Examination of Witnesses (Questions 300-319)
ENERGY NETWORKS
ASSOCIATION
31 OCTOBER 2006
Q300 Roger Berry: How?
Mr Goodall: We can do almost anything
that people want with enough certainty and time and the appropriate
incentives. The challenge of course is, I defy anybody to accurately
predict what the likely mix will be at ten, 15, 20, 30, 40 and
perhaps even 50 years out, and it is of critical importance to
us as the networks because of course networks tend to be rather
like big pieces of furniture—you do not want to make a mistake
in buying. The electrification of the UK post-war, we are now
coming to the approximate, shall we say, replacement or repair
period for the assets there, and if we are making sure it is about
a wholesale shift in any direction, now is a very good time to
know it. Equally, if we were looking for a significantly higher
level of penetration of, say, microgeneration or distributed generation,
now is a very good time to anticipate what those needs are. We
already have a fairly mixed economy predicated on central generation,
but with increasing levels, and we are anticipating a further
increase, but we do not quite yet know how accurately we can predict—because
it is not written anywhere—what the endgame might be, and
therefore what are the adaptations to the network it would be
prudent to take now.
Q301 Roger Berry: Some changes can
be quite difficult. The Government actually says it is not going
to make a policy decision on nuclear, that is a matter for the
market.
Mr Goodall: Yes, and that is not
the easiest thing. Dr Popovic?
Dr Popovic: Let me say something
about nuclear and microgeneration and is it conflicting or not?
I would not say it is conflicting, it is just if you input the
different voltage levels. So nuclear generation will connect to
the transmission system and microgeneration connect to the distribution
network, and low voltage distribution networks. So I think that
these aspirations will target the networks at different voltage
levels and therefore the impact will be in certain areas of transmission
and certain areas of distribution. However, what you may ask then,
as the subsequent question, is how we are going to balance the
system? Are there some difficulties in terms of having more inflexible
nuclear, (largely inflexible base load nuclear), and CHP, also
largely inflexible? But then you have offshore wind included,
which is variable and intermittent. So you have these kind of
issues which you would need to resolve at certain points; while
on the other side, on the distribution networks, you have largely
passive distribution networks, especially at the low voltage levels,
networks which cannot respond to the dynamics of the system, so
they have to be made more active and able to respond to various
operating conditions, which these new technologies are going to
impose. So, to go back to your question, I would not say that
the objectives are conflicting, but they will affect the system
differently and at different voltage levels.
Q302 Roger Berry: My real question
here though is really about the time lags involved. If it is government
policy that, subject to wishing to penalise carbon producers and
give incentives to non-carbon producers, it is left to the market—nuclear
is a classic example—your phrase about anticipating changes
becomes particularly relevant. Can networks be adjusted sufficiently
quickly so that when the private sector decides whether or not
to invest in nuclear, hey ho! the networks can be sorted? Or do
you need to know beforehand?
Mr Goodall: Networks have thus
far been able to accommodate and, you might be able to deduce
from that, have been able to adjust. We have not really had much
of a wholesale change until now. Picking up your point about the
market, of course, generation is absolutely about the market;
the networks are natural monopolies and are regulated as such,
so there is a burden of anticipation, which we trust we share
with the regulator, who of course has to look across the piece.
Somebody once rather riskily said that networks are very simple
things—they are not, and they are becoming increasingly
more complex as we are just beginning to scrape the surface now.
In anticipating the requirement to be flexible, to be able to
accommodate the wide range of generation that exists and may yet
come, is the burden that we bear in order to ensure that the lights
stay on. However, although, as I am sure you will appreciate—and
Dr Popovic can explain in great detail some of the technical issues
about the operation of networks and how they can, when challenged,
respond, and what necessary innovation is applied—it is
almost relatively easy compared to the regulatory dimensions which
we unavoidably come to in looking at how that anticipation might
be fulfilled.
Q303 Roger Berry: Do you have any
reservations about the view that these things, in terms of energy
supply, can be left to the market and your job is not difficult
to do?
Mr Goodall: We move it around;
we move round the capacity that is put into the system and deliver
it to the customers.
Q304 Chairman: I know that Mick Clapham
wants to come in, but actually your memorandum says that it cannot
be left to the market because it is a regulated industry that
you are working in and you are looking to Ofgem to enable the
investment you describe, to incorporate a vast amount of technology
and solutions when planning a renewal of the grid.
Mr Goodall: Yes.
Q305 Chairman: So you are actually
looking for regulation to make sure that the problems that Mr
Berry is describing do not occur.
