UtilityWeek, together with Mott MacDonald, has published a report on “What characteristics and capabilities does a net zero ready independent system operator (ISO) need?”. I was fortunate enough to be interviewed for this alongside some big brains such as Mott MacDonald's Simon Harrison and Craig Lucas, Northern Powergrid’s Patrick Erwin and Flexitricity’s Alistair Martin.
As many of you will be aware, back in January Ofgem recommended to government that the system operator for electricity (and elements of gas) be made fully independent from the transmission network owner. In addition, Ofgem recommended new functions and capabilities for this ISO:
providing independent advice to government, including on how best to achieve net zero;
more direct planning of onshore and offshore electricity networks and the introduction of competition in network solutions; and
a more active role in designing and planning the future energy system – in a way that maximises value for money and ensures a level playing field between different parts of the energy network and wider energy services.
UtilityWeek's report walks through the challenges and opportunities for the yet to be formed ISO. You can read the detail in the report. Below I pull out what I see as the “to do list” for the ISO.
First, that bullet point on independent advice on net-zero is crucial. The direction on travel in the power and broader energy system(s) is reasonably clear – build out a tonne of renewables. You might have seen the IEA net-zero report, which shows a global electricity system powered by 90% renewables. For the UK, according to my Imperial College London colleagues in their “Net-zero GB electricity” white paper, this could mean more than 100 GW of offshore wind and a decent array of solar PV (dependent on how much it costs). The big question is when and where all the required assets will be built, and how much new network infrastructure is required to carry power from A to B.
Second is that the power system above is rather weather dependent, so where does the flexibility come from when the sun isn’t shining and the wind not blowing? Many of the current sources of flexibility, such as diesel generators and open cycle gas turbines, are carbon intensive. In a future zero-carbon system, this is not on. Delivering zero-carbon flexibility is going to require a myriad of options including demand-side response, energy storage, interconnection with Europe, and zero-carbon flexible thermal generation (for example using hydrogen as fuel). The ISO, together with Distribution System Operators are going to have to square this ‘flexibility without the carbon’ circle. This brings me onto my next point.
Third, it is crucial that assets are visible to the energy system because in the future it will matter what and where they are. It is also important that everyone knows what actions are being taken and where they are being taken. A future zero-carbon energy system will throw up many challenges, from local network constraints to inter-seasonal challenges, like keeping everyone warm in winter when the wind isn’t blowing. It is a system where millions of assets, from power stations to batteries on wheels (also known as electric vehicles) can contribute to solving problems. As a consequence the ISO and other parties have an important role in creating a level playing field for all (zero-carbon) sources of flexibility (for example, interoperability so assets can play in all markets where they have value). There is also an important engagement role, to ensure that all those flexibility sources that COULD participate are aware that they CAN participate. In other words, the ISO must be brilliant at communication and engagement.
Fourth, linked to the above, roles are responsibilities are going to important. For example, in a future energy system, what are the respective roles of the ISO, DSOs and other parties, like aggregators, energy suppliers or flexibility platforms? In theory any of these parties could take a lead on delivering essential energy system services, potentially shrinking the role of other parties. I don’t have an opinion on who should be leading, but I do have a view that having a mechanism or institution where roles and responsibilities can be sorted out is critical. We need a seamless energy system ecosystem, where all parties play their role to the benefit of the whole system and its users. If we end up in a world with a bunch of poorly integrated markets and institutions, and limited interoperability and ability to stack value, we will have failed.
Fifth, this vision of a integrated and seamless energy ecosystem is predicated upon data and aspects of automation. This carries with it new digitalisation risks that will need to be managed – including cyber-security, market gaming, operational challenges where people work with artificial intelligence and data protection. In our EnergyREV report on Digital Energy Platform, we argued that many of these risks aren’t unique to energy, and there is much to learn from other sectors. If this is an area of interest for you, stay tuned for a forthcoming report from Imperial College Consultants and Scottish and Southern Electricity Networks on “Risks of Digitalisation in the Electricity Networks”.
Finally, whilst carbon and cost are significant objectives, they aren’t the ONLY objectives for a zero-carbon transformation. Other important issues include post-pandemic economic recovery, levelling up, green jobs, just transition, the environment (ideally enhancing rather than degrading!) and innovation and business opportunities arising from transition to net-zero. This energy transition isn’t a homogeneous journey for every house, business and place – each journey could be different. The ISO needs to be able to celebrate and recognise the diversity of local zero-carbon transitions, rather than apply a one-size-fits-all template.
No pressure on the yet to be formed ISO, then.