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NETWORK / 10 / OCTOBER 2017 supply energy to one another, or other types of peer-to-peer trading in which local gen- eration and storage is supplied to meet local demand. Communities such as these might question the basis of their use of system charges if they are making little use of the upstream distribution and transmission sys- tems, Openshaw said. "More sophisticated communities might develop micro-grids that can operate islanded from the grid if necessary." Of course, it is di• cult to know precisely what the energy system will look like over the period that RIIO-2 will cover. "Although we are seeing signi cant change now," Brearley pointed out, "if you go back to my colleagues who developed RIIO-1, they will tell you that the world looked like it could have been a very di‚ erent place to where we are now." This raises the question of how much „ exibility should be built into the next price control. "For example, it is possible to index-link elements of the price control to underlying data. You can have what we called 'uncertainty mechanisms' in RIIO-1, where you simply say, 'we don't know how much energy generation is going to come forward, and therefore we are going to reset the price control when that becomes clear'." Brearley points out that RIIO-1 contained a mid-period review. "We could look at these issues again." One of the issues is the RIIO -2 Key technologies for RIIO-2 Telecommunications and data management – a key enabler to active network management and visibility is dependable telecommunications and data systems. DNOs' SCADA systems will need to evolve to handle much higher traffi c volumes. Cyber security will become an increasingly important consideration. Power electronics – power electronics will play an increasing role in the form of interfacing storage with the power system, fi ne voltage control (control of reactive fl ows), load balancing, network meshing (through 'soft' open points) and phase balancing. Existing systems – the focus for RIIO-2 will be integration of new and existing systems, including evolution and adaptation of existing systems where appropriate, through retrofi t automation and monitoring, for example. It is unlikely that existing distribution infrastructure will become redundant and stranded – especially given the load-building effects of EVs and, in the future, heat pumps. Indeed, nothwithstanding smart solutions to maximise capacity headroom, further investment in network reinforcement will also be required. Source: Millhouse Power length of the price control itself, he said. "We must ask ourselves what the costs and bene ts are of a longer price control, and if you have a longer price control, how can you make sure it can adapt in the future?" But this is not the only possible solution, Brearley says. "Options are also open to shorten the price control. This is now about us having a conversation across industry and academia, and elsewhere, to make sure we design this framework in the right way. We are very keen to engage with networks on this." Incentives for innovation More than 1,400 innovation projects have taken place to date under Ofgem's innova- tion incentive schemes, and it is important that lessons learnt from these are applied by the DNOs and DSOs, Openshaw said. The Energy Networks Association Open Networks Project will be a key founda- tion of RIIO-2 when it comes to exploiting synergies between interventions on the transmission and distribution networks, or where a distribution-level intervention can better address a transmission-level issue. Open Networks will also need to consider how to integrate the customer side of the meter with the wider power system, exploit- ing opportunities such as smart metering, time-of-use tari‚ s and smart appliances. The Future Power System Architecture programme has also identi ed 35 new or en- hanced functions necessary to ensure "the future optimum management of the power system", said Openshaw. Some of these re- late to cross-vector opportunities, especially between electricity, gas and heat. Electric vehicles – how, where and when they are recharged – are expected to have a major impact during RIIO-2. Fast and rapid charging has advantages and disadvan- tages. It will be necessary to have a system that helps to balance the grid and prevent overloads. "There is also the potential – subject to impact on battery life – for EVs to provide system services, including fre- quency response and other vehicle-to-grid services," said Openshaw. It is imperative that smart charging systems are developed, he added. What might be expected from the next round of RIIO? Openshaw highlights the need to ensure DNOs have incentives to invest for the future; recognising the merit of investments that deliver longer-term bene ts than the period of the price control; and enable the DNOs to transition to DSO through the removal of inappropriate con- straints on new business models and rev- enue streams. "RIIO-2 is likely to be tougher – but it will also create opportunities for the networks. The key to exploiting them is the network operators and Ofgem developing a clear strategy on how the power system needs to develop over the next ve to 10 years." Openshaw acknowledges that it is "dif- cult to forecast" what will happen over the next price control period. The FPSA programme advocated a rolling nine-year price control period, with interim reviews every three years to Ofgem in its response to the RIIO-2 consultation letter issued in July. Openshaw said: "What we have to face is that there are some huge challenges for the power system over the next decade. We need to be incentivising the network opera- tors to do the right things and not constrain them unnecessarily – which would make them too risk-averse." Brearley of Ofgem said "lots of good things" had come from RIIO-1. "Lots of good things have come from price controls." He says customer service has improved, as well as the level of innovation. But he added: "We have a lot of really good innovation projects coming through, but we think there is still some way to go for the indus- try to build on what you might describe as 'medium-level innovation performance'." Ofgem hopes that companies will inno- vate more rapidly in the next round. "One of the things we will want to see in the RIIO-2 period is greater innovation, and ways in which companies are taking on projects themselves – without necessarily needing the funding to do so. It is something we are asking questions about." "We need to be incentivising the network operators to do the right things and not constrain them unnecessarily." DAVE OPENSHAW, DIRECTOR, MILLHOUSE POWER DAVE OPENSHAW, DIRECTOR, MILLHOUSE POWER