Smart Grid Forum - Update DCMF Meeting – 7 February 2013 Gareth Evans Head of Profession – Engineering Ofgem

2 The Smart Grids Forum Key Aims Bring together key opinion formers, experts and stakeholders in the development of GB smart grids Provide strategic input to help shape Ofgem’s and DECC’s thinking and leadership in this area Help provide the network companies with a common focus in addressing future networks challenges The Forum will focus on the role that the electricity network will play, both technically and commercially, in the low carbon transition *Paraphrased from full Terms of Reference

3 Smart Grids Forum Established April members (excluding Ofgem and DECC), all key stakeholder groups represented 5 initial work streams –WS1 - Scenarios & Assumptions –WS2 - Smart Grid Evaluation Framework – work completed –WS3 - Developing Networks for Low Carbon –WS4 - ‘Closing Doors’ –WS5 - Ways of Working WS6 – Commercial & Regulatory – established in year 2 All meeting minutes and reports published on the Ofgem website

The Smart Grids Forum – WS1, 2 & 3

5 Task 1 – to establish the benefits of smart grid solutions using an agreed view of the future and the likely network solutions WS1 Data & Assumptions WS2 Evaluation WS3 Network Solutions Carbon Plan WS3 Further Evaluation RIIO-ED1 DECC Ofgem DNOs

6 To develop a set of credible assumptions and scenarios to build consensus on demand networks are likely to meet to The Forum agreed that demand assumptions and scenarios should be centred on DECC pathways to meet the Fourth Carbon Budget ( ). WS1 worked with policy teams in DECC and OLEV to agree data/analysis from the Carbon Plan work that can be used as inputs. This allowed us to provide rich data, including projections from now to 2030 of the uptake of technologies that can impact significantly on electricity distribution networks (electric vehicles, heat pumps, solar PV). These provided input to other Forum workstreams. Source - DECC WS1

7 WS3 – Developing networks for low carbon 7 The WS has produced a qualitative view of the responses to a 2030 future characterized by significant decarbonisation on a trajectory to 2050, with implications for 2020 Report available on the SGF website WS now taking the WS2 modelling forward in more detail and will provide quantitative results very soon WS3

8 Smart Grids Evaluation Framework These INITIAL results suggested that:  Smart grid solutions are likely to benefit customers as we develop our distribution networks toward 2050  More analysis is required to establish when it would be most cost effective to commence the widespread deployment of smart solutions The framework is valuable in helping us to better understand what drives the value of smart grids and which planning assumptions we should focus on to improve the outputs The goal is to get a common understanding between all key stakeholders before the DNOs submit their RIIO-ED1 business plans WS2

The Smart Grids Forum – WS4

10 WS4 – “Closing Doors” The SGF established this work stream in recognition of the risk that short term policy decisions could close off longer term opportunities. The main focus for the work stream has been the interaction between the smart metering programme and the development of smart grids. It has acted as a catalyst for discussions between DECC, the DNOs, the Institution of Engineering and Technology (IET) and SGF members. In particular, it has helped the debate about smart meter functionality in the context of network operation and the required performance of the communications infrastructure. WS4

The Smart Grids Forum – WS5

12 WS5 – Ways of Working This work stream is considering how the SGF can best pursue its objectives and communicate effectively with stakeholders. The Energy Networks Association (ENA) and Smart Grids GB are jointly developing a programme of activities to make the work of the SGF and its key stakeholders as visible to interested stakeholders as possible. In particular, the ENA is committed to helping the DNOs to share the considerable learning that is being generated by the Low Carbon Networks Fund projects. A new web portal will link the ENA, Smart Grids GB and academia. We will announce more developments about this soon via the SGF website. WS5

Year 2 Work Programme

14 Year 2 Programme WS1 – Align the Forum with material changes in the assumptions and scenarios that could impact network investment decisions; ensure the overall coherence across the Forum’s activities WS2 – Work completed WS3 – Agree a common methodology for the assessment of smart network development opportunities that can be used by all the DNOs and Ofgem in the price control process WS4 – Continue in its role to identify near-term issues that could affect longer-term ambitions WS5 – Work progressing to provide user-friendly web-based access to information on smart grid developments, including LCNF, industry and academia WS6 – New WS to consider the Regulatory & Commercial impacts of smart grid deployment underway

15 Confirms WS2 conclusion that a smart strategy is likely to be lower cost than BAU Clustering will be an important factor Material expenditure related to low carbon developments will not ramp up until ED2 Investment is likely to be needed in RIIO-ED1, to set an achievable path for subsequent years Stakeholders will need to be engaged in delivering the solutions needed Provides modelling tool for DNOs in RIIO-ED1 World-leading work

The Smart Grids Forum – WS6

17 WS6 – Report published 31 August 2012 “Not a huge number of regulatory barriers to DNOs implementing smart grid solutions” “The main ones centre on engineering recommendations and charging methodologies...” “Lack of commercial enablers to support smart grid solutions” - particularly where DNOs are required to interact with parties outside the usual value chain The trialling of such arrangements can provide an invaluable insight into what these enablers need to look like. The work stream has gleaned some important lessons from ongoing LCN Fund trials and considers that there is more to be learnt as these projects mature and run to conclusion.

Year 3 Work Programme

19 Year 3 Programme Currently under discussion - will be agreed at April meeting Objective is to continue to pursue a coherent programme of work but now looking beyond the current price control process, ED1 (i.e. beyond 2015) Work of the current work streams is being reviewed to ensure that it is of value and has clear deliverables New work is being considered in two areas: –DECC and Ofgem, with input from interested SGF members, should develop a common view on the proposed refresh of the Routemap including timing and resourcing –Ofgem will lead an ad hoc group to develop a proposal for work on system operation issues. This group will take account of the potential future work of the IET and bring a proposal to the SGF as to how it should engage in this area.

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