SSEN announces a new cost-effective approach to delivering a smart, low-carbon energy system

Scottish and Southern Electricity Networks (SSEN) has today published a paper outlining a new tool, developed by Frontier Economics, that compares the cost of flexibility services with network reinforcement, to support the delivery of a smart, low-carbon energy system. The new tool will assess the benefit of ‘optionality’ in avoiding network reinforcement through utilising flexible resources including low-carbon technologies. The paper describes the approach the tool uses.

The proliferation of low-carbon technologies and solutions is creating new opportunities for management of the energy system. SSEN’s priority is to act as a neutral market facilitator, so all participants can be certain of a fair, transparent market. By outlining how the tool will be applied, SSEN is helping households, businesses and communities that may consider participating in flexibility markets to understand how options for accommodating demand growth on the network are assessed. To read the paper describing the tool’s approach, click here.

In the future, less predictable patterns of electricity supply and demand could mean that using a flexible resource to resolve a network constraint may in some instances deliver better value to consumers than investing in traditional network reinforcement. For this reason, SSEN prioritises flexibility first when considering areas of constraint on its network. Flexibility also offers local communities the opportunity to engage with the electricity network and help to balance their local grid, whilst earning money. Unlike traditional network reinforcement, if the cause of the network constraint changes, the network operator can choose not to extend the flexibility contracts, thereby ensuring long-term value for customers.

The tool developed by Frontier Economics will help SSEN to determine the optimal decision for resolving a network constraint, taking into consideration the ‘optionality’ that flexibility provides. This is part of a broader strategic approach to help address uncertainties in investment decision-making frameworks. Addressing these issues is a key part of ensuring the cost-effective net zero transformation of energy and transport. To this end SSEN is also working with Imperial College to provide quantitative evidence to industry stakeholders and policymakers related to the new role of electricity networks in supporting decarbonisation through the electrification of the transport sector.

Recognising the demands that a smart, low-carbon and interactive energy system will place upon network operators, SSEN has committed to transition from operating as a Distribution Network Operator (DNO) to become a Distribution System Operator (DSO). This will allow our business to accommodate the changes that will enable net zero, putting customers and communities at the heart of the process and ensuring best value for money.

SSEN’s flexibility portfolio currently includes contracts worth 6MW that were placed on the Isle of Islay earlier this year, which have already had the carbon reduction equivalent of powering half a million homes for a week. This demonstrates SSEN’s commitment to flexibility first: to adopt the lowest carbon, most economic approach to managing the network in the communities it serves. 

Andrew Roper, DSO Director for SSEN said:

“Acting as a neutral market facilitator is critical to SSEN successfully operating as a DSO. Customers and industry need to be confident of a level playing field and by going to a third party to devise this methodology we are ensuring that neutrality will be embedded in our decision-making process.

“This tool will help SSEN to make better decisions over long time horizons, factoring in the costs and benefits of different approaches and considering what will be most beneficial for the communities we serve.”

Dan Roberts, Director at Frontier Economics said:

“By imposing a structure on the decision-making process, the framework allows the decision-maker to think about the key factors which influence the best solution for the network. The tool can help identify the best solution given a set of assumptions about the future and can also help to establish how sensitive this conclusion is to changes in those assumptions. It will hopefully serve as a key part of SSEN’s decision making process.”

To read our paper describing how the tool compares the cost of flexibility with network reinforcement, click here.

To learn more about SSEN’s transition from DNO to DSO, click here.