DNO to DSO: A work in progress

Last month the Electricity Network Association (ENA) published updated figures regarding the procurement of Distribution Network Operator (DNO) flexibility services. This is the latest update from the ENA since April this year, with the document highlighting the historical uptake of services across the DNO regions. The publication also provides projections of future procurement of DNO flexibility services out to 2028.

Since 2018, DNOs have been tendering and procuring for various flexibility services to help solve congestion (thermal constraints) in local electricity grids. More recently DNOs have started procuring for additional services to meet other network needs such as voltage and reactive power support.

Such activity has been influenced and shaped by the ENA’s Open Network project, specifically ‘Workstream 1A: Flexibility Services’. This project aims to facilitate the transition from the DNOs traditional network owner role, to one which takes an active role in balancing and managing the system (Distribution System Operation (DSO)). This has seen the ENA and its members work to improve the transparency in evaluating flexibility tenders, provide clear information on current and future system needs, and has supported a move towards a standardised approach to flexibility procurement across the network and system operators.

The table below outlines the various flexibility services which can be procured across the country. These are standardised and have been adopted by all the DNOs, with tenders for these services based upon need across the DNO regions.

Procurement of these flexibility services has progressed slowly over the past three years, with a number of tenders concluding undersubscribed with a large amount of outstanding requirement. This can be highlighted in the chart below, which also shows how service procurement has progressed to date in some DNO regions.

The issue of outstanding requirement can be best expressed by observing the procurement projections for 2020 which were published by the ENA back in April 2020. These showed that all DNO regions had some form of service requirement for this year, ranging between 2MW and 336MW. In total, the document showed there was over 1.9GW of requirement across all six network owners. Observing last month’s recently published figures we can see that procurement for this year has totalled 1.2GW. This included 314MW of over-procurement for the Dynamic and Restore services across the UKPN and WPD networks.

Alternatively, some regions are yet to procure any service volumes this year (e.g. NPG). In such cases, and in DNO regions which have seen low procurement of services more broadly, this could be due to the DNO opting for more traditional alternative routes to meet a service need – i.e. network reinforcement or Active Network Management (ANM) schemes.

To date providers of these services have typically been made up of battery storage units, demand side response (commercial and industrial), gas reciprocating engines and EV fleets.

Following on from April’s projections, the ENA have published a revised forecast of procurement over the coming eight years. This includes the anticipation that the SPEN region will start tendering for reactive power to help manage voltage across the network.

Overall, these latest figures show more than 1.3GW of requirement across all services and DNO regions in 2021, with the largest share of requirement (636MW) attributed to the Dynamic service. The figures also show the largest forecast procurement to be throughout the WPD region, with nearly 800MW of service need out to 2023. This indicates the maturing of these services across this network, along with UKPN and SPEN over the coming years.

It should be noted that these latest figures have not published requirements for both NPG and SSEN regions. This suggests that these regions are yet to disclose their future needs, or that they have no requirement for these services in the coming years.

To keep up to date on the latest market developments and opportunities across DNO flexibility markets, do check out our brand new Flexibility Markets report, launching in 2021.

The Flexibility Markets report provides an overview of the commercial developments throughout the various revenue streams for flexibility providers, ultimately providing a collective view of value across all National Grid ESO and DNO flexibility markets.

Issued monthly, each report will also provide you with an independent view on potential earned revenues in flexibility markets via our revenue benchmarks and backcasts.

The service also includes Cornwall Insight’s view on where service prices may be heading, with the inclusion of our forecast of frequency response market prices. We also plan to include price projections on future response and reserve services as these develop.

Subscribers to this service will also receive data packs, providing readers with the core underlying data used in the report.

For more information please contact Joe Camish j.camish@cornwall-insight.com.

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