APPENDIX 59
Memorandum by the Energy Networks Association
(ENA)
INTRODUCTION
This document is offered as a primer in understanding
the challenges and opportunities that distributed generation (DG)
have for UK electricity networks. It has been prepared by ENA
with expertise in regulation and distributed generation with input
from the incumbent distribution network operators (DNOs), together
with the transmission operators. It assumes a basic knowledge
of electricity systems and the regulatory environment.
WHAT IS
DG?
There is no internationally recognized and adopted
definition of DG. For the purposes of this submission we have
used a similar definition to that used in the Energy Review[1]
which relates to the wide range of generation technologies that
are not directly connected to the electricity transmission network.
These can provide electricity from renewable energy sources such
as wind, wave, tidal, waste, sunlight and water. They can also
be associated with the combined heat and power (CHP) technologies.
Such generators vary significantly in size and
range; from sub-kW size domestic photo-voltaic (PV) and micro-combined
heat and power (CHP) systems connected to low-voltage (LV) distribution
networks to several hundred MW wind farms connected to higher
voltage distribution networks.
The identification and consideration of any
network issues (eg technical, commercial and regulatory) that
might constrain the deployment and development of DG has been
an important consideration of the UK Government, Ofgem and various
electricity industry stakeholders (in particular since the research
which fed into the 2003 Energy White Paper).
BENEFITS OF
DG
It is widely recognised that distributed generation,
including renewables and low carbon co-generation can make a significant
contribution to meeting the key challenges the energy industry
is currently facing. The potential benefits include:
— Climate change benefits primarily
through increased penetration and use of renewables and displacement
of gas power stations that might otherwise be built.
— Security of supply benefits primarily
through improving energy security by diversification of energy
sources.
— Economic benefits brought about through
avoidance/deferral of network investment and reduced electrical
losses.
However, there are also costs associated with
the connection and operation of DG in a network. These will be
determined by the capability of the nation's electricity networks
to absorb and adapt to different developments in electricity generation
patterns. The issue is less one of the fundamental nature of distribution
networks but of the nature and location of generation likely to
be connected. Generally, generation that is intermittent and/or
remote from the load centre will tend to add rather than remove
network costs.
EXISTING AND
PROJECTED DG ACTIVITY
ENA collates statistics on the amount, type
and size of distributed generation connections and connection
applications in the UK distribution networks on a quarterly basis[2].
The data show that the amount of distributed generation being
connected has been steadily increasing even though the spread
of connections across the UK is not even.
At the end of March 2006, the installed capacity
of DG was over 12GW (almost half of which was conventional generation,
primarily CCGT.) The dominant "new" technologies are
CHP (32%), onshore wind (7%), offshore wind (2%), hydro (6%),
landfill and sewage gas (6%) and waste incineration (4%). The
biomass and energy crops plants and tidal and wave energy installations
make up a small proportion of the current generation mix. The
amount of micro-generation (solar, micro-wind power and micro
CHP) is relatively insignificant.
The connection of wind farms (both offshore
and onshore) has made the most significant contribution to the
levels of DG connected over the last two years. Connections of
landfill/sewage/biogas and waste incineration plants have also
been notable. The majority of newly connected plants are medium
or large size (eg over 10MW) developments.
Both the volume and types of DG connecting to
the different DNO networks vary significantly. The highest growth
has been in Scotland, East Anglia and the South East. In areas
with abundant supplies of renewable resources, the increase in
DG capacity was as much as 7% between December 2004 and January
2006, whilst other areas saw very little increase. Such developments
are closely linked with the wind activity in particular being
stronger in Scotland than in England and Wales. Despite current
low levels of micro-generation, higher penetrations of these technologies
are usually found in urban areas.
