Utility Week

UTILITY Week 22nd January 2016

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People & Opinion Utility Week community utILIty WEEK | 22nd - 28th January 2016 | 7 Distributed networks and systems operators require different actors to protect UK customers. A s the UK aims to transi- tion to a lower carbon energy mix as cost-effec- tively as possible, the manage- ment of electricity distribution networks requires a radically innovative approach. Distribution network opera- tors (DNOs) are essentially infra- structure companies, so are not known for championing innova- tion in the sector. Investors with a risk-averse infrastructure focus are unlikely to harbour a more entrepreneurial appetite. DNOs have proved reluctant to use demand response, despite the Low Carbon Network Fund innovation projects. The fact that DNOs have not aggressively pursued the huge financial incentives offered by Ofgem through RIIO that effectively allow higher returns for DNOs making cost savings on physical assets in favour of cost-effective approaches to meeting demand such as through demand shi- ing, is evidence of this. Running the UK's distribu- tion networks as cheaply as pos- sible, to cut customer bills and incorporate solutions such as decentralised energy, demand response and more renewables, requires a higher risk appetite than DNOs want. The key question is: how do we unbundle storage from the network and ensure savings from network efficiencies reach the end customer? DNOs are not permitted to play a generation or supply role, as this would create a conflict of interest. It follows, since storage effectively delays consumption or generation, that placing storage with DNOs is not in customers' best interests. It must be unbundled either to the customer, the supplier (as a proxy for the customer) or the generator. One suggestion requiring no regulatory intervention is a "DNO franchising model", which circumvents the issue of DNOs not wanting to risk their stable rate of return by contract- ing out – or franchising – the management of the network to an innovation company. The franchisee would look to use distributed resources and apply smart technology to more efficiently manage the network and effectively function as the distribution system operator. The franchisee would be fully responsible for the risks but equally be able to cash-in on the full benefits accruing from cost- optimisation under RIIO. I am not arguing for a pre- scriptive approach to altering the way networks are managed but to acknowledge that DNOs by their very nature are not innovation companies and nor do they profess to be. Smarter networks depend on innova- tion to cut network costs and customer bills. This requires different actors and mandates. In considering our options, the UK would be wise to also ensure local network principles are in line with principles guid- ing the EU's unbundling efforts. A joined-up approach will boost investor certainty and future- proof UK system innovation. Opinion Sara Bell, Chief executive, Tempus Energy "However important we think renewables are – and we do – we need also to have absolutely secure baseloads" Energy secretary Amber Rudd December 2015 saw 338,253 electricity switches, which is above aver- age for the year. The latest electricity switching data also shows a net gain of 100,904 for small and mid-tier suppliers, which is around 30 per cent of all switches for the month. Small energy suppliers making progress Larger to small and mid-tier suppliers Small and mid-tier to larger suppers Larger to larger suppliers Small and mid-tier to small and mid-tier suppliers 300,000 250,000 200,000 150,000 100,000 50,000 0 MoveMent between energy suppliers Source: Electralink yorkshire Water director of communications Richard Sears has been named the 2016 northern area president for the Institute of Water. he will replace outgoing president Simon Chadwick who is the wastewater director at united utilities. "The market is not working as competitively as it should be" Ofgem chief executive Dermot Nolan on why energy bills have not been cut despite wholesale price falls appointMent Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15

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