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UTILITY WEEK | 8TH - 14TH JANUARY 2016 | 9 Interview U K energy networks are at a turning point and leaders in the sector have must some big deci- sions about how they want their companies to be defined in a time of transformation, according to David Rutherford, chief executive of the Power Networks Dem- onstration Centre (PNDC). "We are moving to a point of excitement where those who wish to be bold and to be first movers have got the ball at their feet to do that," says Rutherford, who met Utility Week just before Christmas in the restaurant of a London Hotel. His words, which refer to the momentous changes afoot in the energy system and the management challenge they represent, stand in odd contrast to the tinkly seasonal background music. "The question is, are they [the distribution network operators] going to be bold enough to move forward as fast as they can, or are they going to be prepared to just stand back and let the whole UK electric utility piece move forward at one time?" Rutherford says this is the key management chal- lenge for utility sector leaders. "They have got solutions that can make a difference to their business-as-usual proposition. How bold are they prepared to be? How brave are they prepared to be, in terms of taking forward some of the innovation initiatives they have invested in? I have no doubt that it will happen over time. The ques- tion is how fast they are prepared to make it happen." Rutherford, a utility sector veteran of more than 30 years, is fascinated by the transformation challenge enveloping the UK's energy sector. He worked at Scottish Power before and aer privatisation, and held a number of engineering roles on the network, rising through the ranks to become managing director of energy networks. Aer time out in consulting and academia, Ruther- ford was offered the position of chief executive at the PNDC, a rare opportunity to get back to his hands-on engineering roots while retaining strategic influence over the evolution of the UK's future energy system. He clearly feels he's fallen on his feet, relishing both the highs and lows of the job. "You get all the frustrations of the inertia of the sector, all the excitement of the hope of the sector, all the sharing of success when something goes well," he reflects with satisfaction. The PNDC is a not-for-profit innovation centre, set up with funding from Scottish Enterprise, SSE, Scot- tish Power, the Scottish Funding Council and the Uni- versity of Strathclyde. Its purpose is to accelerate the deployment of technologies that will enable the smart energy networks of the future. It reduces the risks associated with new products and solutions by test- ing prototypes for technology manufacturers, and also works with utilities to demonstrate new techniques for network management. In short, the centre is an essential resource for the energy sector as it seeks to migrate the lessons it has learnt through extensive investment in innovation pro- jects in recent years – largely thanks to regulatory fund- ing incentives – into business-as-usual solutions. Almost 40 projects have been completed since the centre opened in 2013, and Rutherford feels "there is that simmering point of technology solutions that can trans- form activities on the networks in a way that gives rise to massive benefit to customers". But returning to a ques- tion that clearly preoccupies him, Rutherford reiterates that there is still significant uncertainty about how fast companies want to move to realise these changes. The dithering is down to a lack of clarity around the competitive benefits of adopting innovation, Rutherford theorises. "At the time of privatisation there was a clear view that the ability to drive process improvement and efficiency could give rise to bottom line improvement," he says. As such, investment decisions were enabled and companies strove to innovate to achieve those step changes in organisational performance. "At this time," he continues, "the freedom of leaders in industry to act in that way is somewhat constrained by the whole industry having to move forward at one time." In other words, the same mechanisms introduced by Ofgem to incentivise investment in innovation pro- jects – which require dissemination of lessons learnt throughout the industry to ensure maximum customer value – are acting as "a little bit of a brake" on deploy- ment of innovation. This is because "senior leaders in the industry are very much aware of the fact that if they do something that is successful, the other companies are going to catch up very quickly". What can be done to elicit more competitive zeal? Rutherford is not sure, "but there might be something about stimulating benefits for those that deploy inno- vative solutions faster than others". Ofgem might rea- sonably argue that such incentives already exist under the RIIO framework, but Rutherford is clearly not con-