Even though these statistics provide a useful
insight into recent history, they should be approached with caution
as an indication of how the UK DG "mix" is likely to
develop. It is our view that growth in DG is likely to continue
and the clustering will become more marked. Planning permission
consents indicate that the networks serving geographic areas with
larger amounts of wind resources are likely to see a similar or
slightly higher rate of wind connections than over recent years.
Also, many areas are likely to see an increase in biomass generation,
crudely divided between energy crop fuelled systems in rural areas
and refuse burning plants in towns and cities[3].
This clustering of generation presents a challenge
for DNOs, especially in areas abundant with renewable resources,
as these tend to be in rural locations, typically with a relatively
weak local network. As the number of such connections increases,
network issues may become even more critical. Some of the existing
rural networks are considered to be relatively weak as they were
designed to provide connection to small loads over a widespread
area and to sparse communities. Regional Spatial Strategies often
identify these areas as being most suitable for large scale wind
development. Accordingly, a significant number of schemes have
been proposed. Furthermore, many of these communities see renewable
generation as a means of providing sustainability and income in
the longer term, and we might expect to see additional DG proposals
in these locations.
Micro-generation
The current volume of micro-generation connected
to distribution networks is very small. Several recent studies
have looked at the potential for increased roll-out of these technologies.
Depending on the assumptions made, a range of projections have
indicated the amount of micro-generation installations possibly
reaching as high as 21GW by 2050. The projections for 2010 are
considerably lower, in the range of between 77MW and 2.5GW. [4]
The impact of micro-generation on networks has
not been a significant issue to date. There have not been clustering
problems in existing networks as a result of customers choosing
to install micro-generators, either as a new device or as a replacement
(for example, of a previous heating system). In the future, however,
local authorities may require developers to install smaller generators
on new buildings as a requirement of obtaining planning consent.
Where there are new housing developments that contain micro-generation,
the network will specifically be designed to cater for the technical
issues. However, a scenario that could create a real challenge
is where there is a high penetration of domestic CHP on existing
networks that are not designed for bi-directional power flow.
This might arise if domestic CHP became the dominant choice, through
either scheme economics (as prices fall and the value of energy
generated rises) or mandated standards (eg changes to building
regulations).
CONNECTING AND
OPERATING WITH
DG—TECHNICAL ISSUES
Distribution networks are planned and developed
in accordance with the Electricity Safety Quality and Continuity
Regulations (ESQCR) 2002, and the security of supply standard,
Engineering Recommendation (ER) P2/6.
The distribution networks' security standard
specifies the quality of service as experienced by customers and
is measured by the time taken to restore power supplies following
a pre-defined set of outages. Historically, with very little or
no generation present, distribution networks have been designed
to be operated as "passive" networks which primarily
convey electrical energy from high-voltage transmission networks
to end users. The real-time control of distribution networks is
limited to managing unplanned outages arising from faults and
planned outages to permit access to the network to facilitate
customer connections and network development projects.
The UK's electricity networks are designed in
general to deliver energy via high voltage and low voltage systems,
with a "top down" direction of power flows. Increasing
levels of DG in distribution networks pose certain operational
and control challenges for traditionally designed and operated
distribution networks. The key technical challenges relate to
power flow management, voltage control and fault level management.
These challenges tend to be different in rural and urban settings.
In urban areas the issue is predominantly fault level, whilst
in rural areas voltage management and load flow tend to be the
main issues. Additional issues are related to protection requirements,
the harmonics and stability.
It should be noted that there are recognised
engineering solutions to all these technical issues[5].
The industry has significantly broadened its toolkit over the
past five years through work sponsored by DTI and Ofgem, through
working groups including Embedded Generation Working Group (EGWG),
Distributed Generation Co-ordinating Group (DGCG) and Electricity
Networks Strategy Group (ENSG), through the DTI Technology Programme
and Ofgem's Innovation Funding Incentive (IFI) and Registered
Power Zones (RPZ) initiatives. Continued work to reduce the costs
of accommodating DG relies upon these support mechanisms. Whilst
the majority of solutions include the application of new or advanced
technology, a new infrastructure is likely to be required in areas
where there is high penetration of DG and a sparse network.
