IEEE Power & Energy Magazine - September/October 2016 - 21

2015, 27% of the total 338.9 TWh electricity generation came
from renewables with 49% from gas and coal. This corresponds to a 17% increase and 20% decrease compared to 2011,
respectively. The FITs and other incentives for small-scale,
low-carbon technologies are the main triggers of the changing landscape in U.K. distribution networks. PV-installed
capacity increased from 0.2 GW in 2010 to 8.4 GW in 2015,
which is almost 10% of the total installed capacity in Britain.
Electric vehicles (EVs) have also seen a remarkable uptake
with registrations increasing from 3,500 in 2013 to more than
50,000 by the end of 2015.

Incentivizing Innovation

energy resources (wind, PVs, EVs, and storage), the deployment
of information and communications technology, and the use of
advanced network automation to tackle diverse technical challenges at various voltage levels (see Figures 4 and 5). Many of
these projects have taken truly progressive views of what future
DNOs might be able or required to do, increasing network
observability and intelligently managing not only new network
elements [e.g., DNO-owned storage and LV on-load tap changers (OLTCs)] but also participants (e.g., small-to-medium-scale
renewable DG, household appliances, EVs, and storage).
The success of the LCN Fund and the clear understanding from Ofgem that smart grid investments should be
strongly incentivized were key aspects reflected in the new
model for the current (and longer) regulatory period 2015-
2023: RIIO (Revenue = Incentives + Innovation + Outputs)
ED1. The LCN Fund was replaced in RIIO-ED1 by the Network Innovation Competition and the IFI (which continued
until 2015) by the Network Innovation Allowance. According to Ofgem, this new RIIO model was designed to encourage DNOs to
✔ put stakeholders at the heart of their decision-making
process
✔ invest efficiently to ensure continued safe and reliable
services
✔ innovate to reduce network costs for current and future consumers
✔ play a full role in delivering a low-carbon economy
and wider environmental objectives.

More than ten years ago, when the connection of mediumscale wind farms started to boom in the United Kingdom,
Ofgem recognized that DNOs had to be incentivized to
truly adopt a proactive approach toward the connection of
such typically renewable distributed generation. In addition
to the well-established innovation funding incentive (IFI)
targeted at research and development, Ofgem created for
the 2005-2010 regulatory period two new incentives: the
distributed generation (DG) incentive and the registered
power zones (RPZ). Although the corresponding monetary
incentives of £2.5/kW/year for new DG connections (DG
incentive) plus £2.0/kW/year if connected in a cost-effective way (RPZ) were relatively modest, they certainly paved
the way for making DNOs more active facilitators of lowcarbon technologies. Indeed, despite the limited number of
RPZ at the end of this regulatory
period, they served as proof that
the active management of distribution network elements and
Stakeholder Engagement, 3
Low Carbon
participants (in this case DG) was
Modelling, 3
Generation, 23
technically, financially, and comMeshed Networks, 3
mercially possible.
Fault Level, 3
For the regulatory period 2010-
Community Schemes, 3
2015, Ofgem created the £500 million
Commercial, 3
LV and 11 kV
Low Carbon Networks (LCN) Fund
Networks, 20
for DNOs to try out new techDG, 5
nology, operating and commercial
arrangements to help them underMV Technology, 7
stand how to cost-effectively manDSR, 17
age their networks as Britain moves
PV, 8
to a low-carbon economy. This fund
was divided into direct allocations
EV, 8
for small projects (Tier  1, based
Comms
on the size of the license area) and
and IT, 15
a competitive stream for large, flagEES,
ANM, 8
ship projects (Tier 2, up to £64 mil10
lion per year). The result of reducing
Network
the investment risk associated with
Monitoring, 10
smart grids, albeit on a trial basis,
was more than 60 innovative small- figure 4. The scope of LCN Fund projects (many with multiple instances) based on
and large-scale field projects (some 2016 Energy Networks Association (ENA) Smarter Networks Portal data (http://www.
still ongoing) involving distributed smarternetworks.org/).
september/october 2016

ieee power & energy magazine

21
http://www http://www.smarternetworks.org/
Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - September/October 2016
