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Trends in the Distribution Grid - New Year, New Grid? What Does 2021 Hold for DSOS?

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Michael De Vivo's picture
CEO & Founder Depsys

Engineer in power electronics, specialized in electrical grids, namely in monitoring and control systems for low-voltage networks. Experienced in research, analysis, development and...

  • Member since 2021
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  • Feb 9, 2021 4:26 am GMT
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This item is part of the Special Issue - 2021-01 - State of the Industry, click here for more

2020 – what a year! The beginning of each new year is an invitation to reflect over the past twelve months. But this new leaf is peculiar because it's hard to recall a January that feels so different from the previous year. 

And that's as true in power distribution as in any other professional sphere. We're amidst an industry that has a reputation for being slow to change. But in many ways, 2021 feels like a turning point. Even if you put aside the hope of COVID-19 vaccines for the moment, there are reasons to be cautiously optimistic about what this year holds.  

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So, what did 2020 tell us about distribution system operation and what changed? Which of these changes were the natural result of long-term trends? And which ones are the result of the unique events of 2020? And, given all that, what can we expect (and hope) for 2021?   

Momentum maintained   

As a whole, the power industry can be proud that the pandemic never stopped the sector fulfilling its responsibilities. The lights did not go out, even when workforces were forced to relocate to their kitchen tables. Nor when they were juggling the challenges of being short-staffed due to sickness or self-isolation.   

Not only did the sector keep the electrons flowing during these challenges, but it also maintained its forward momentum: the energy transition never halted. Electric vehicles (EVs) continued to win market share, solar photovoltaic panels continued to be installed, and DSOs continued to work on and execute their digitalisation plans. Although world leaders had to call off COP26, engineers and programmers on the ground rethinking the energy system carried on much as before.  

When I spoke to DSOs seven or eight years ago, these trends could not be taken for granted. You had to make the case that the energy transition and digitalisation were coming, that EVs would take off before you could start a conversation on what those plans might be.  

Go back just two or three years ago, and those arguments were generally accepted but still often seen as a problem for the future. Then, came 2020, a turning point for all but the most old-fashioned DSOs who embrace the direction of travel and a need to plan.  

That said, some are further ahead than others. From our vantage point, we can categorise DSOs into approximately four categories. Grid operators who have: 

  1. A strategic vision and digital ambition but low capabilities to execute it.  
  2. A strategic vision and digital ambition with high capabilities to execute it.  
  3. A more tactical, ad hoc approach and with low capabilities.  
  4. A more tactical, ad hoc approach and with high capabilities.   

Based on this understanding, we can track progress on two metrics: movement from a tactical to a strategic approach to the energy transition, and degree of digitalisationYou could also say that it's a conscious shift from a reactive to a proactive approach, driving the need to evolve execution capabilities from low to high.   

High capabilities encompass a lot, from available capital to invest in the organisation's skills, to more nebulous things like effective leadership and processes. It's easy to imagine how the coronavirus pandemic and its economic fallout in 2020 could have distracted DSOs from these initiatives.  

However, what we have unambiguously seen is an accelerated trend towards strategic thinking. We've seen utilities take more steps, more quickly to move from Category 4 to Category 2, and from Category 3 to Category 1. This was already the direction of travel, but this year has seen a step-change. Why might that be?  

The 2020 factor  

We have already noted that part of the pressure for more significant strategic planning comes from long-term trends: EVs, PV and so on. We can also add that, with each year, the new graduate entrants into the workforce bring more digital skills and expectations into the sector. However, 2020 undoubtedly added yet another catalyst.  

Why would 2020 specifically have made DSOs look more closely at strategic digitalisation?

There are a few reasons. First, operational. The pandemic has forced us to rely more on remote working. In turn, this has reduced utilities' ability to monitor and maintain their networks using a small army of field engineers. Instead of sending people to seek the data and information, by physically finding the source of a problem, you need to send the data and information to your people, at their kitchen tables! 

To make this transition possible, you need a more digital, transparent grid. It means sensors collecting data throughout the distribution grid at both medium- and low-voltage (MV/LV) levels, which is traditionally only done at MV level, and at best only sparingly due to cost. It then requires advanced analytics to make sense of the data collected from afar, without the luxury of extensive physical inspection.    

Secondly, there are economic reasons for increased digital grid planning. Most DSOs are publicly funded and maybe anticipating tighter budgets when the pandemic eventually subsides. Though it may seem counterintuitive to spend on digitalisation, that's only the case if you compare with investing in nothing.  Which is unrealistic.

As Leonhard Birnbaum, the incoming CEO at E.ON said at a recent Eurelectric's webinar about investing in the future of our grids to power the energy transition: "Invest now or regret later" as under-investing will ultimately be more expensive than over-investing. 

DSOs are always having to make investments in anticipation and respond to grid issues. Typically, this takes the form of grid reinforcement: adding new cables, transformers etc. to bolster the distribution grid where there are concerns over capacity or faults. However, laying down copper is incredibly expensive, and utilities are almost certainly over-spending as they're obliged to take a 'better safe than sorry' approach whenever there are question marks.   

And this is where transparency and digitalisation can help DSOs, by removing those question marks so that the utility only spends on reinforcement when it's essential, hence saving money in the long run while still improving performance.   

2021: hopes and expectations   

So, what next? My wish is twofold. I sincerely hope and expect that we will continue to see the utility operations shift from tactical to strategic approaches. Those acting tactically now will begin to put in place their strategies.  

Those already taking strategic approaches will refine them based on early findings and better data. In that respect, the energy transition genie is out of the bottle. And there is no putting it back in. However, there's still plenty of work to be done on the other metric: the DSO's capability to implement the strategies.  

There's been good progress on this front, but some significant hurdles remain. For example, the budgetary and governance models of many DSOs create a built-in bias towards capital expenditure (CAPEX) over operational expenditure (OPEX). This way of working is an approach of the past. And we all know that what worked well in the past doesn't guarantee success in the future. However, software and solution-based investments are ongoing initiatives and more typically made using OPEX budgets.   

This inherent balance needs to be addressed promptly to free DSOs to pursue strategic digital initiatives. However, the problem for publicly funded and regulated bodies is that change can take a long-time. In most countries, regulations typically move at a five-year cycle. 

So, things are changing, but not at a speed that matches the urgency of the energy transition. My hope for 2021 is that the energy industry collectively finds ways to accelerate this process.   

So, what did 2020 teach us about the power distribution sector? 

It taught us that our utilities are resilient and capable; that strategic digitalisation is more important than ever and that utilities recognise this. But what does this mean for 2021? Change will continue apace, but we must remove the barriers that are slowing down progress. I hope and expect that we can do so together.  

Michael De Vivo's picture
Thank Michael for the Post!
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