The operation of micro-generation connected
to the low voltage (230V and 400V) network can cause statutory
voltage limits, recommended voltage unbalance levels and switchgear
fault ratings to be exceeded. However, the level at which this
happens will depend upon the generator and network characteristics[6].
Across the UK there are a range of distribution network designs
and operating practices and thus the impact will vary accordingly.
Mitigation could take the form of more advanced control systems,
plant and switchgear upgrade but network augmentation will often
be required.
Network losses
The impact of distributed generation on network
losses is another aspect of DG integration that requires due consideration.
For a traditional distribution network, power normally flows from
the grid supply point down through the voltage levels. Injection
of power from DG changes the pattern of power flow and therefore
the energy losses during the transportation of electrical energy.
The relationship between DG and network losses is quite complex
and dependent on location of connection, its operation/export
profile, the type of network and the interaction between demand
and generation. A DG connection could either decrease or increase
the network losses. Furthermore, the DG connections may reduce
the losses at some voltage levels while increasing the losses
at other voltage levels[7].
The impact of micro-generation technologies
on network losses at LV levels, and the inter-relationship between
various network management techniques aimed at facilitating DG
connection and the level of network losses also deserves careful
consideration.
In summary, whilst new low carbon generation
technologies are certainly able to facilitate low carbon economy
goals, they may often lead to the networks operating sub-optimally
from a losses perspective. In such instances, any future regulatory
incentive framework which is put in place will need to ensure
that network operators are encouraged to take decisions which
are consistent with the government's energy and environmental
policy objectives.
CONNECTING AND
OPERATING WITH
DG—REGULATORY ISSUES
The regulatory framework that has governed the
networks post-privatisation has been a great success. The private
electricity companies have been allowed to run their own businesses
within a regulatory regime which has encouraged the fullest possible
utilisation of existing network assets. This framework has served
the country well with a 50% real reduction in use of system charges
since privatisation. However, more than two thirds of the network
is now nearing the end of its design life and will need to be
replaced sooner rather than later. This will require substantial
and sustained increases in investment by the DNOs. Ofgem acknowledged
this during the most recent price control review (DPCR4), allowing
a 48% increase in DNO capital investment over the five years to
2010, compared with the previous period (2000-05).
As part of its response to the Government's
environmental objectives and for the development of renewables
in particular, Ofgem also introduced new mechanisms for the DNOs
to facilitate the connection of DG. They comprised:
— Revised connection charging arrangements
for connecting to the distribution network based upon a "shallower
charging methodology" and the introduction of generator use
of system charges designed to reduce the generators' initial cost
of connection. (In addition, the DNOs are working together under
ENA, and with industry stakeholders, to develop an enduring framework
for charging for connection and use of the system, which will
apply both to demand and generation, and be cost reflective, transparent
and facilitate competition in supply and generation).
— A package of incentives for DNOs
to respond proactively to requests from generators to connect
to their network. These included:
— an incentive for connecting DG (that
also applies to micro-generation) which is set at 80% pass through
plus £2.50/kW/year (£3 in the North of Scotland). Also,
generators connected at HV and above receive compensation for
access failure.
— an Innovation Funding Incentive (IFI)
to cover most of the cost of development projects focused on the
technical development of distribution networks to deliver value
to end customers. This incentive was introduced in response to
concerns that the current regulatory framework was discouraging
R&D funding by DNOs. It is also designed to encourage collaboration
between DNOs, universities, suppliers and manufacturers.
— The creation of Regional Power Zones
which encourages DNOs to provide new, innovative and more cost-effective
solutions to DG connections.
In addition, the incentive on DNOs to reduce
their network losses was increased by over 50% to £48/MWh
(in 2004-05 prices).
