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Unlocking the Grid: Challenge and Opportunity in the UK Energy Industry

The nature of energy generation and distribution is changing from a one-way process, with supply going from producer to the consumer, to a more distributed network where individuals and businesses are no longer simply consumers: they have the means to produce and supply power to the grid themselves.

This has significant implications for the UK’s power generation and distribution industry as Distributed Energy Resources (DER), such as solar and wind power, change the way the grid operates. The system of the future will be less about transmitting power from a central source and more about the local management and balancing of generation, supply, demand and storage.

As a result the organisations and infrastructure needed to handle the UK’s energy market need to change, with smaller Distribution System Operators (DSO) handling disparate sources of energy generation. In a move away from today’s much larger Distribution Network Operators (DNO) the DSOs will operate with a more local focus, facilitating a market of multiple, small scale generators as well as remaining accountable for local demand balancing. The future DSO will need to understand and operate a Smart Grid to maximum effectiveness and create and manage contractual and commercial relationships.

Faced with this fundamental change, today’s DNOs must begin the transformation to a DSO over the next two years, developing the functionality and culture required to exploit the opportunity to grow and increase margin. This includes moving towards a substantially Smart Grid and preparing to enter RIIO2 as a DSO, with a robust business model and a platform to influence the regulatory framework that will oversee the new environment.

If existing DNOs do not act they will be vulnerable to new and disruptive organisations that are ready to enter the market. Change needs to start now.