Brendan Coyne looks at distribution network operators' pitches to Ofgem's Low Carbon Networks Fund.

Ofgem was due to announce this week which of the distribution network operators (DNOs) have cleared the first hurdle of the Low Carbon Networks Fund tier 2 process.

The fund was created by the regulator as a component of the latest distribution price control review to provide finance for network companies to conduct preparatory work on building networks that can cope with higher loads, shifting peaks and distributed generation. The DNOs and their project partners bid for a tranche of funding to research and implement smart technologies.

Their findings are then shared among all DNOs and expanded upon with the aim of delivering the skeleton of the smart grid. At the time of writing, Ofgem was putting together a team of judges to determine which bids get the money.

*£64m pot up for grabs*

A week before the screening of submissions, virtually all the DNOs were confident of making it through to the knockout round, and a share of the £64 million annual kitty. Ofgem, though, is taking a Dragons' Den approach: DNOs either get all they ask for or leave empty handed. With £191 million of bids tabled, the scheme is three times oversubscribed. There will be disappointment for some come December when the winners are announced. For now, with everything still to play for, there's a lot of praise for the regulator.

CE Networks has put in one of the biggest bids (only Scottish Hydro and EDF are asking for more). CE wants £28 million from the fund for its project, which involves 10,000 homes and businesses in the North East and ties-in with British Gas's smart meter rollout. Head of regulation and strategy Jim Cardwell says Ofgem "can congratulate themselves on the policy direction" and the impetus it has given to industry collaboration. Steve Edwards, head of smart metering technology at British Gas, concurs. "This is exactly what the UK needs," he says.

Some, though, feel that the process of competing for funds is at odds with Ofgem's desired outcome, which is collaboration and knowledge sharing.

"The competitive nature of the bid has been frustrating at times," says Scottish Power strategic market development manager Martin Hill. "I don't think it encourages DNOs to collaborate fully with each other, which could have delivered even greater benefits than the projects put forward. We'd like to collaborate with other DNOs for actual delivery, not just sharing the results afterwards. That is something that needs to be considered in future."

*Questions over the competitive call*

Simon Brooke, Electricity North West's low-carbon projects manager, agrees, but says you have to start somewhere. "The competitive call has created some behaviour that isn't as positive as it could be, and it is difficult to know whether it will deliver what Ofgem wants because it's the first time this approach has been tried. Personally, I'll reserve judgement until we've gone through the process."

One thing on which all the DNOs are agreed is that it is as important to learn what doesn't work - both in terms of technology and regulation - as it is to discover what does.

The projects vary hugely in scope, size and complexity. While Scottish Hydro wants £51 million to connect wind and trial energy storage in Shetland and Orkney, Scottish Power has pitched at the opposite end of the spectrum. Its plans for Glasgow, for example, seem pragmatic. The Glasgow bid asks for £3 million to fund a £3.4 million project to use electric storage heating as a means of energy storage.

*Two-way control*

Scottish Power's Hill says the aim is to add two-way control and measurement to the existing radio-telecoms switching system that has controlled off-peak electric storage heating in the UK for the past 25 years. If electric storage heating was demand-side management learning to crawl, Hill says, the Glasgow project could represent its first steps, and cut a path for smart meters to follow.

"There's a huge benefit in two-way communications," he says. "Customers at present are switching off in 50MW chunks, so there's a definite benefit in being able to control that on a customer by customer basis. We can ramp demand up and down to resemble renewable generation rather than in step changes, and that is the basis of the project."

Western Power Distribution hopes to devise network templates so that, in future, a common approach can be taken to smarter networks - for example, a template for a central business district versus a template for the commuter belt. The company is asking for £9.5 million from the Low Carbon Networks Fund to test earlier work in this area (by the likes of Imperial College, Kema and the Energy Networks Association). A main chunk of the project, in which Npower is a partner, will be to monitor end-of-feeder low voltages to get thermal and voltage data, which means installing monitoring kit on the end of feeders. "That will involve a fair bit of care in terms of customer communications to ensure we get the right message across," says Western Power Distribution policy manager Phil West.

*Home truths*

Keeping customers onside is a challenge facing many projects. Jeff Douglas, head of network strategy and development at Central Networks, says the trickiest part of the company's Milton Keynes project will be the links into the home. "Some householders will be very keen to adopt, others less so," he says. "So linking into demand-side management in the domestic sense will be a challenge because we've got the energy company stepping beyond the meter and inside the home."

Douglas says the lion's share of the £23.5 million budget for its Milton Keynes project is for information and communications technology infrastructure, as well as additions to substations and network infrastructure to manage and interrogate data. That type of specialist equipment will involve the company looking beyond its traditional suppliers. "We're looking to encourage small and medium-sized enterprises as well as large players," he says. "We want to hold a representation day for businesses to show us their ideas. Milton Keynes is keen to attract smart industry to the area." Douglas adds that the buy-in of local people will be encouraged if local firms benefit.

While Milton Keynes might aspire to be Europe's leading low-carbon city, London also has ambitious targets, such as 25 per cent of electricity coming from decentralised generation by 2025 and a 60 per cent reduction in carbon emissions by the same year. EDF Energy's low-carbon London project, for which it wants £39 million from the Low Carbon Networks Fund, aims to work out how to meet such targets within the confines of the capital's congested architecture. "The cost and disruption of putting more copper in the ground is not feasible," says EDF Energy Network's head of engineering regulatory strategy, David Openshaw.

EDF Energy is asking for a lot of money, but Openshaw says the company is "quietly confident" that it will be granted, given the importance of London to the UK's efforts to decarbonise power. "If you look at the carbon intensity map of Great Britain, London stands out hugely," he says. "The project supports customers, we have the backing of the mayor and local government, and it supports central government's low-carbon transition plan and renewable energy strategy ...That's a very powerful proposition."

Whether Ofgem's Dragons agree remains to be seen.