The UK power system is changing. At the local level, the distribution network is becoming increasingly important to the energy transition, as significant amounts of renewable generation and other low carbon technologies (LCTs) are connected at distribution. The role of the distribution network is therefore evolving – and Distribution System Operators (DSOs) will have a key part to play.
This guide covers:
Why we need Distribution System Operators (DSOs)
In the UK, Distribution Network Operators (DNOs) traditionally run electricity distribution networks. This type of operator was created at a time when the flow of electricity was unilateral. Back then, it only flowed one way, from dispatchable, large power generation at transmission level to consumers.
As the UK looks to decarbonise the power system by 2035, the role of the distribution network is changing. More Low Carbon Technologies (LCTs) and Distributed Energy Resources (DERs) are connecting to the distribution network.
These include:
- Onshore windfarms
- Solar parks
- Grid-scale battery storage
- The electrification of cars
- The deployment of, for example, rooftop solar PV – and so on
This represents a marked change in perspective. Network operation was always the priority in the past, ensuring the wires and transforms can deliver power. Now, system operation is of equal importance.
This is the driver for the creation of DSOs in the UK. Their focus is on power flows rather than physical infrastructure.
The role of the DNO
DNOs and DSOs are both need to help the distribution network deliver what’s required to decarbonise the power system.
The DNO owns and operates a passive system used for the distribution of electricity. This runs between the transmission network to the point of delivery to customers.
The DNO retains responsibility for the physical infrastructure of the network, the wires, pylons, transformers, and substations. Keeping the system operational is a priority. So too is ensuring infrastructure is built where it’s needed, and that connections are managed.
The role of the DSO
The DSO is then responsible for the power flows on the distribution network and for developing local decarbonisation strategies.
A key aspect of the role is ensuring that there is sufficient network capacity at lowest cost. Part of this involves the use of flexibility products and services.
In other words, DSOs rely on data and support from DNOs. DNOs will depend on DSOs to fulfil obligations to customers and the regulator.
The DSO, using flexibility, will help ensure efficient and optimal use of the distribution network. This increases DER and LCT uptake. DSOs are therefore a key step on the journey to a decarbonised power system by 2035.
How DNOs are setting up their DSO capabilities
DNOs are implementing their system operator capabilities in different ways.
Ofgem’s decision on the “Future of local energy institutions and governance” shares that DNOs aren’t required to create legally independent DSOs. However, a DNO could choose to set its DSO capabilities within a legal entity that’s completely separate from its DNO.
Alternatively, a DNO could choose to deliver its system operation responsibilities through functions sitting under its distribution network operations.
Another approach to take is to transition from a DNO to a DSO. The DSO structure still retains the functionality of the DNO yet is supplemented with new responsibilities – such as facilitating flexibility markets, driving competition, and improving the resilience and security of the system.
Is there a single DSO transition model to follow?
The examples above show that there is no one size fits all approach to this transition.
When considering the future requirements of a flexible energy system, DNOs should have the ability to choose the best way to develop their systems, according to their individual needs. Different DSO implementation models will naturally have different requirements when it comes to flex market platforms.
Our three pillars for Net Zero grid optimisation propose an open ecosystem of innovating and competing actors – and this ecosystem approach mitigates the challenge that DNOs face when building DSO capabilities. The DNO would have a pool of providers to choose from, to pick the best solution for their DSO’s individual needs.
The government’s stance on Distribution System Operators
In 2019, Ofgem released its position paper on DSOs, saying that it wants to “support and steer the development of new flexibility markets”.
It outlined that it’s waiting for DSO functions to fully develop before implementing “institutional reform” of the distribution network. This gives DNOs the scope to shape their own evolution.
Ofgem also ran a consultation on incentivising DNOs to develop more efficient DSO capabilities in 2022. It aimed to encourage them to take advantage of flex services over other forms of network reinforcement.
This was set out in the RIIO-ED2 Final Determinations. It also highlighted incentives to limit curtailment in the face of constraints and promote visibility in the secondary network.
Ofgem guides and regulates the DSO function across each of the 14 license areas throughout the current price control – RIIO ED2 – period.
How flexibility market platforms help
Flexibility market platforms, such as ElectronConnect, are a great way for DSOs to run and coordinate flexibility products and services.
DSOs can use flexibility market platforms to:
- Access a range of sources of flexibility via a multi-market platform from different technology types at different voltage levels
- Control the services they are accessing, when and where they are accessing them, and how they are rewarding providers
- Scale up the volume of flexibility and integrate with existing network systems to better inform the requests for flexibility
Read more about the challenges that flexibility market platforms can help system operators overcome.
