ED3: a critical juncture for distribution networks

Looking beyond the current regulatory period, the next electricity distribution price control, RIIO-ED3, is widely expected to represent a turning point in how distribution networks are planned, operated and regulated, marking the moment when the sector must move decisively from incremental adaptation toward the full-scale transformation required to support a deeply electrified energy system.

While ED2 has largely been focused on enabling the early stages of electrification and strengthening the operational foundations of the DSO role, ED3 is increasingly seen as the period in which distribution networks must further accelerate the delivery of the infrastructure, digital capabilities and market frameworks required for a future energy system built around clean electricity.

As Akshay Kaul, Director General Infrastructure at Ofgem, has emphasised, the ED3 price control period will be a “critical juncture on the pathway to a clean power system by 2030.” From a system operator perspective, the challenge is ensuring that national planning aligns with local infrastructure. “Distribution networks will increasingly play a crucial role in connecting national system planning with what actually happens on the ground,” one system planning specialist says.

“[The ED3 price control period will be a] “critical juncture on the pathway to a clean power system by 2030.”

Akshay Kaul, Director General Infrastructure, Ofgem

This emphasis on long-term planning reflects a growing recognition that the infrastructure required to support electrification cannot be delivered through reactive reinforcement alone. Instead, distribution networks will need to adopt a far more proactive approach to system design, identifying where demand for low-carbon technologies is likely to emerge and investing in infrastructure ahead of time in order to ensure that connections can be delivered quickly and predictably. SSEN points to its publication and commitment to update annually its Strategic Development Plans, together with its Distribution Future Energy Scenarios (DFES) process which underpins these plans, as evidence of its proactive approach to future network planning. The LENZA tool has also been an important part of SSEN’s proactive approach to system design and its commitment to helping local authorities with their plans for decarbonisation. One senior councillor in SSEN’s southern network area described LENZA’s capabilities as a “gamechanger” in their county’s journey to becoming carbon neutral.

Such an approach represents a significant shift from the traditional model of network investment, which has historically been driven by demonstrated demand rather than anticipated change. In a future energy system shaped by rapid electrification, waiting for connection requests to materialise before upgrading infrastructure risks creating bottlenecks precisely at the moment when policy objectives require acceleration. For this reason, many stakeholders argue that ED3 must enable networks to move beyond the ‘fit and forget’ approach that has historically characterised parts of the sector, replacing it with a more dynamic model of system planning that reflects the growing complexity of the electricity system.

Alongside this shift toward anticipatory investment, the role of the distribution system operator is also expected to evolve further during the ED3 period. As distributed energy resources such as rooftop solar, batteries and electric vehicles become more widespread, the electricity system will increasingly depend on the ability of networks to coordinate how these resources interact with the grid. “If networks wait for connection requests before investing, we risk creating bottlenecks just when electrification needs to accelerate,” says one energy infrastructure adviser at a policy think tank. SSEN’s experts are sympathetic to this concern, and it’s one reason why its focused so much time and efforts in developing its DFES process with its partners at Regen. The DFES takes forward key insights from stakeholders themselves when predicting communities’ anticipated network needs. This work informs strategic plans for network development that are fit-for-purpose.

Flexibility is expected to play an important role in enabling this coordination. By allowing electricity demand to shift away from peak periods or by enabling distributed assets to support the grid during periods of high demand, flexibility services can help reduce pressure on local infrastructure while making better use of existing network capacity.

“If networks wait for connection requests before investing, we risk creating bottlenecks just when electrification needs to accelerate.”

Energy infrastructure adviser

Yet industry experts caution that flexibility should be seen as one component of a broader system solution rather than a substitute for investment in physical infrastructure. As one market representative observes, “flexibility cannot be the only business case,” highlighting the importance of ensuring that the economics of electrification technologies are not dependent solely on participation in flexibility markets.

There are also questions about how flexibility markets should evolve to support a fair and efficient energy transition. If incentives vary significantly between locations, households in constrained areas could receive different signals than those elsewhere, raising concerns about the potential for geographic disparities in the benefits of electrification.

Ensuring that flexibility markets operate transparently and deliver value for consumers will therefore be an important consideration as these mechanisms develop.

At the same time, ED3 is likely to place increasing emphasis on the importance of data and digitalisation as foundational elements of the future electricity system. As millions of distributed devices connect to the grid, the ability to monitor network conditions in real time and coordinate resources dynamically will become essential for maintaining system stability.

This digital transformation will require substantial investment in monitoring infrastructure, data platforms and operational systems capable of processing vast quantities of information. Yet it also represents a significant opportunity for distribution networks to unlock new forms of system efficiency, enabling the grid to operate more intelligently and respond more effectively to changing patterns of demand and generation.

“The industry is moving from responding to demand towards actively shaping how the system develops.”

Energy strategy advisor

Finally, ED3 is expected to deepen the collaboration between distribution networks and the wider ecosystem of organisations involved in the energy transition, including the National Energy System Operator (NESO), local authorities, community energy groups and technology innovators. The future electricity system will not be delivered by networks alone. Instead, it will require a coordinated approach in which infrastructure investment, market design and local energy planning are aligned in order to support the rapid deployment of low-carbon technologies. We can already see the evidence of this changing approach through the emerging influence of the RESP (Regional Energy System Plan) process, which is bringing forth a more holistic view of energy demand and supply.

As one energy strategy advisor observes, the shift towards anticipatory investment marks a fundamental change in how networks operate: “The industry is moving from responding to demand towards actively shaping how the system develops.”

In this context, the ED3 period will ultimately be judged not only by the infrastructure it delivers but by the extent to which it enables distribution networks to operate as true system orchestrators, capable of balancing national decarbonisation objectives with the needs and opportunities of the communities they serve.

A Utility Week Intelligence report in association with Scottish & Southern Electricity Networks