The birth of the DSOs – a turning point

2023 was a big year for power distribution. It included the start of the RIIO ED2 price control and, for the first time, formal recognition of the new, distinct, Distribution System Operator (DSO) functions established in various guises by the network operators.

Unlike asset-focused operations, DSOs have specific roles and responsibilities which are focused on supporting the cost-effective transformation of the energy system for a net zero future. These core roles have been set out by Ofgem and include:

The provision of enhanced planning and development capabilities which support positive whole system outcomes
The advancement of flexible network operation by making more operational network data available and facilitating efficient dispatch of flexibility services
Development of flexibility markets by finding new ways to present transparent market information and introducing fair, consistent rules and processes for flexibility procurement
Defining these activities marked a “turning point” for the energy industry says SSEN’s DSO director, Andrew Roper.

“Demand on the networks had been going down in recent years due to increasing energy efficiency,” he reflects. “But as we decarbonise heat and transport we need to have the available capacity to accommodate that load growth and support decarbonisation. This is the fundamental role of the DSO, to work in partnership with others to optimise our network and facilitate that load growth through flexibility services and strategic investment.”

Marcia Poletti, head of European system change at Octopus Energy – whose pioneering development of opportunities for consumer participation in demand side response markets make it a key stakeholder for any DSO, likewise describes their establishment as “essential”.

“Conceptually, setting up these entities which are independent of the monopoly infrastructure organisations and tasking them with driving new, flexible, digitally enabled capability to support the development of markets and understand what flexibility markets need – it was an essential step,” she observes. (Read more from Marcia Poletti in the Stakeholder view [link to Stakeholder view chapter] chapter of this report.)

But although all DSOs are seeking to fulfill the same roles within their license areas, it has been interesting to see some considerable variation in the way these have been interpreted by different networks. Nuances here have led to a range of different organisational structures and strategies.

At SSEN, Roper says “it is all about decarbonisation – and delivering that it a way that complements economic opportunity in our communities.

“To deliver decarbonisation by 2050 we need to at least double the capacity of the network by 2035. The way we see it, our DSO has three main levers it can pull to support that outcome. Those are: strategic investment, flexibility services and accelerated connections.”

Unpacking these facets to SSEN’s DSO strategy in more detail, Roper continues: “We’ve brought these things together in what we feel is a unique way in SSEN’s DSO. By advancing flexible connections we are enabling people to get connected to the networks sooner. But we can only keep doing this if the capacity is available. That’s where our strategic investment role comes in.

“In addition to using flexibility services to manage capacity in a dynamic way, we’ve also developed a strong system planning capability which allows us to bring together flexibility services with strategic investment so we can really understand our potential to get people connected in a way that supports economic growth. We’re taking responsibility for understanding the whole system impact of our investment decisions and deferrals. We feel this differs from other DSOs which have focussed more heavily on the flexibility services element of the DSO roles defined by Ofgem.”

The three facets of DSO responsibility according the SSEN.

Building capability

In part, the foundation for a strong, strategic system planning function in SSEN’s DSO is based in its business model. Different approaches have been taken across the industry to establishing the necessary independence of function for DSO, with UK Power Networks going as far as establishing an entirely separate subsidiary organisation.

At SSEN, distinct reporting and accountability lines ensure independent decision making, but there is also a strong “connecting tissue” between the DSO and the legacy network business which supports access to the right data and insights for effective system planning, says Roper.

But there’s been a lot more to building the necessary capabilities to deliver on its ambitious DSO vision than getting the business architecture right. A key concern has been getting the necessary quality and volume of power system analysis talent in place.

To tackle this challenge head on, SSEN partnered with Oxford University to develop a bespoke top course for newly qualified engineers, mathematicians and scientists which fast tracked them into power system analyst roles.

The initiative allowed SSEN to add 26 new power system analysts to its ranks in its first year – among a total of 40 new staff to join the function since the start of RIIO ED2, a personnel uplift of 30%.

The Oxford University partnership is considered to have ben resounding success in the business, providing a rapid solution to pressing skills constraints and providing a firm career footing for new engineering graduates in a challenging economic environment. Roper says recruits are helped to see and pursue an attractive road for career progression on joining, and that the first cohort to emerge from the top up course have established valuable bonds as a peer group that have helped them bed in and make an impact in the business.

The University top up scheme will be repeated again in 2024 adding yet more essential resources to a business with a daunting to do list. “So far, the Oxford University scheme has allowed us to double our resource for intelligent assessment of connections application and system planning,” says Roper. “We need these skills to deliver what is needed.”

While this swelling of the DSO’s ranks continues for key entry level analyst roles, SSEN is also keenly aware of the need to ensure it has suitable oversight of the way it pursues its DSO goals – including via an advisory board with suitably diverse representation and expertise. The DSO is currently in the process of recruiting this new board and Roper says it has been overwhelmed with the volume of high calibre applications – over 300 have been submitted.

With the right infrastructure and talent building out, a number of big milestone achievements already under its belt and some significant plans for 2024 (as we cover in the Making an impact and Next steps chapters of this report) Roper is optimistic that SSEN’s DSO will achieve highly in Ofgem’s first assessment of DSO performance, which will take place over several months later this year.

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