Ed’s note: Is the future of the energy transition dependent on regulation?


Grid Futurability is the name Enel have given to the transformation of passive distribution networks into smart grids by combining the use of traditional equipment with advanced digital solutions. All of this to make networks more resilient, participatory and sustainable.

At the heart of their system is a concept we have reported on previously – namely the Network Digital Twin. This is a 3-D digital model faithfully replicating “electricity infrastructure and surroundings, identifying single components and their operating state, relying on thousands of sensors physically installed on the grid to deliver real-time information useful to both the distribution company as well as to local stakeholders.”

This is just one tool in the Grid Futurability arsenal at Enel’s disposal. Combined with data from smart metering, digital workforce management tools, augmented reality and drone footage, this is all part of the efforts to completely digitalise Enel’s network.

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In a recent LinkedIn post, Antonio Cammisecra, Head of Enel Global Infrastructure and Networks Division, said that regulation needs to support and encourage the level of commitment and investment that will be needed to deliver on the promises that technology can offer. He called for regulators to “embrace the idea of Grid Futurability, encouraging the development of innovative and digital solutions rewarding both performance and long-term sustainability.”

The question that has been asked many times across numerous platforms is whether regulators are moving fast enough to keep up with the technology and innovation in the market. How can they work to encourage the level of investment needed while ensuring fair returns and sustainable tariffs?

A report in Administrative Science Quarterly takes this question one step further by examining “how regulatory discretion — regulatory agencies’ flexibility to interpret and implement public policies created by elected officials — can influence the market entry of new ventures.” While this report focuses specifically on regulatory approval of hydroelectric facilities in the United States, the basic premise is one to be considered: Is there a role for greater regulatory discretion when it comes to the implementation of policy?

And how can that discretion be passed down to energy suppliers, retailers, DSOs etc? Ofgem has made a start in considering this by the issuance of an open letter to chief executive officers of energy supply companies and other stakeholders in which the regulator said it would not “prescribe all the activities suppliers should and should not prioritise during this period in order to protect consumers.”

The regulator has highlighted a number of key considerations for energy supply companies to use as a guide when determining actions to be taken at the start of the COVID-19 pandemic. However, it comes down to one question: ‘How am I going to treat my customers fairly and how am I going to protect vulnerable consumers given the resources I have available?’ If suppliers can show this was their primary consideration at any time when implementing COVID-19 specific strategy, they should have the support of the regulator.

The enabling framework for regulatory flexibility was initially in place between April and June 2020 and we will be following up with Ofgem to understand how the strategy worked in practice.

As always, we’d love to hear what you think. Contact us at editorial@smart-energy.com or visit our LinkedIn post to leave a comment.

Wishing you a flexible week!

Until next time,