EVALUATION

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AN INDEPENDENT <strong>EVALUATION</strong> OF THE LCNF Figure 10 – Estimated number of innovation initiatives per category 40 35 30 25 Tier 1 Tier 2 Number of Innovations 20 15 10 5 0 4.3.2 Potential for business as usual Whilst the definition of innovation includes the requirement for improved performance of the company, the criteria on which the LCNF projects were initially assessed and approved by Ofgem included the wider benefit to customers. As part of our evaluation we have observed that one of the ‘innovation initiatives’ – ‘DG Connection’ – has, to date, consistently been successful in achieving roll-out into business as usual (BAU) 44 . For many of these projects, the DG customers have benefitted from lower costs to connect to the distribution network, and hence access operational revenue. There are also benefits to GB that arise from the displacement of carbon intense electricity generation 45 . It is noted that, in many cases prior to LCNF, connecting DG, based on conventional techniques, often required relatively expensive direct inter-trip schemes or major network reinforcement – often leading to a prohibitively expensive connection price to the DG proponent. Many schemes only progressed to connection due to innovative initiatives supported by LCNF. As a result of the connection of distributed generation at all distribution voltage levels power flows, voltage profiles and demand profiles have changed and this is being managed by the DNOs and a number of the innovation initiatives have helped facilitate this. 44 45 In this report BAU is defined as an initiative which has transitioned into the daily business practice or consideration of the DNO thus realising greater benefits than demonstrated by the project alone. Some initiatives are defined as being ready for BAU once the energy landscape requires them because there is no current business case for adopting them immediately into BAU. Further discussion on LCNF ‘benefits’, including those that fall outside of the DNOs, can be found in 5.3.2. PÖYRY MANAGEMENT CONSULTING October 2016 713_Poyry_Report_Evaluation_of_the_LCNF_FINAL_Oct_2016_v700.docx 54
AN INDEPENDENT <strong>EVALUATION</strong> OF THE LCNF There is evidence that valuable learning has occurred across the portfolio of projects we have assessed, but the status of the network or the demand is not such that the innovation initiative is required in business as usual at the present time. For example, the investigations into primary substation voltage reduction identified that demand could be reduced without any impact on the downstream customers; the managed electric vehicle charging initiative showed that consumers are prepared to flex their EV demand and that primary and distribution substation storage can assist with management of congested networks. There is significant present uncertainty about the change in the demand that the networks will experience in the future due to the decarbonisation of transport and heat. Benefits from LCNF projects that address increasing demand can be directly attributed to the DNO in relation to deferred expenditure in asset replacement or asset expansion (i.e. reinforcement and augmentation). Benefits can also flow to the customer through lower energy bills associated with demand management and energy efficiency. Hence, from the perspective of successful transfer of innovation to BAU, we have categorised the projects into three groups: 1. new innovation initiative with BAU potential identified now; 2. new innovation initiative that is likely to contribute to a BAU innovative solution when required due to the take up of LCTs; and 3. initiatives that have contributed to learning, but where significant further work is necessary before a BAU solution is successfully developed and implemented. The University of Strathclyde assessment 16 considers the evidence for whether or not the Tier 2 innovation initiatives are sufficiently developed to be deployed where appropriate. The approach uses a scale of -4 to +4; where -4 represents strong evidence against deployment and +4 represents strong evidence for deployment. This assessment criteria is used in our financial benefit assessment considered further in Section 5. Our categorisation of the innovation incentives into the three groups identified above is based on: • the DNO submissions which assigned current and future benefits to the projects; • our project assessments; and • the recent academic assessment 16 for completed Tier 2 projects and the methodology applied to the remaining Tier 2 projects and the Tier 1 projects. Table 12 illustrates the split between the number of innovation initiatives from the Tier 1 and Tier 2 projects and the timescale in which they are likely to be deployed; just under 40% of initiatives are suitable for deployment into business as usual now; just over 40% of initiatives should contribute once the energy landscape requires them and just over 20% of the initiatives have contributed to learning but further work would be needed to obtain a business as usual solution. This is broken down by Tier 1 and Tier 2 projects Table 12 from which it can be seen the contribution of the initiatives for both Tier 1 and Tier 2 projects is similar. The overall allocation is summarised in Figure 11. PÖYRY MANAGEMENT CONSULTING October 2016 713_Poyry_Report_Evaluation_of_the_LCNF_FINAL_Oct_2016_v700.docx 55
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EVALUATION

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