Mr Goodall: Regulation is absolutely
the enabler. The question comes to the extent to which one is
being asked to innovate and to do something new and different,
as opposed to merely continue to do what is currently happening,
and that is perhaps the unknown area. Mr Phelps?
Mr Phelps: The issue is very much
associated with whether regulation can deliver the network or
regulation can provide incentives for the company to deliver in
a timely way what is needed to link producers and consumers, which
is really the question you are posing.
Q306 Roger Berry: Is it the ability
of Ofgem to anticipate change?
Mr Phelps: It is, but on the other
hand the nature of Ofgem and the nature of the system is such
that they are not going to prescribe what we have to do, they
are going to put incentives in place. However, they are not going
to want us to build networks—and shareholders are clearly
not going to want us to build networks—hoping that a generator
will come and connect. And there is this timing issue, which is
key, I think: which comes first, the network or the generation?
For us at the moment it is the generation which will come first
and the network will seek to provide that connection in a timely
way. There clearly is a risk there that the two will not be in
sync, and that is something that we are working on with Ofgem
to resolve those sorts of issues.
Chairman: Mick Clapham, do you want to
come in?
Q307 Mr Clapham: Yes, very quickly.
Given what you have said about the compatibility of the input
of power to the network and linking that to yesterday's report,
which is going to give a real impetus for much more microgeneration,
are you discussing at all with the DTI how this might impact on
the network, or do you leave that up to Ofgem, and are your discussions
or consultations with Ofgem?
Mr Goodall: We have regular discussions
with the DTI on all aspects of the way that the networks are operated,
both now and in the future, and Dr Popovic, for example, sits
on a number of committees that look at the technical introductions
of these, and I am fairly sure that the amount of attention is
going to be even more in the light of the Stern Report yesterday.
Q308 Mr Weir: Your submission notes
that a high level of take-up of domestic CHP could pose a challenge
to existing networks. I noted that Dr Popovic mentioned it is
about 500 kilowatts, if I picked it up correctly, coming in at
the moment, but it comes in a distribution network rather than
the generating network, if you like. But what levels of micro-CHP
take-up are we talking about before this becomes a problem?
Dr Popovic: I must say firstly
that we should distinguish between whether we are talking about
existing networks or we are talking about new uptake of microgeneration
and new clustering of microgeneration as a part of new developments.
Let us say that if we have new developments, new build residential
areas, then we can tailor network designs so as to meet the generation
requirements, micro-CHP requirements in particular. The challenge
is more for the existing networks and, again, depending whether
it is going to be a large uptake or clustering of microgenerators,
in particular on the existing networks. It is very location-specific
to give you an exact answer on the penetration level. Our networks
are designed, especially distribution networks are designed, to
meet load customers and they are a different sort of design, if
we can say, dependent on the customers in certain areas, so that
even though they all comply with the network design standards
still the development of the network within a particular area
may be such that there is not enough fault level headroom, for
example, to accept certain large amounts of microgeneration. We
do not have negative experiences so far because the levels have
been very low, but we are anticipating, for example, for micro-CHPs
in particular, if the exporting from micro-CHPs is significant—which
means at the same time we have a large amount of micro-CHP in
the networks or in certain clusters within the networks—then
that would cause significant problems for voltage limits, at the
low voltage levels; they would be exceeding the statutory limits,
and therefore our networks would not be compliant. That means
that we have to make some modifications to existing planning and
design standards in order to be able to accommodate these larger
amounts.
Mr Weir: Given that the move to micro-CHP
is very much in the domestic market at the moment, if I am understanding
you correctly there would be a different design for a network
in, say, a predominantly industrial area as opposed to a predominantly
residential area, so are we talking about the problem being that
in a distribution network serving a predominantly residential
area there would be a real problem if a significant number of
houses had CHPs and were trying to generate back into that network?
It may be very difficult to give an answer when you are talking
about averages, but is it, you say, one in 10 houses have micro-CHP
and we are talking about serious problems, or is it higher than
that or lower than that?
Q309 Chairman: I do not want to discourage
your obvious enthusiasm for your subject, which is very impressive,
but if we could have the executive summary, as it were, it would
be very helpful because we have to get through quite a few questions
before half past 12.
Mr Goodall: It depends on the
network and it depends on the sub-area of the network. An important
lesson is that no two networks are exactly the same in their configuration.
You have to remember that historically basically networks were
designed to cascade down the power from generating plant down
to customers. The ability for the network to accommodate anything
that is effectively going in the opposite direction is limited
and itself variable by location.
Q310 Mr Weir: One of the follow-up
questions to that is what are your members who run these networks
doing to address this problem, which is clearly that if there
is a major take-up of microgeneration, as the Government is pushing,
this is going to hit you sooner rather than later?
