Learnings

Outcomes

This report has been completed as part of the Community DSO Network Innovation Allowance (NIA) project, by TNEI Services Ltd (“TNEI”) and LCP-Delta in partnership with Northern Powergrid (NPg). The Community DSO concept was proposed to NPg by TNEI and LCP-Delta as the core of a possible Network Innovation Competition (NIC) project in 2020 and was submitted to Ofgem in spring 2021 as an Initial Screening Proforma (ISP).

NPg, TNEI, and LCP-Delta subsequently decided to defer the application until the 2022 NIC process and, in the meantime, to complete an NIA project to undertake more research into:

·         The technical enablers required to make the Community DSO method viable.

·         The possible commercial models that might be involved.

·         The role of communities and how realistic it is for widespread involvement.

·         The value of the approach and the business case.

This report outlines the findings of this NIA research completed through late 2021 and the first half of 2022.

In addition, the findings of this NIA project have been part of the evidence base that informed the development of a Full Submission Proforma (FSP) for the Community DSO NIC project. This was submitted to Ofgem in August 2022, with Ofgem announcing the successful award of funding to the project on 30 November 2022.

Community DSO Concept

The Community DSO approach is intended to capture the potential for flexibility from individual consumers at the very lowest voltage level of the distribution network. It is believed that this can be achieved by distribution networks helping to facilitate the creation of smart energy communities – groups of engaged and physically connected customers who can both produce and consume power. These energy communities would become responsible for the management of energy flows at that level and perform at least some part of the DSO’s role. It aims to simultaneously explore how energy communities can support the DNO transition to DSO and vice versa.

The broad intention is to develop energy communities at the lowest level in the energy system within small cells, possibly as small as a single substation circuit. By taking an approach which considers the lowest levels of the network, we aim to avoid the tendency of some schemes to “boiling the ocean” in an attempt to manage transactions throughout the energy system at all levels simultaneously. That approach may have worked in the old, top-down energy system with unidirectional energy flows and payments, but it becomes increasingly and unmanageably complex when faced with intermittent generation feeding energy into every level of the system.

Each cell is optimised internally as far as possible to balance supply and demand. Any deficit or excess is transacted only with the adjacent cell via the node at the next level above. No transactions occur directly between remote cells at the same level nor between cells at different levels.

Unlike many other energy community concepts, in Community DSO, every effort is made to align the financial with the physical transactions. That is, we try to optimise the energy flows within the system by directly linking the related commercial transactions. This is key to genuine transactive energy models.

Figure 1 Schematic of hierarchical cellular energy system architecture
Technical and Commercial Enablers

Energy communities are emerging across Europe with the objectives of:

·         Engaging consumers in the exploitation of local renewable energy resources.

·         Providing a highly distributed source of flexibility.

·         Capturing additional sources of funding to support the energy transition.

Additionally, energy communities are seen as a means to retain value locally and support ambitions of a just transition for all, particularly the most vulnerable. The focus so far has been on accommodating the needs of energy communities by implementing favourable financial and regulatory support measures in many countries. This has led to the development of many projects both in the UK and Europe which demonstrate many of the key characteristics of a decentralised and democratic future energy system. However, many fail to capture the full stack of values which can be generated by the exploitation of local resources. They also fail to align the economic values with physical energy flows, which is a key attribute of a transactive energy system.

Existing projects have demonstrated many positive attributes, including both technical solutions and business models for managing local flows of power and energy. However, the extent to which these could be easily replicated and their alignment with the incentives for (and benefits of) community energy need further investigation.

However, it is clear from the study that numerous solution providers exist and are able to deliver one or more components of a functioning energy community. There is a clear opportunity to build on these existing solutions to create additional values for communities as they support the DSO transition. In particular, the better alignment of local electricity demand arising from the electrification of heat and mobility with local renewable generation is key to accelerating the transition to a sustainable energy future.

Interest from communities

Engagement with communities and community representatives has shown there is an appetite for the Community DSO concept given its potential for addressing community ambitions and network needs. However, benefits of the Community DSO concept could seem less tangible to communities than other energy and net-zero initiatives (due to the structure of consumer energy bills DUoS charges), and these need to be explicit and quantifiable where possible.

Our research suggests that it will continue to be valuable and effective to engage through existing channels, e.g. organisations that represent community energy or community groups, or have existing community networks, as well as with organisations at local and regional level for example through local government (including council representatives, and regional Net-Zero hubs). It has also shown that community engagement can be challenging, but that it “has a long tail” in that efforts in one area often lead to longer lasting and unexpected additional benefits.

The value of Community DSO

Community energy, SLES, and demand side flexibility could create mutual value for both DNOs and the communities connected to their LV networks. For communities, this value is likely to be indirect, and could be very significant. For example, Community DSO might be a key enabler of local decarbonisation. The direct value to the DNO will be created through deferring and even avoiding the need for LV network reinforcement. The Community DSO would seek to maximise this, by encouraging high levels of participation in local flexibility at as wide as possible a scale.

Sophisticated modelling frameworks and assumptions have been developed for: 

·         Simulating the behaviour of a community, including its peak demands imposed on LV network cables and secondary transformers, and its ability to be flexible.

·         Assessing how a DNO would intervene to address the impacts on its network as customer capacity requirements exceed existing asset ratings.

The modelling approach has enabled us to consider a wide breadth of LV networks (35,000 secondary substations within NPg’s licence area, supplying 90,000 LV cables), providing simulated peak demands for each of these under a range of different scenarios and with different assumed levels of flexibility. However, the modelling methodology still considers a large amount of detail, including a half-hour-by-half-hour simulation of community demands, the state of charge of electric vehicles within the community, etc.

The modelling shows that, without flexibility, a typical community could require substantial intervention within the 2030s to accommodate the anticipated changes in the energy system. Under the most transformative scenarios, this might affect between 90% and 100% of the LV networks within NPg’s licence area. Customer participation in flexibility offsets that – as expected – but even 20% participation in flexibility could lead to 90% of networks requiring intervention by 2050 in the most aggressive scenario.

Very high levels of participation in flexibility significantly reduce the extent of the intervention required for typical networks, and the proportion of networks which require that intervention. It is exactly this sort of widespread participation in flexibility for LV networks that Community DSO seeks to promote.

Conservative assumptions have been made about the possible scale of the roll-out of the method, alongside some high-level assumptions about how much it might cost to implement this on individual LV networks. This has enabled the calculation of an NPg scale net present value of £21 million, rising to £160 million at the GB level. This corresponds to 2% savings compared to the counterfactual cost in the base case (which relies on other forms of flexibility). This is based on relatively conservative assumptions and if a much more widespread rollout is possible then even greater savings could be achieved.

A customer benefit of £160 million under relatively conservate assumptions suggests that there is a sufficiently strong case to justify further investigation of the Community DSO concept.

The attached full report should be read for further details of this project. Further reference can be made to the Community DSO NIC proposal, available on Ofgem's website.

Lessons Learnt

As with most desktop work, the range of questions and issues of interest developed as the project was delivered. however no significant changes to methodology were required during the course of this activity.