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20 | 9TH - 15TH DECEMBER 2016 | UTILITY WEEK Operations & Assets Market view S ome of you will remember the land- mark moment on 10 May this year when for the first time in well over 100 years, no coal was used to generate electricity in Great Britain for several hours. Coal generation during that month was displaced by renewables – in particu- lar, solar – and other cleaner generation. It shows how far GB has progressed with encouraging renewable energy, but it also highlights one of the big issues we have to tackle to move to a lower carbon economy. Around 7GW of distributed generation is being connected year on year, as large cen- tralised fossil fuel plants close. At the same time, smart meters, energy efficiency and other new technologies give customers much greater control over their energy use, as well as opportunities to generate electricity at home. These changes in the energy landscape put the role of electricity grids into sharp focus. Companies will need to be innovative when thinking about how their networks adapt to the future. They also need to recon- figure grids to get the most out of their exist- ing capacity. Only through innovation will we make the low-carbon transition at lowest cost to consumers. Ofgem has encouraged networks to inno- vate by investing in trials, the costs of which they can recover through our network price controls. So are the companies up to the task? We have carried out a review of our inno- vation funding and we asked consultancies Pöyry and Ricardo Energy to assess progress by looking at the projects the distribution network operators (DNOs) delivered from 2009 to 2015 through the Low Carbon Net- works Fund (LCNF). One of the LCNF projects was carried out by UK Power Networks (UKPN), in which it connected wind and solar generators by offering them cheaper connections if they all agreed to curtail their output at peak times. Connections like this are cheaper because UKPN does not have to carry out expen- sive grid reinforcement. Another project, by Western Power Distribution, also offered generators cheaper connections. Customers that connected more recently are more likely to be asked to curtail output at certain times. This project also trialled overlaying commu- nications infrastructure over the electricity lines. The consultants found that since 2009, DNOs carried out 65 trials, up to 37 per cent of which can be incorporated directly into their work practices. A further 41 per cent could be suitable for rollout in future when the market requires them. This is a reason- able success rate, as by their nature some innovation projects will fail. DNOs spent £300 million on projects, and according to the consultants, benefits to customers are between £800 million and £1.2 billion if the projects are only rolled out as far as all DNOs. If the projects are rolled out more widely across Great Britain, the overall benefit is estimated at between £4.8 billion and £8.1 billion. We cannot be certain about these figures because it depends on what happens in the future, but this is an encouraging assessment of the value for money of this fund. Overall, the DNOs have made progress, moving from low to medium levels of inno- vation. If we are to have a smarter energy market, we need grid companies to be highly innovative. There will need to be a culture change within network companies for them to get there, according to the consultants. Their view was that many DNOs still do not believe that innovation is critical to the success of their business. The rate at which DNOs converted innovation into business High innovation is essential A review of LCNF projects shows DNOs have moved from low to medium levels of innovation, but that a smarter energy market will need them to be highly innovative, says Jonathan Brearley. "If we are to have a smarter energy market, we need grid companies to be highly innovative. There will need to be a culture change within network companies for them to get there." JONATHAN BREARLEY, SENIOR PARTNER, NETWORKS, OFGEM What is the Low Carbon Networks Fund? Ofgem announced the Low Carbon Networks Fund in August 2009 to help drive innovation and new technology to deliver the networks of the future. It is one of the most significant and impor- tant investments in network innovation in Europe. It provided £500 million over five years, encouraging and enabling the transition to a low- carbon energy sector. A total of £64 million of funding was available each year in the competitive element of the fund and a further £80 million was made available over the five years to help fund smaller scale projects. An additional but discretionary £100 million was provided over the five years to reward projects that brought particular value in helping the networks adapt to climate change while providing security of supply and value for money to consumers. LCNF projects are broken down into Tier 1, covering smaller scale projects that deliver initial learning to benefit the operation of the grid, and Tier 2, which is for larger scale projects in specific areas.