Mr Goodall: A great deal of work,
an awful lot of innovative technical solutions, which are now
actively incentivised by the regulator, is actually asking people
like us to help to try and find the political intelligence as
to what the likely level of uptake will be in the future so that
they can build that into the proposal that they put to Ofgem,
the amount of money they are allowed to invest in the networks
in the price review periods to enable this. One of the big problems
in all of this, though of course—and it is not wrong—I
would love to be able to predict exactly who was that one in 10
and where they lived, and what happened if it were two and maybe
if it wanted to be three, and those other unknown factors, and
it is very difficult to optimally design an efficient system without
prior knowledge of who, where and when. That is the hard part.
Q311 Mr Weir: But you are going to
have to face that problem because, given that microgeneration
is being pushed, there is nothing to stop anyone from going in
and putting in a micro-CHP or windmill or whatever at the moment.
If they come along and say, "We want to export additional
energy into the system," then your members are going to have
to deal with that. At the moment the amount being given, as I
understand it, for that energy is so low it is miniscule, but
if the Government, for example, decided to go down the German
model and give a much larger figure to push then your members
will have a real problem unless you address it now.
Mr Goodall: They will have a problem
if it is not recognised in regulation; of course, regulation sits
in the context of government policy, and this is perhaps where
we can give an example of how the current incentives that Ofgem
have put in in the most recent price distribution review recognised
the beginnings of this level of increased uptake.
Mr Phelps: Your question is very
apposite because I think it is fair to say, speaking as a non-technical
person, that a lot of the technical issues are being addressed,
are being discussed and I think solutions are there. I think then
the job of the regulator, whether it be the DTI or Ofgem will
then be to incentivise the companies and to make sure that the
network is in place, as I said earlier, to meet the requirements
of this new form of generation. I think it is about getting in
place a market, an economic framework, which will make sure that
when it comes to the five-year price review, that we do not just
replace like with like. It is actually saying it is no good to
think five years out, we need to think 10 or 15 years out, and
maybe we need to spend a little more money on something different
because we need to create a network which is going to satisfy
the customers or satisfy the needs of the customers ten, 15 years
out and not just five years out.
Chairman: I am going to move on because
we are going into areas that overlap and we are getting into areas
that we will ask about later. I will move on to Peter Bone and
come back to them later on.
Q312 Mr Bone: During the previous
evidence we have heard there is a real problem that microgeneration
will create safety risks with the grid. So if you happen to flick
a switch and turn your lights on when you have a windmill on you
might electrocute yourself. Are there real safety risks involved
here?
Mr Goodall: I would like to give
two answers to that one. First of all, there are the specific
requirements of those assets themselves, those devices, and we
go through a process of approving anything that is connected to
the network, so everything goes through a very high quality control
process, and we do reject and we do require changes to devices.
The second part is about the impact on the system and the load
management, about which Dragana can perhaps explain a little more.
Dr Popovic: When it comes to microgeneration
in particular we have a standard G83/1 which is for the connection
of microgeneration, which means these small appliances up to four
kilowatt of 16 amp per phase, and all installers, if it is a single
installation, are firstly bound to notify the DTI, according to
ESQCR, which are our safety and quality of supply regulations,
of their installation; and also within 30 days of commissioning
they are supposed to notify DNO, Distribution Network Operator,
within the areas they are installing the appliance. Not only that,
but within the guidance or engineering accommodation there are
annexes for each particular type of technology.
Chairman: We are going into a little
bit too much detail again, if I may say so.
Q313 Mr Bone: A straight yes or no:
are there safety risks or are there not?
Dr Popovic: I would not say that
there are safety risks because the process is in a way standardised
in the sense that connection—
Q314 Chairman: There is a process
to control what is connected to the network, but there are two
answers to this question—and from our earlier discussions
in private there is a particular risk, which I think you will
probably want to discuss as well, Mr Bone, of severance, isolating
the sub-stations and so on; is that not a problem? We are trying
to establish the safety risks from microgeneration. We have established
that the products and the factors are okay, are there any other
risks for engineers?
Mr Goodall: In terms of the impact
on, say, local transformers and so forth: load questions?
Dr Popovic: No, because they are
supposed to submit a sheet, which tests the verification sheet—
Q315 Chairman: What you told me is
that you could not guarantee that the sub-station was isolated
because the microgeneration system was delivering power the wrong
way round.
Mr Goodall: Not all sub-stations
and local configurations are equal. Depending on the number and
type of devices connected there may be on certain occasions extra
required in order to ensure the current levels of safety standards
that we enjoy. That is not to say that devices per se have
a higher risk; it is all about the relationship of the device
to the specific sub-part of the local network, which is where
we have standards and requirements and which is where, in the
long-term, we need to ensure that we have as much visibility as
possible as to the likely levels of penetration to ensure that
those standards are met.
