In short
Distribution networks were built for power flowing one way, from big power stations to homes. Now they carry rooftop solar, batteries, heat pumps and EV chargers, and power flows both ways. Distribution system operation (DSO) means managing those flows actively instead of only building more cables. A big part of it is flexibility: paying customers to shift or reduce demand, or change their output, when the local network is under strain.
From DNO to DSO
A distribution network operator (DNO) owns and maintains the network. A distribution system operator also:
- forecasts how power will flow on the network, down to individual substations;
- buys flexibility to manage constraints, where it is cheaper than reinforcement or buys time until reinforcement is built;
- coordinates with NESO, so local actions don't cut across national balancing;
- publishes network data so others can see where capacity and flexibility are needed.
Under RIIO-ED2, every DNO has had to separate its DSO function from its network ownership role, with its own governance, and Ofgem measures and rewards DSO performance through a specific incentive.
What flexibility is
Flexibility is a change to a customer's normal import or export in response to a signal. It can come from:
- batteries, large and small;
- EV chargers and fleets that shift charging;
- heat pumps and storage heaters that pre-heat;
- industrial and commercial sites that can turn processes down;
- generators that can turn up or down.
Smaller assets are usually grouped by an aggregator, which bids their combined flexibility into a market.
How local flexibility markets work
DNOs tender for flexibility in specific places and times where they expect constraints. Through the Energy Networks Association's Open Networks programme, the DNOs agreed common products so providers don't face a different design in every area. The main ones are:
- Sustain: scheduled in advance, to keep peak demand below a limit.
- Secure: booked in advance, then called when needed, to manage expected peaks.
- Dynamic: used after a fault, to support the network while it's running with less capacity.
- Restore: used to help reconnect customers after a power cut.
Tenders and trades are run on flexibility platforms, and payment is usually for availability (being ready), utilisation (actually delivering), or both.
The market facilitator
Flexibility markets grew up separately in each DNO area and alongside NESO's national markets, which made them hard for providers to join and stack. Ofgem decided to create a single market facilitator to set common rules, processes and standards across local flexibility markets, and chose Elexon for the role. Its work covers things like common qualification, contracts and settlement, and how local and national markets coordinate.
Local and national flexibility
NESO also buys flexibility at national level, through the Balancing Mechanism, frequency response, reserve and schemes such as the Demand Flexibility Service. The same battery or EV fleet may be able to serve both local and national needs. Avoiding conflicts, where one market asks an asset to turn up while the other asks it to turn down, is one reason coordination between DSOs and NESO matters.
Flexible connections
Flexibility also works the other way round. Instead of the DNO paying the customer, the customer accepts a flexible connection: they connect sooner or for less, but their import or export can be curtailed when the network is constrained. DNOs use active network management systems to do this automatically. For many solar, battery and EV charging projects, a flexible connection is now the quickest route on to the network. See getting a grid connection.
What's changing
- DSO performance and flexibility will be central to RIIO-ED3.
- NESO's Regional Energy Strategic Plans will shape where local flexibility and reinforcement are needed.
- Smart meters, half-hourly settlement and smart appliances will make household flexibility easier to use.
- There is continuing debate over whether DSO functions should be fully independent from DNOs.
Sources
Based on Ofgem's DSO and market facilitator decisions, the ENA Open Networks programme and DNO flexibility publications. Follow DSO and flexibility for current tenders and decisions.
Follow the news
Latest stories on DSO & Flexibility, Battery Storage, RIIO Price Controls. For terms, see the glossary; for key dates, the policy timeline.