*The role of distribution network operators will change beyond recognition once smart grids are in operation. What should they do now to prepare?*

*Keep it affordable - by Stephen Haw, manager, and Finlay Macdonald, senior associate, Baringa Partners*

As the UK smart grid edges closer to reality, distribution network operators (DNOs) are gearing up for a period of radical change to electricity networks. Over the next 10-20 years, the network will have to adjust to pressures created by the integration of multiple sources of intermittent and inflexible low-carbon generation, and the growing adoption of electric vehicles. DNOs will have to juggle an increasingly complicated network design and the involvement of multiple parties in its operation.

Above all, DNOs will become far more active operators and managers of the network, and will be key players in the decarbonisation of the electricity system. They will take the lead in managing energy storage facilities, embedded generation, and demand response at a community level, to manage network constraints and avoid unnecessary reinforcement.

While these challenges will be tough, there is a flipside. DNOs are also set to benefit from a raft of opportunities created by an increasingly intelligent network. For example, by optimising existing networks with emerging demand-response technology, spending on network reinforcement will drop drastically. Additionally, better performance and utilisation data will equip DNOs to make far more accurate assessments of the life expectancy and performance of specific parts of the network or particular assets, such as substations.

This will make for more judicious and efficient investment decisions. Similarly, better access to real-time network performance data will enable DNOs to detect and resolve outages and incidences of theft more efficiently, as well as improving regulatory metrics.

So what should DNOs be doing to ensure they can cope with smart grid challenges and maximise smart grid opportunities? With the timetable for deployment not yet set in stone, and the extent of customer adoption of new energy service products and technologies still unclear, DNOs must weigh up the relative costs and benefits of all the possible approaches to developing smart grids.

One thing in particular to bear in mind is that DNOs are subject to short-term financial constraints imposed by the capital expenditure agreed under the distribution price control review have limited capital available for research and development. This means they have to use their resources to maximum effect and think strategically to mitigate the risk of a sub-standard network that is unable to cope with a very different demand profile.

The traditional approach of meeting growing, and increasingly volatile, demand by reinforcing the network is likely to be significantly more expensive and much less efficient than using an integrated set of resources to actively shape demand and maximise the capacity of the existing network.

*Get closer to suppliers - by Duncan Sinclair, director, Redpoint Energy*

When it comes to the smart grid, DNOs are in an interesting position. In other countries where smart grids have already been deployed, companies owning the networks have typically been responsible for the deployment of smart meters, and hence have established direct relationships with end customers. Here, it is the suppliers that are the custodian of the customer relationship.

For smart grids to become a reality, there needs to be a change in the relationship between DNOs and suppliers, with more sophisticated commercial arrangements that give DNOs access to customer data, and can stimulate load management by the customer where this can benefit the local operation of the network, as well as helping the supplier to manage its own balance position.

On the policy and regulatory side, a huge challenge will be to create the correct incentives framework, spanning competitive energy supply markets and regulated network businesses, to ensure that an economic trade-off between investment in further demand-side response, peaking capacity and network capacity can be made.

*Step up network control - by Mark England, managing director, Sentec*

The smart grid will drive two key changes in the way we use our networks. First, the distribution network will need to be robust enough to cope with vastly increased loads for which it was never designed, such as heat pumps and the charging of thousands of electric vehicles. Second, it will have to support distributed generation from householders in the form of solar photovoltaic panels and wind turbines.

DNOs need to manage their networks as efficiently as possible by investing in new infrastructure where it is needed most, rather than carrying out a wholesale replacement of existing equipment. They need to invest in technology that can support them in doing this and in maintaining the integrity of their networks. Specifically, they need proper instrumentation and control on the electricity network, so they can manage it to cope with the increased strain. This is particularly important for the lower-voltage distribution networks, where there is currently lower visibility in terms of instrumentation.

With greater visibility and control, DNOs could suspend the operation of a heat pump connected to a smart meter, for example, during times of heavy demand. This would minimise the strain on the network.

*Team up with broadband power line providers - by Eugen Mayer, chief operating officer, PowerPlus Communications*

Without a seamless communications infrastructure that provides bi-directional transmission of consumption and control data in real time, the smart grid will fail to deliver the expected benefits. Broadband power line technology transforms existing electricity grids into an internet protocol-based communications platform. Every power line becomes a broadband data interface and power grids turn into intelligent systems, connecting to meters in homes and businesses.

As the UK moves towards wide-scale adoption of smart meters and, ultimately, the smart grid, the role of DNOs will change. Network operators should look to partner with broadband power line communications providers. This would support the integration of renewable energy and generate significant benefits for DNOs - for example, enabling them to potentially generate new revenue streams.