These incentives have applied since April 2005
and thus experience of their effectiveness is limited. However,
it may be possible to draw some tentative conclusions from their
operation to date.
— First, it is not clear that the revised
connection charging arrangement has attracted increased levels
of DG onto the system. This is not surprising as the current incentive
does not give DNOs a positive incentive to promote DG connections;
indeed uncertainty over the future application of Generator Distribution
Use of System charges may actually be acting as a barrier to DG
entry. Overall however, we believe that the "shallower"
charging policy has not been a major consideration when developers
are considering whether or not to develop a site. Other factors,
such as availability of generation resource, planning permission
and more direct incentive schemes such as Renewable Obligation
Certificates (ROCs) are far more important.
— There is concern that the DG incentives
package actually drives DNOs to take a short term/low risk approach
to determining reinforcement proposals. There are many uncertainties
in potential DG developments (financial viability, planning consent,
landowner consent etc) and the developers tend to seek application
at a very early date, before these uncertainties are removed.
The new DG revenue incentive does not provide full pass-through
of capital invested. So DNOs will naturally minimise their risk
by investing only what is required to accommodate DG on a scheme
by scheme basis, once they are reasonably sure that each scheme
will go ahead. This may not lead to the optimal development of
the distribution system.
— In addition, while the DG incentive
is effective in ensuring that effective localised infrastructure
is put in place, it does not fund the deep reinforcement required
in resource rich, infrastructure sparse areas. The current incentive
arrangements should therefore be augmented with a mechanism that
takes a holistic view of likely network requirements in the medium
to long-term and changes DG from being a bolt-on extra to an integral
part of the way DNOs develop their networks.
— Whilst ENA supports the RPZ initiative,
it has its practical shortcomings, mainly around finding first,
a network opportunity, secondly, a suitable novel technology and
a co-operative developer all at the same time. However, there
is a deeper concern that its scope is too narrow. This is because
it rewards DNOs only for making DG capacity available, and essentially
creates "reception" networks that simply accept more
DG onto an otherwise standard system.
— Despite some concerns voiced about
whether the RPZ framework is achieving its objectives of demonstrating
innovation[8],
Ofgem's initiatives have provided a welcome opportunity to develop
new ideas and pilot new operational control schemes. The RPZ initiative
in particular provides a very useful platform to stimulate the
deployment of active distribution networks and demonstrate more
innovative generation and network technologies. Several DG-related
IFI projects are currently under way (eg demand side management
and virtual power plant, single phase LV regulator, OHL fault
passage indicators etc) and also, three RPZ schemes (within Central
Networks, SSE and EDF Energy's areas).
FACILITATING DG CONNECTIONS
The DNOs have done much over the last five years
to facilitate connection of DG by providing and successfully implementing
technical solutions and hence removing the majority of technical
(and technical/commercial) barriers to the development of distributed
generation.
Examples of work achieved with ENA involvement
include (but are not limited to):
— A common technical guide to the connection
of generation to distribution networks.
— A banding guide for DG.
— New Engineering Technical Reports
(ETRs) 124 and 126 related to active management of power flows
and voltage levels respectively, applying new techniques to reduce
DG connection costs while maintaining system security.
— A new ER G83/1 for the connection
of micro-generation.
— The review of planning/security standard
ER P2/5 ie publication of ER P2/6 which accounts for DG contribution
to network security by quantifying the ability of various forms
of DG to displace networks assets. This tends to reduce overall
system costs, to the benefit of customers in general, rather than
benefiting DG developers directly.
— A system of reporting the distribution
related DG activity.
DNOs have also been very active in re-examining
traditional operating practices and looking for innovative technological
and technical solutions that will lead not only to more cost-effective
and efficient connection and operation of distributed generation
but also prevent significant reinforcements. Developing new technical
solutions in the areas of voltage control and power flow management
have been most intensive as these are often the initial barriers
faced in the connection and operation of DG. Another area of activity
is communications and control which is seen as key to enabling
active distribution networks.
