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16 | 7TH - 13TH JULY 2017 | UTILITY WEEK Policy & Regulation Analysis T he government cannot sit back and leave the power sector to transform itself. That was the core message from the second phase of the Future Power Sys- tem Architecture (FPSA) programme which reported towards the end of last month. Describing the latest findings, FPSA pro- ject delivery board chair Simon Harrison warned there could be dire consequences if ministers failed to act. He noted that the sec- tor is already evolving rapidly with the emer- gence of a wide array of new players and technologies. "Without the necessary co-ordination, there is a real risk that these developments will have adverse impacts on the power sys- tem, leading to lost whole-system opportuni- ties, and potential incompatibilities in the way that technology is implemented and the way that markets operate. "There is currently no shared vision or even shared understanding of how to bring all the elements together in a way that addresses whole-system issues and is efficient, effective, secure and reliable," he added. "All parties, including customer repre- sentatives, now need to come together as a whole to create that vision and, with the cat- alyst of government, put in place the mecha- nisms that will make it a reality." The government-sponsored FPSA pro- gramme is developing a blueprint for the delivery of the power system that will be needed by 2030. The ambitious project was commissioned by BEIS in its first phase and Innovate UK in its second. It is being pro- duced collaboratively by the Institution of Engineering and Technology and the Energy Systems Catapult. Published last year, the first chapter out- lined 35 distinct functions the power system will need to fulfil, grouped into eight broad categories. The second chapter has, among other things, identified four main obstacles to delivering those functions: industry govern- ance; the regulatory framework; commercial arrangements; and technical challenges. Industry governance According to one of a series of reports pro- duced for the second phase of the FPSA programme, the current code governance process, which involves an array of indus- try panels recommending modifications to Ofgem, "is not sufficiently agile or flexible to respond to the degree and pace of future change envisaged". It says the delivery of the 35 functions will require "significant interaction" with technical market codes. The transition of distribution network operators (DNOs) into distribution system operators (DSOs), for example, may require the introduction of a balancing code at the distribution level. Future code changes will need to involve a greater number of stakeholders and con- sider a wider range of factors. "The exist- ing process may not support a system-wide perspective," the report cautions. Codes risk having to be repeatedly adapted when the full implications of previous changes become apparent. Regulatory framework The current licensing and regulatory arrange- ments "do not account for new parties and new business models". Local suppliers, for instance, can apply for a licence restricted to a certain geographic area but only where they can demonstrate an "overriding public interest rationale". The regulatory framework also fails to reflect whole-system thinking. Most obvi- ously, the RIIO price controls for electricity distribution are misaligned with those for transmission and gas distribution. While this does not by itself prevent cross-sector invest- ments, new mechanisms or incentives are needed to bring them forward. The delivery of many system functions will require new players to have access to the growing volume of data produced Power Architecture The latest findings from the government- sponsored Future Power System Architecture programme are out. Tom Grimwood takes a look at them. " " "The policy challenge for us is to recognise what we don't know and create a policy and regulatory framework which is agile enough to deal with that and also helps to us to horizon scan, particularly what the most disruptive technologies might look like in terms of how we not just make policy but also operate the system." CRAIG LUCAS, DIRECTOR OF SCIENCE AND INNOVATION FOR CLIMATE AND ENERGY, DEPARTMENT FOR BUSINESS, ENERGY AND INDUSTRIAL STRATEGY "There is a big transition underway. We know there's a lot of change. But the reality is we do not know where we are heading in the next 10 or 15 years, and therefore we have to, as regulators, policymakers and indeed those running the system, be adaptive and be able to respond to unexpected changes as they come up." JONATHAN BREARLEY, HEAD OF NETWORK REGULATION, OFGEM "We look at the industry through perspectives or lenses that reflect … our context and our personal baggage. But there are many other people who look in a completely different way and when you start to compare those different perspectives you get very different answers." SIMON HARRISON, PROJECT DELIVERY BOARD CHAIR, FPSA "We sat in a meeting with our friends at BEIS and talked about 'beyond the meter', and realised each of us was talking about the opposite side of the meter… It all depends where you start. ENERGY SYSTEMS CATAPULT HEAD OF INNOVATION, ERIC BROWN