Review of Low Carbon Network Fund proposals

Transcription

1 Review of Low Carbon Network Fund proposals Report to Expert Panel EdF Energy EDFT2001: Low Carbon London 8 th October 2010 Report prepared by TNEI and Arthur D. Little for project commissioned by Ofgem

2 Report Context This report has been prepared for the Expert Panel with the aim of supporting them in their funding allocation decisions for the Low Carbon Network Fund. Having reviewed the submission pro-forma and all of the supporting material, as well as answers to clarification questions we have put to the DNO, this report is intended to serve two purposes: it sets out any factual clarifications that we believe would be helpful to the expert panel when considering the submissions, based on information or data that is not immediately apparent or available in the pro-forma or Appendices A-E; and it highlights any concerns we have in any particular areas from, for example, either a technical, commercial or deliverability perspective, that the Expert Panel may wish to explore further with the DNO. Consequently, the Expert Panel can assume that the factual content of the submission pro-forma to be sound unless noted otherwise in this report. In writing the report we have avoided merely reproducing large parts of the submission, which stands on its own merits for the Expert Panels' consideration. This report does not seek to assess the quality of this submission or rank it against any others. In particular, it does not provide any opinion as to whether the proposal should be funded. This is the role of the Expert Panel. This report is not intended to be read in isolation and should be reviewed alongside the pro-forma and compulsory appendices. Notice This report was commissioned by Ofgem on terms specifically limiting the liability of TNEI and Arthur D. Little Limited. Our conclusions are the results of the exercise of our best professional judgement, based in part upon materials and information provided to us by Ofgem and others. Use of this report by any third party for whatever purpose should not, and does not, absolve such third party from using due diligence in verifying the report s contents. Any use which a third party makes of this document, or any reliance on it, or decisions to be made based on it, are the responsibility of such third party. TNEI and Arthur D. Little Limited accepts no duty of care or liability of any kind whatsoever to any such third party, and no responsibility for damages, if any, suffered by any third party as a result of decisions made, or not made, or actions taken, or not taken, based on this document. EDFE Low Carbon London - Final Public.doc 2

3 Table of Contents Project: Low Carbon London 4 Description of Project (summarised from pro-forma Box 1) 4 Key Project Figures 5 Summary of independent analysis 6 1. Accelerates the development of a low carbon energy sector 7 2. Has the potential to deliver net benefits to existing and/or future customers Has a Direct Impact on the operation of the distribution system Generates new knowledge that can be shared amongst all DNOs Involvement of other partners and external funding Relevance and timing Demonstration of a robust methodology and that the Project is ready to implement 17 EDFE Low Carbon London - Final Public.doc 3

4 Project: Low Carbon London Description of Project (summarised from pro-forma Box 1) Smart Cities EDF Energy has proposed a whole system approach with a suite of interdependent trials. It will be leveraging off Plugged in Places with 7,500 charging points by 2013, the Greater London Authority s LowC initiative for 14,000 existing homes, and the Green Enterprise District (Lea Valley & Thames Gateway). It will create new information, communications and control systems to accommodate new loads. Problem London has the highest concentrations of electricity demand and CO2 emissions in Great Britain, and the most demanding carbon reduction targets. Its central area electricity networks are already very highly utilised, reinforcement costs are high and greatest scope for distributed generation, micro-generation, and electric vehicles. All these factors make London a good test-bed for a low carbon project with a number of other significant low carbon initiatives in planning. This creates unprecedented challenges and opportunities for electricity network management. Solution Low Carbon London will develop a new approach to distribution network management to meet growing demand from emerging low carbon technologies such as electric vehicles, heat pumps and distributed generation. It will focus on carbon reduction targets and the need to reduce dependency on conventional reinforcement. It will focus on Commercial and Technical solutions. Method The project brings together a partnership to emulate the 2020 end-to-end electricity supply chain. It implements solutions to improve the overall efficiency of the distribution network. It maximises the capability of the network, and also the end-to-end electricity supply chain, to facilitate new low carbon initiatives such as wider use of decentralised generation and electricity for personal transport and home heating, and a higher contribution from centralised wind generation. It will do this by introducing, testing and proving new commercial arrangements, new system design and planning practices and new operational practices. The trials, via the Learning Laboratory will provide valuable knowledge for the industry throughout the project. Project Low Carbon London incorporates a co-ordinated suite of interdependent trials based on detailed Use Case Analyses, involving National Grid; suppliers; aggregators; residential and I&C customers; electric vehicles (and charging infrastructure); distributed and micro-generation; and the impact on the distribution network of intermittent centralised wind generation. Supported by the Learning Laboratory, the trials will test these new low carbon generation technologies and applications to determine their impact at scale to evaluate solutions for future issues. The trials will explore the role of innovative commercial contracts, Time of Use tariffs, and advanced active network management. The project will involve real customers. It will test the impact of new carbon technologies and how customers use these technologies and how willing they are to engage with new commercial incentives. EDFE Low Carbon London - Final Public.doc 4