Q316 Mr Bone: Just moving on from
there—and I want to try and get this right—your submission
suggests that the increasing levels of distributed generation
could actually increase network losses rather than reduce them,
thus negating the apparent benefit of locating generation near
to consumption. That seems strange to me; I would have thought
that it was the opposite?
Mr Goodall: I am going to set
Dragana an impossible task. This is, without doubt, a very big
question that you have asked. To compress this—and I am
going to set her the ultimate career challenge—please do
that in the shortest possible sentence, whilst doing it justice.
Dr Popovic: I will try to but
it is extremely complex how distributed generation impacts the
losses. At a local level, at a level where the distributed generation
is connected, it is most likely that, if you have proof of match
between peak generation and peak demand, there will be a loss
reduction. However, let us talk about micro-CHP in the morning
hours when you have essentially low demand and significant generation.
That particular micro-CHP will be exporting and therefore you
will have an increased flow and that increases the losses. Or,
for example, PV during summer months where we have office buildings
and a large number of air conditioners—during the daytime,
perfect, you will have that perfect match and you will say that
it contributes or actually reduces the losses. But, for example,
if you look at Sunday, when people are not working, you will have
export conditions. So in order to reduce the losses you have to
have a perfect match between generation and demand in time and
space, and only then you will have loss reduction. We have done
a comprehensive study which has shown that while losses at certain
voltage levels are decreasing, losses at other voltage levels
may be increasing. So there is no way to generalise and therefore
that is very complex.
Chairman: That is a very good summary.
Q317 Mr Bone: Well done, that was
very clear. I get the impression, Chairman, that, with all due
respect, I see a dinosaur here and I see the Government saying,
"This distributed generation, these renewables, we will pay
lip service to it, but we are really going to press ahead with
nuclear energy, tax carbon saving. That is nice and simple for
you, you know how to deal with that. We do not really want to
be bothered with all this renewable energy and microgeneration,
but let us pay a bit of lip service to it." Is that not the
truth?
Mr Goodall: Thank you for the
unexpected reference to a dinosaur. If anything, actually, the
UK's networks are considered quite innovative—because they
are some of the most mature in the world they are actually facing
these opportunities earlier than others. I cannot emphasise how
fuel-neutral the networks are. It is also worth remembering that
the prospect of building and designing electricity networks is
quite interesting and attractive to network operators, so the
challenge of trying to anticipate what is going on is quite welcome.
Q318 Chairman: The bottom line is
because it is such a fascinating technical challenge, you make
so much money out of a more complex system you are actually rather
pleased about it?
Mr Goodall: I do not think there
is more money to be made because do not forget—and it is
a very important point, Chairman—because the companies are
very specifically regulated by Ofgem, who have the consumer as
their first driving objective, it is anticipating the customer's
requirements, whether they be ultra distributed generation or
large-scale conventional generation, and the most cost-effective
way of meeting and anticipating that is in, after all, a market
for generation.
Chairman: Ill-disciplined questions from
myself and members of the Committee and long answers are conspiring
against us: we are not making the progress with the questions
we need to make, so we need to speed up a bit. Mick Clapham.
Q319 Mr Clapham: I can see that this
issue is immensely technical, but we are talking in terms of probably
30 to 40% of distributed electricity coming on to the network
in, say, 30 years' time. Given that the evolvement of management
of the system is almost leading to create a kind of hybrid system,
would it not be worth now consulting with, or advising government
that we do need a hybrid system, possibly, and what would the
cost of a hybrid system be as against a purely centralised system
or a purely decentralised system?
Mr Goodall: We are expecting—because
I do not think there is anybody of any note suggesting that we
are not going to see what is effectively a hybrid, certainly even
more mixed economy for the networks in due course, and we spend
a great deal of time discussing this problem—we could probably
put a price on it, if we knew exactly what was going where and
when. But because nobody is in a position to do that because that
is of course far too much market intervention, even with the knowledge
of 40% locational signals are enormously significant in terms
of the cost implications. It is entirely at distribution levels—another
question of course, because some very large wind farms may go
in a transmission level, offshore wind farms, for example. We
are having those dialogues, we are expecting, but we do not specifically
advocate anything other than networks that continue to be as secure
and safe and reliable as they are now, and that is partly driven
by technical standards. But it is also driven by the ability to
use innovative technologies that we have not had to use in the
past because we have had relatively passive distribution networks,
and it is the movement to active network management that answers
many of the questions that have popped up around the room.
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