for grid monitoring and control, and outage management systems. A few (17 per cent) had made significant headway into implementing smart meters and net metering. No-one had positively implemented tracking and maintaining event histories of assets. What does it all mean? The challenges facing energy networks in the near future are very real. Concerns about working under RIIO are most acute in the areas of investment and regulatory reporting. Meanwhile, smart meters are coming for sure but networks have very lacklustre confidence they will deliver much in the way of benefit for gas or electricity transmitters and distributors. In the face of these challenges, energy networks are by and large opting to stick to the knitting and focus on immediate priorities. While this is understandable, they would do well to think a little longer term and more strategically than these results suggest is happening. Responding now to industry and technology developments that can already be seen on the horizon would be wise. More positively, there is a real thread run- ning through respondents' answers that the customer has become paramount. Forward- thinking network firms should be ambitious here and look to develop in the spirit of RIIO expert view from tcs: network optimisation analytics From the recent dra determinations by Ofgem on revised business plans, it is evident that DNOs are being asked to deliver more benefits with limited investments on smart grid technologies. They are expected to leverage lessons learnt from the Low Carbon Network Fund and investments in smart meter rollout within ED1 while low-carbon technologies are still evolving. The challenge for DNOs lies in identifying the assets, timing and location of the invest- ment based on the lessons learnt from different low carbon network trials. This will bring an innovation opportunity for the DNO to leverage analytics to identify optimised network location points to connect low-carbon technologies and plug in smart devices selectively. DNOs could also use analytics to economically optimise the capacity of existing networks, avoiding traditional reinforcement to deliver the benefits pledged from limited investments. ReseaRch methOdOlOgy Utility Week and Tata Consultancy Services, via researcher Insight Advantage, sent a detailed online survey to senior decision makers in relevant disciplines in all UK energy network companies. This was followed up with telephone research. Twelve detailed responses were secured, including from three-quarters of GDNs; two-thirds of DNOs, National Grid and one independent DNO/GDN. The research took place in spring 2014. Respondents were guaranteed confidentiality. Consequently, all responses are reported in aggregate only. Once the results were in, Utility Week contacted a number of relevant third parties for attributable comment.