How digital disruption is driving the evolution of the network operator

Three opportunities for next-generation DNOs

Fortunately, while the evolution of technology is creating integration challenges, it is also helping provide the capabilities to overcome them.

• Smart meters and low-voltage grid sensors offer unprecedented visibility at the grid edge, generating vast amounts of digital data that can help optimize the network.
• Affordable batteries store energy and alleviate grid volatility.
• Advanced automation across the grid provides real-time network management capabilities.
• Analytics are providing utilities with a window into asset health and performance under these new conditions.
• Microgrids offer a new way to service and isolate specific parts of the grid.

This new reality is also creating new and exciting opportunities and roles across the sector, some of which DNOs are very well positioned to seize.

1. Distribution System Operator: Distributed energy demands a new role – let’s call it the active distribution systems operator (Active DSO) – to manage so many variable sources of electricity. This could be achieved via a central control approach, whereby the Active DSO responds to flexible demand, centrally dispatching distributed energy resources (DER) at a distribution grid level and managing the voltage volatility. An alternative is a market-led approach, allowing DER owners to provide their localized resource to the grid, based on pricing markets. In this model, the network company serves as a neutral gatekeeper – or administrator – between the providers and buyers of energy coordinating grid-wide DER activities. Some utilities have already stepped into such roles. In the US, Con Edison has been appointed by New York’s electricity regulator to take on the expanded role and California’s energy bosses are considering making a similar appointment.
2. Data hub: In an energy market with millions of smart meters, billions of connected devices, increased number of actors and multiple sources of power, it makes economic sense to create one central repository to store this incredible amount of data, keep it safe and allow for its easy access by all utilities and market players. This is the data hub – almost like a clearing house for information transactions – and such models are being established in markets around the world. This is a radical departure from the existing model but one that could leverage existing stakeholder relationships and industry knowledge of network utilities. It’s a concept I’ll explore further in an upcoming blog.
3. Digital grid “app” store: A connected, digitized grid has the potential to become a platform for apps offered by third party providers. These apps could include services to manage appliances in the connected home, as well as charge electric vehicles or conduct peer-to-peer transactions to trade solar energy with neighbours. Network utilities won’t develop or run these services, but instead host the platform (i.e. the digital grid) on which they are held – similar to the way that today’s technology giants host apps via smartphones and devices. After all, utilities already own the physical platform (i.e. the network), so why not operate the digital platform enabling others to offer additional services?

Charting the way forward

This list is not meant to be exhaustive. It is, however, a very exciting sub-set of opportunities for market role and business model reinvention. DNOs are arguably best placed to seize these opportunities given their knowledge and current position in the market.

There are undoubtedly challenges posed by such landmark changes, not least the capability transition required across the organization, engaging new stakeholders, embracing fresh business models and overcoming strict regulatory rules regarding non-regulated revenues. However, now is the time to embrace disruption. The energy revolution is happening on the DNOs’ watch - on their turf - and the world is waiting to see how they will respond.

Fortune will favor the bold. DNOs that embrace the challenge of the volatile grid as a call-to-action can reinvent themselves to fulfil a new, more active role. If they do not, regulators or customers may step in and provide their own solution – one that could potentially minimize the role of the network operator further.

Of course, even in this doom-and-gloom scenario, it will not spell the end of the DNO as an entity. After all, we need distribution networks don’t we? Surely, it will always be more efficient to move electrons across the grid than produce, store and consume in a single place?

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