EVALUATION

AN INDEPENDENT EVALUATION OF THE LCNF
assessment, we have focussed on identifying who will be the primary beneficiary based
on the type of innovation associated with the project. This categorisation is shown in
Table 18. There are a number of benefits exogenous to the DNO – such as those
delivered by the connection of DG, while there are other benefits that can lead to a direct
cost saving for the DNO – such as improvements in network configuration, which can help
avoid the need for costly augmentation or can improve the effectiveness and efficiency of
network operations.
For simplicity we have categorised the benefits in terms of the primary beneficiary – either
‘DNO’ or ‘Other Market Participants’. Ultimately we would expect that these benefits
would accrue to end consumers either directly through reduced Distribution Use of
System (DUoS) charges 57 (in their final bill) or indirectly through a reduction in the level of
CO2 emissions being produced.
Table 18 – Primary beneficiary of the innovation project
Innovation categories
Voltage control
Visibility
Network configuration
Large-scale storage
Flexible demand
Fault-level management
DG connection
Asset rating
Primary beneficiary (DNO or Other)
DNO
DNO
DNO
Other Market Participants
DNO
DNO
Other Market Participants
DNO
The results of this assessment are presented in Figure 30. This chart presents the
estimated split of benefits between ‘DNOs’ and ‘Other Market Participants’ alongside the
probability of the innovation being adopted into BAU. This probability assessment draws
on the analysis presented in a recent academic report on the outcomes of LCNF
projects 16 .
The results show that approximately 55% (approximately £960 million 58 ) of the estimated
benefits will accrue outside of the DNOs. In addition, for those projects which are the
most likely to be incorporated into BAU (e.g. probability categories 4 and 3) the per cent of
benefits accruing outside the DNO is approximately 70%. This reaffirms our assessment
57
58
The RIIO-ED1 framework aims to incentivise innovation to deliver improvements in defined
outputs and provides for a sharing of any out-performance benefits between customers
(though a future reduction in charges) and the DNO (through revenue adjustments). The
sharing ratio is based on the quality of the DNO Business Plan submissions.
The equivalent figures for the upper range of estimated benefits are approximately 40% and
£980 million.
PÖYRY MANAGEMENT CONSULTING
October 2016
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