Global power systems are changing. At the local level, distribution networks need to accommodate increasing connections of renewable generation, low-carbon technologies, and other distributed energy resources (DERs). The role of the distribution network is therefore evolving – and system operation has a key part to play.
What is system operation?
Distribution network operators (DNOs) own and operate the electricity distribution network, running between the transmission network to the point of delivery to customers.
They are responsible for building and maintaining the physical infrastructure of the network – the wires, pylons, transformers, and substations – and managing connections.
System operation focuses on maintaining grid stability and optimising energy flows, as well as coordinating the integration of distributed energy resources (DERs).
In the UK, some grid operators have adopted the term distribution system operator (DSO) to demonstrate that they incorporate DNO and system operation functions.
Why is system operation needed?
The flow of electricity used to be unilateral. It only flowed one way, from dispatchable, large power generation at transmission level to consumers.
Now, the role of the distribution network is changing. More low carbon technologies and DERs are connecting to the distribution network than ever before.
These include:
- Onshore windfarms
- Solar parks and farms
- Grid-scale battery storage
- The electrification of cars
- The deployment of, for example, rooftop solar PV – and so on
This represents a big opportunity – and a change in perspective around the importance of operational investments alongside capital investments.
This is the driver for the creation of DSOs in the UK. Their focus is on managing the power flows alongside maintaining the physical infrastructure to ensure energy security.
DSOs rely on data and support from DNOs. DNOs depend on DSO capabilities to fulfil obligations to customers and regulators.
How are UK DSOs incentivised?
The UK’s energy system operates within a set of price controls – ROII. These price controls are based on a total expenditure (TOTEX) price model, which gives similar importance to capital and operational investments.
That incentivises the more efficient running of the electricity network and encouraged network operators to develop system operation capabilities.
The current UK RIIO-ED2 model also explicitly encourages DSOs to procure local flexibility products and services – such as demand response – with a market-based approach to help make networks more efficient. DSOs effectively buy capacity on the network by incentivising flexible DERs – also known as “flexibility service providers” (FSPs) – to shift or shape their load or generation by time and location.
How do flexibility markets help DSOs fulfil their obligations?
The DSO, using flexibility, ensures efficient and optimal use of the distribution network with sufficient network capacity at the lowest cost.
Those services can be procured via individual programs or through flexibility markets. In the UK, local flexibility market trading tends to take place on a neutral market platform like ElectronConnect.
This increases DER and low-carbon technology participation. Local flexibility markets help DERs earn more revenue and create new ways for them to offer their flexible capacity into the grid – while ensuring more visibility across the board.