5 Key Project Figures Project Funding requested: Total Project value: Direct Benefit: 24.3M 36.1M 1.85M Roll-out Proposal Normalised (TNEI/PPA) Total Carbon Benefit (discounted): 29B - Total Other Benefits (discounted): 12B - Total Costs : 3,300M - Net Benefit : 39B - Carbon Saved (undiscounted): 589 million tonnes - TOTAL WITHOUT CONTINGENCY 32,812,808 Percentages of total cost Contingency 9.9% IT 12.1% Equipment 15.3% Staff 40% Internal 40% Contractors 0% Payments to consumers 7% Decommissioning 0.0% Other 25% EXPLICIT PROJECT MANAGEMENT LABOUR Project Working Days 757 Labour Days Full Time Equivalents 19.7 Project Management 4,594,828 Relative to Project Cost 13% FUNDING PROPORTION OF TOTAL ITEM COSTS Key Items Total Cost External LCNF DNO Compulsory Extra Labour 13,130,150 0% 65% 23% 12% Equipment 5,019,750 0% 100% 0% 0% Contractors IT 3,984,100 0% 100% 0% 0% IPR Costs Travel & Expenses 90,000 0% 100% 0% 0% Payments to users 2,440,000 0% 100% 0% 0% Contingency 3,247,000 0% 100% 0% 0% Decommissioning Other 8,148,808 76% 24% 0% 0% Total 36,059,808 17% 70% 8% 4% EDFE Low Carbon London - Final Public.doc 5

6 Summary of independent analysis General View: The proposal seeks to develop a smart grid that captures the interactions between embedded low-carbon technologies, electric vehicle uptake and manage these interactions via demand-side engagement and network based solutions. The project covers many of the aspects of the transition to a low carbon society and is concentrated on dense urban networks. It has a good set of partners and collaborates but it is a large and complex project. Significant Issues: There are no significant issues. Specific Issues: - Key collaborators propose making significant contributions which appear to be commensurate with benefits. The initial proforma did not provide a breakdown of contributions made. Also some collaborators are able to capture costs to their organisation elsewhere (e.g. software licence requirements of SGS are also part of the 465,000 cost item) Further clarifications from EDF have provided further descriptions of these contributions (see EDFE001 Response Attachment Rev D 14 Sept 10 ). These contributions include items such as decreased profit margins, licences contributed, direct investment into energy efficiency and renewable measures, plugged-in places funding, time contributed, and reduction in charge rates. - The project fundamentally uses existing technology applied to a new application but requires new IT/software to implement the scheme on a scale that may be difficult to deliver on time and or budget - New contracts include those with aggregators to provide demand response services, demand customers with on-site or stand-by generation, distributed generation, changes to charging tariffs, new tariffs for electric vehicle charging, new "wind" tariffs to follow generation. There may be challenges in meeting all of these commercial arrangements - The project management office consists of a very large team and it is not clear on the dedicated resources (beyond funding provided) to be committed to the specific Low Carbon Network project by each collaborator. (DNO comment: project management of 13% in line with project of this scale, especially for a project with multiple workstreams and different parties. See Appendix C for further detail. A number of staff confirmed and ring-fenced for this project) - There is no explicit mention of organisations to manage personal data security through the assignment (DNO comment: importance of data security is recognised and the project has a milestone associated to information security governance. All parties aware of their responsibilities under the data protection act) - The carbon benefits claimed for the rollout are high, with significant proportion being attributed to wind twinning and the electrification of heating which appear to risk double-counting or over-stating benefits as benefits for electrification of heating assume a declining carbon intensity of grid electricity, itself a function of increased wind generation. - We note that the benefits of avoided reinforcement for electric vehicles and heat pumps is based on relative costs in London, which could overestimate the benefits. However we note that the overall benefits are in line with those estimated by Strbac, et al, in Benefits of Advanced Smart Metering for Demand Response based Control of Distribution Networks for the combined 75% penetration scenario. EDFE Low Carbon London - Final Public.doc 6

7 1. Accelerates the development of a low carbon energy sector Summary: The proposal seeks to develop a smart grid which captures the interactions between embedded low-carbon technologies, electric vehicle uptake and manage these interactions via demand-side engagement and network based solutions. The carbon benefits claimed for the rollout are high, with significant proportion being attributed to wind twinning and the electrification of heating as benefits for electrification of heating assume a declining carbon intensity of grid electricity, itself a function of increased wind generation. While the project covers many of the aspects of the transition to a low carbon society, we question whether the specific aspects of the London network -high load density, high fault levels, high quality of supply standards and high reinforcement costs mean it is completely applicable to the more diverse range of GB s DNO networks, though we note that London believe their findings will be transferrable The proposal is closely aligned to priorities outlined in the current Low Carbon Transition Plan The proposal seeks to bring together greater involvement in demand side in management of the electricity system, as well as facilitating greater penetration of distributed renewable generation, heat pumps and electric vehicles. It is not clear if the proposed heat pumps are air or ground sourced. It also trials new network solutions, including active demand management and network configuration to reduce congestion and allow more renewable generation to connect more quickly The calculations for carbon savings are robust (audit of calculations only) The calculations of carbon savings appear robust The carbon benefits of the project are credible 70% of the carbon benefits (both by volume and value) are from two sources attributed to the project: carbon displaced by : 47 TWh of wind output in 2050 due to twinning of wind, and 76 million tonnes of CO2 from the penetration of electric heating. Both of these are based on assumptions that a percentage of the overall carbon savings from the technologies is attributable to the outputs of the project. Specifically: - 35% of the total carbon savings from 135 TWh of wind generation in 2050 is attributed to the project due to wind twinning (active matching of demand with renewable generation). The percentage of the contribution grows at 0.5% per annum from 0% to 5% between 2010 and 2020, then1% per annum to A percentage of the total carbon savings from the electrification of heating (air- and ground-source heat pumps and solar) is attributed to the project. The total carbon savings is 76 million tonnes of CO2-20 million tonnes from non-domestic heat and 56 million tonnes from domestic heat. The percentage credited to the project starts from zero in 2010 before increasing to a peak of 25% in 2030 before EDFE Low Carbon London - Final Public.doc 7