Whilst the uptake of micro-generation has been
relatively slow to date, DNOs have recognised that the impact
of these technologies on low voltage distribution networks is
potentially significant if larger penetrations are to occur in
the future. The most likely limitation will arise due to network
design practices for local low voltage networks and possibly also
for 11kV feeders. Realising the full potential of lower voltage
networks in particular will require further clarification of the
requirements under ESQCR that would potentially permit a wider
(LV) voltage operating range within specified parameters and hence
permit a wider penetration of DG (especially micro-generation)
into LV networks.
A WAY FORWARD
Although it is impossible to predict with certainty
the precise future structure of the electricity networks, it is
widely expected that the UK will progressively move towards a
network with a wide range of generation technologies in use at
every level of the distribution and transmission system. Load
as well as generation will be controllable and local areas of
the network will become more self controlling. Customers themselves
may become a more integrated part of the control of DNO networks.
The distribution network may become an integral part of an overall
energy delivery system as electricity, heating, cooling and transport
become co-ordinated. On the one hand, this may smooth power demand
and production, but on the other it will add a new dimension to
the operational and control requirements.
These considerations are complemented by the
fact that much of the equipment on our electricity networks is
increasingly at the end of its serviceable life. The requirement
for investment to replace ageing equipment and reinforce the networks
is coupled with an opportunity to facilitate the integration of
new and emerging generation and network technologies which will
offer many benefits to increasingly aware and actively engaged
energy customers. As very significant investment will be required
to simply renew this infrastructure, the most efficient way forward
is to incorporate advanced and innovative technologies and solutions
when planning this renewal. The approach to "design-in"
for greater network capability and functionality will also allow
for managing uncertainties and future, as yet unforeseen, changes.
Planning for the future is essential so that
we make the best use of technological innovation but also deal
with all the commercial, regulatory and environmental considerations
as well. The industry is considering the ways that would allow
it to plan for the rolling replacement of ageing network assets
while building in additional capacity, capability, flexibility
and resilience that will be needed to meet customers' expectations,
security of supply and climate change objectives.
ENA has consistently called upon Ofgem to consider
the long term investment needs of the network companies in the
context of a time frame well beyond the traditional five years
of a single network price review period. ENA is therefore encouraged
that Ofgem has stated in its response to the Energy Review (April
2006) its intention to work with the network operators to draw
together and publish long term scenarios for network developments
reflecting perspectives on broader and long term trends. ENA has
also welcomed the Energy Review's recommendation that Ofgem and
Government will undertake a comprehensive review of the incentives
and barriers that impact on distributed electricity generation
(including CHP).
There is a need for appropriate business drivers
and regulatory incentives to encourage the developments necessary
for the nation's networks to deliver what is required of them
over the long term. The present regulatory regime is designed
for a passive network and provides, for example, little opportunity
for generators to participate in voltage control, ancillary services
or to coordinate their output. It also requires developments on
the network to be considered on a case by case basis with new
network users desiring the cheapest solutions. This gives little
opportunity for co-ordination and long term strategic planning
or scope to adopt new technologies or operating practices.
In most circumstances, as traditional techniques
are sufficient to allow new connections of load or generation,
there is no business case to adopt more innovative methods even
if they may be more efficient in the long term. In the situations
where conventional techniques are not adequate there is not sufficient
time or resources to build the confidence to use Active Network
Management (ANM). Moreover, the current regulatory incentives
to improve quality of supply in terms of Customer Minutes Lost
(CMLs) and Customer Interruptions (CIs)) do not necessarily support
and encourage an innovative approach to network management that
ANM techniques introduce.
The present regulatory framework should therefore
be reviewed to ensure that there are no regulatory disincentives
to ANM development. The effective development of active network
architecture requires a more long term and well-aligned incentive
programme to allow DNOs to invest in ANM solutions. Innovation
and investment is increasingly important because "like for
like" replacement will not secure the change in network and
service capabilities that will be needed to meet rising consumer
expectations and recent changes in government objectives.
