Scottish and Southern Electricity Networks (SSEN) Distribution today publishes its first Distribution System Operator (DSO) Action Plan, which sets out its plans to accelerate the delivery of DSO services to benefit customers, communities and market participants.
The journey to net zero is well underway and SSEN is committed to taking action to decarbonise society in a way that leaves no person or community behind. The DSO functionality being embedded within our network will ensure sufficient system capacity is available to incorporate the low carbon technologies and services that will support a fair transition. Over the next price control period (2023-2028), SSEN will grow investment in its DSO capability by over £73m.
The DSO Action Plan sets out the flexibility products, markets and connections, that will help customers build their understanding of the opportunities ahead and their ability to engage. Using the Plan, stakeholders can build a customised profile of how SSEN’s DSO offerings can support their objectives. By developing DSO functionality, SSEN expects to deliver over £460m of benefits through deferred reinforcement and avoided capital expenditure over our next price control period.
Framed around three core DSO functions, forecasting and planning future needs; developing a flexibility marketplace; and delivering network flexibility, the DSO Action Plan will cover an initial two-year period, with a dedicated online portal to track progress against key commitments and metrics, including for subsequent years.
Andrew Roper, DSO Director at SSEN said:
“We have ambitious plans to build our DSO capabilities in the years ahead and deliver the smart, flexible system that will be fundamental to achieving a just transition to net zero. By 2028, we aim to procure at least 5GW of flexibility, grow our flexible connections to 3.7GW of capacity and avoid over £460m of reinforcement costs.
“At SSEN, we are fully committed to getting on with the job of delivering DSO and our DSO Action Plan will be a key portal through which our customers can track our progress and engage with the energy system of the future. This will be supported by an enhanced governance structure with a dedicated DSO function, driving optimal co-ordination with network users and enabling agile decision making.
“As our DSO journey continues, we will continue to engage with market participants, industry stakeholders and policy makers to help further shape our Action Plan, whilst always putting the communities that we serve, first.”
In establishing its DSO governance framework SSEN commissioned a review of options for potential governance models from economic consultancy, NERA. The independent report assessed costs, benefits and overall economic impact, concluding that any form of DSO separation beyond ring-fencing would be likely to lead to negative net effects, because the costs of separation or ownership unbundling would exceed the anticipated savings that could potentially be available to DNOs. The report also cautions that legal separation of the DSO functions could jeopardise the UK’s net zero goals.
Richard Druce, Managing Director at NERA Economic Consulting said:
“The NERA team’s research shows that enforcing the legal separation of the DSO from the rest of the integrated DNO business would impose substantial costs on customers to create and operate separate businesses and may interfere with the objective of achieving net zero by absorbing substantial time and resources.
“Despite these large costs, there is currently little evidence of a need for this separation to ensure a level playing field between traditional network solutions delivered by DNOs and alternative flexibility services procured from third parties. We therefore recommend Ofgem adopts more limited ringfencing rules, which would be less costly for customers, provide reassurance to flexibility providers as the market develops, and leave open the option for Ofgem to adopt more stringent business separation rules later if evidence emerges that they are required.”
Visit the DSO Action Plan here.
Read the NERA report in full here.