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16 | 19TH - 25TH MAY 2017 | UTILITY WEEK Utility Week Live 2017 Talking about a revolution UK Power Networks chief executive Basil Scarsella has been voted one of the ten most transformative leaders in utilities. He tells Ellen Bennett how the transition to flexible networks requires a change beyond any he has ever seen. B asil Scarsella knows transformation. The chief executive of UK Power Networks is widely recognised in the energy industry for taking the country's larg- est network group, with the most challeng- ing patch, and turning it into one of the top performers. UKPN has won the Utility Week Utility of the Year Award for the past two years straight, achieved a solid regulatory performance with a customer satisfaction score of 87 per cent and strong returns for its investor CKI Holdings, with Ebitda up by £167 million to £1,293 million in 2015-16. Little wonder, then, that Scarsella, who led CKI's acquisition of the business in 2009, was voted one of the ten most transformative individuals in utilities today by the readers of Utility Week, ahead of this year's Utility Week Live at the Birmingham NEC from 23-24 May. So is the transformation complete? "No, it's just starting," Aussie Scarsella tells Utility Week in his south London office, in the unglamorous location of Elephant and Castle. Relaxed as usual, straight talking but charming with it, he explains how UKPN may be well advanced in the tradi- tional transformation expected of an energy network – but the changing landscape now requires a transformation beyond any he has yet seen. Scarsella is determined that UKPN will play a leading role in the new world order, and reckons the DSO model, the smart systems consultation and RIIO-ED2 will help it do so. "The traditional transformation of the business is well advanced, but transforma- tion as the industry transforms and UKPN is going to respond to or lead that innova- tion is now becoming more important and urgent," he says. Barely pausing for breath, Scarsella lists the changes the business faces: the increase in renewables, the electrification of transport and heat, the impact of decentralised generation on traditional revenue streams, the need to balance the system at a local level, the shi to microgrids… The list goes on. Scarsella isn't daunted. Rather, he seems excited by the scale of the challenge – "it will revolutionise the industry in a way I have certainly never seen before" – and determined that UKPN will lead, and benefit from, the change, rather than be outpaced by it. Take his views on microgrids, for example: "Rather than try and fight it, we should be facilitating that transition. We're better placed than anyone else." It's become the accepted wisdom that DNOs will need to evolve into DSOs, or Distribution System Operators, which bal- ance the grid at a local level. There's a lot of buzz about the new model within the sector, but has its business case been proven? "The business case needs to be developed," Scar- sella acknowledges. And then in reference to the potential £8 billion of savings per year the National Infrastructure Commission has identified from the more to a flexible power system: "The business case of moving from a DNO to DSO really depends on how that £8 billion of benefits is going to be split up. I see distribution system operators as playing a pivotal role in delivering the flexibility and therefore I expect they will share some of the flexibility benefits." The other power networks are queuing up alongside UKPN to lead the transition to a more flexible energy model that makes use of storage and demand-side response to manage the new forms of generation and consumption – but will the regulatory system allow these monopoly businesses to lead a new market? A consultation is currently under way as to how to remove the current barriers to smarter systems, for example, around the ownership and market operation of storage. Is Scarsella confident it will come to the right conclusions? "I think we should be careful not to predict what the new world will look like because we're bound to get it wrong…. In short, the regulatory regime needs to evolve with the industry transformation." One vexed point is storage. It's increas- ingly seen as the silver bullet that will enable the transition to a flexible power net- work, but there's disagreement over whether networks, as regulated monopolies, should be allowed to play directly in the market. Should they? "Yes. It's a new market and it seems to me that trying to restrict networks from owning storage could hamper the development of a market and I think storage is so important that putting obstacles in the development makes no sense." There's a school of thought that the RIIO regulatory regime, which moved the sector with great fanfare to an eight-year regula- tory cycle, should shi back to five years in its second round, beginning in 2023 for electricity distributors, to reflect the rapidly changing nature of the sector. Does Scarsella agree? A measured response: "If it continues as an eight-year cycle then there needs to be uncertainty mechanisms or reopeners. We've still got six years of ED1, let's see what devel- ops over that period before we jump."