Active Network Management (ANM): Opportunities and risks for Smart Local Energy Systems

Innovative new technologies will be key in the transition to a Net Zero electricity system. Active Network Management (ANM) systems and associated flexible connection agreements are one such innovation, aimed at enabling better management of constraints at  distribution level. Such systems, managed by Distribution Network Operators (DNOs), often seek to enable more connections onto the system in exchange for some form of automated curtailment to manage constraint issues.

This insight paper presents some of the benefits and risks that have been highlighted by stakeholders of current ANM deployment approaches by different DNOs.

These ANM systems have:

  • Saved connecting customers in total hundreds of millions of pounds in avoided network reinforcement costs,
  • Allowed for much faster connection times,
  • Given DNOs the ability to allow more distribution-connected customers to connect in areas that otherwise would not be possible without such automated systems in place.

ANM development is not prescribed by regulation. It is a DNO-led innovation for which the DNOs have freedom of development and operation (provided they do not breach their licence conditions).

As such, different DNOs have taken different approaches to ANM development, with reported issues emerging:

  • Certain ANM systems currently in operation have already resulted in numerous technical and contractual challenges for innovation projects seeking to optimise local generation and demand,
  • The services being developed by National Grid ESO (NGESO) have led to restrictions imposed on ANM-connected assets,
  • The lack of standardisation and interoperability, and differing approaches across the DNOs, have created complex interactions with other market solutions to manage constraints.

Key points

This has emerged as a topic of high relevance to innovators developing Smart Local Energy Systems (SLES). This insight paper also explores what future trajectories might look like given current developments and ongoing reforms being led by the Energy Networks Association (ENA) Open Networks programme, and in particular Ofgem’s Access and Forward-Looking Charges (SCR) review.

The aim is to inform what ANM, and the connection agreements that accompany them, could mean for SLES propositions in terms of accessibility for alternative flexible solutions and their replicability across different DNO areas. This insight paper raises important questions that policy makers need to consider around how market-based solutions and backstop network actions can be efficiently combined to manage periods of excess generation. This is important for unlocking flexibility at local levels, particularly on the demand side.

Opportunities

  • Main current benefits of ANM connections often involve cheaper and faster connections to the network.
  • Several DNOs already report ANM savings in the £millions from avoided reinforcement costs.
  • In certain cases, connecting via ANM systems is the only way for customers to join the network.
  • Many DNOs report that ANMs enable much more renewable generation to be added to the system while maintaining network security than would otherwise be possible.
  • Ofgem’s RIIO-ED2 guidance on alternatives to reinforcement, better network visibility and data availability, and providing greater clarity over decision making for flexibility and curtailment, should help enable other market-based solutions to emerge alongside ANM.

Risks

  • Lack of standardisation is resulting in different DNOs developing ANM and associated systems and connections with vastly differing capabilities, particularly regarding interactions with market-based alternatives to curtailment, which could potentially impact the replicability of SLES designs across different network areas.
  • Assets with ANM flexible connections are currently excluded from many revenue streams, particularly NGESO markets. ENA work programmes are attempting to address such issues.
  • Issues over capacity allocation and interactions with current ANM systems have in some instances impeded solutions for local energy and capacity trading.
  • Care needs to be taken to ensure ANM development does not hamper better alignment of demand, generation and carbon  intensity. This is particularly prevalent for any ANM systems that start to interact with behind-the-meter generation.
  • The ability for other market actors to gain access to better forecasting information will be crucial for the development of certain SLES propositions looking at non-network solutions.
  • The remits of DNO control over emerging markets and solutions for network flexibility, particularly regarding constraint  management, remain unclear.

Further considerations

  • Many of the concerns regarding curtailment risks and data access may be mitigated through Ofgem’s Access and Forward Looking Charges decision and the work of ENA’s Open Networks programme.
  • The technical nature of ANM systems, with the need for long timeframes to develop both hardware and software, while digitalisation
    of the power sector rapidly advances, makes it a challenging area to regulate. Enhanced capability and monitoring of developments will be necessary.

Read the Insight Paper

Active Network Management (ANM): Opportunities and risks for Smart Local Energy Systems

Markets, Policy and Regulation

The Markets, Policy and Regulation team is our centre of excellence for energy policy and regulatory knowledge. Offering independent and technology-agnostic evidence, analysis and thought leadership to tackle the hardest problems on the way to Net Zero.

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