It should also be noted that there will be major
differences between DNOs in the volumes and types of DG connecting
to their networks and thus the impact that DG will have on them
will also differ. Consequently, any new regulatory framework which
is developed must be sufficiently flexible to accommodate these
differences, ie "one size does not fit all".
The cumulative impact of micro-generation technologies
is another area that would require further attention. Additional
Government support for a few mixed micro-generation based installations
could be helpful to provide much needed learning experiences for
all stakeholders. The network operators in particular would benefit
from practical "real world" tests of appropriate scale
where the effects of micro-generation technologies can be properly
planned for, assessed and tested.
INDUSTRY-GOVERNMENT
COLLABORATION
ENA members are currently working with other
industry stakeholders through the DTI/Ofgem led cross-industry
ENSG on the development of a comprehensive analysis of longer-term
generation scenarios and development of the corresponding network
architecture options. It is already widely acknowledged that all
futures would require an increasing application of advanced network
technologies and information and communication technologies that
should be able to facilitate a range of alternative electricity
system developments, from centralised to distributed[9].
Investment into and adoption of these technologies
would be critical if enhanced capability, capacity and flexibility
of networks are to be achieved in the longer term. These scenarios
should not be developed in isolation and ENA is discussing with
Ofgem, how this work can be brought together to avoid unnecessary
duplication.
Steps have already been taken by DNOs to develop
even closer integration of new generation in the system operation
through the active network management (ANM) practices which will
allow use of this generation to actively control the system operation
and participate in the provision of system security. The initial
work involved a detailed analysis and assessment of installed
facilities, capacity and operating methodologies in the areas
of data acquisition and management, substation and network monitoring,
substation and distribution network automation, real-time control,
and communications architecture and information models[10].
ANM is found to be increasing on today's distribution networks.
Some local ANM solutions are successfully implemented using existing
technology already installed on DNO networks. However, wide-scale
implementation of ANM will require more technical understanding
and confidence in both existing and new technologies and solutions.
The networks community is also taking the opportunity
to look ahead and see how electricity networks might, and, indeed
might need to look like in the future. To that end, the networks
representatives contributed to developing a framework for guidance
to the sector on best practice for developing a technical architecture
for future electricity networks[11].
They have also participated in similar activities in Europe, namely
development of the "SmartGrids" technology platform.
In terms of EU initiatives and activities particularly, it is
important to ensure that directives and standards do not develop
in ways incompatible with the design and operation of electricity
networks in the UK. Discussions are also underway as to how to
translate an understanding of all potential technical developments
into the management of change in businesses in a liberalised electricity
industry.
1 The energy challenge-Energy Review Report, DTI, July
2006. Back
2
http://www.energynetworks.org/spring/engineering/distributedgeneration02.asp Back
3
SUPERGEN Future Network Technologies consortium "Electricity
Network Scenarios for 2020", July 2006. Back
4
Accommodating DG, Report to DTI by Econnect Group Ltd (06/1571),
July 2006. Back
5
"Technical guide to the connection of generation to the
distribution network", K/EL/00318/REP, URN 03/1631. Back
6
"The Impact of SSEG on the Operating Parameters of Distribution
Networks", K/EL/00303/04/01, URN 03/1051. Back
7
"Network Losses and DG", DG/CG/00038/00/00, URN no
06/1238. Back
8
"Assessing the Feasibility of Establishing Registered Power
Zones on Northern/Yorkshire Electricity Network" Report to
DTI by Econnect Group Ltd 2006. Back
9
"Future Network Technologies", Report for DTI, 2006. Back
10
"A technical Review and Assessment of Active Network Management
Infrastructures and Practices", DGCG/00068/00/00. Back
11
"Technical Architecture-A First Report: The way ahead",
June 2005. Back
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