8 - decaying back to 11% in 2045 where it remains until We note that the carbon intensity of grid electricity to ground- and air-source heat pumps declines to 2050, which will in part be a function of the penetration of wind, risking double counting of benefits from wind twinning. The carbon benefits of electric vehicles (10% of the total) are calculated on a similar basis to wind, with a percentage of the carbon benefit of an accelerated uptake of electric vehicles (from 9 million electric vehicles in 2050 to 31 million) being claimed. The percentage of this accelerated uptake benefit attributed to the project is the same as for wind, that is growing at 0.5% per annum from 0% to 5% between 2010 and 2020, then 1% per annum to 2050 to 35%. Of the remaining 20%, 10% comes from voltage reduction, 9% from demand response (based on an 8-10% demand response) and 1% from reduced losses Extrapolation for roll-out is both statistically and technically sound, reliable and/or verifiable Total energy system consideration as well as for DNO 1.6. Assessment of Method s credibility Carbon savings are based on DECC Non-traded carbon prices. Extrapolations appear to be sensible. There are no assumed interactions with other energy system players beyond those in the trial. We note that it is assumed that the benefits described through the use of aggregators are applicable throughout the UK, but we see no reason to doubt that this is achievable. The method appears credible. The Method should allow for greater penetration of low carbon technologies and a greater role for demand side response in the management of participation of demand. Many of the learnings are, in principle, transferrable to other DNOs. We note, though, that the pro-forma describes London as having very high load densities, high levels of load growth, high fault levels and very high levels of supply quality and very high reinforcement costs. We therefore question the applicability of all the findings across the whole of the GBs distribution networks. In response to questions on the applicability of London s network learnings across the UK (EDFE006) the DNO highlighted that many of the challenges identified will be relevant to networks in many cities across the UK and that these can be captured using the UKGDS (generic distribution system) suite of models. EDFE Low Carbon London - Final Public.doc 8

9 1.7. Significance of the Deliverable Re-estimation of carbon benefits on the basis of correcting for erroneous assumptions or rebaselining The project seeks to resolve uncertainty around the interactions between consumers (both in respect to demand response and uptake and utilisation of low carbon technologies), the role that DNO s and other market players, and the technological solutions available to manage high penetrations of low carbon technologies. This is done through, for example, the use of different tariff arrangements and active network management. (Clarification has stated that While the electrical infrastructure serving central London does have some unique features London suburbia, and the electrical infrastructure that serves it, is typical of suburbia anywhere in the UK the 'technology' that we are deploying is directly transferrable to every DNO s future approach the commercial innovation we are extensively testing is of course relevant to the whole country) EDFE Low Carbon London - Final Public.doc 9

10 2. Has the potential to deliver net benefits to existing and/or future customers Summary: The project has the potential to deliver net benefits to consumers from avoided network reinforcement and demand-side participation. Reinforcement benefits have the potential to be overstated due to being based on London reinforcement costs, which are noted as being high, though we note that they are in line with other published sources The calculations for net benefits are robust The calculations appear to be robust The benefits claimed are credible We note that the benefits for avoided infrastructure reinforcement costs are based on avoided reinforcement costs for London. As noted above, London is described as having high reinforcement costs and so it is possible that the benefits are over stated. However, we note that the benefits for avoided reinforcement spend from impact management of electric vehicles and heat pumps, once price inflation has been stripped out, is similar to those reported by Strbac, et al, in Benefits of Advanced Smart Metering for Demand Response based Control of Distribution Networks for the combined 75% penetration scenario. DSM benefits are calculated on the basis of a 10% demand shift The costs are credible The costs of the roll out appear to be credible, being based on a fixed element, which is replicated in each DNO, and a variable element which is a function of the number of substation in each network. Re-estimation of net benefits on the basis of correcting for erroneous assumptions or rebaselining Costs and Benefits have been inflated at 3.5% per annum. EDFE Low Carbon London - Final Public.doc 10

11 3. Has a Direct Impact on the operation of the distribution system Summary: The project has a clear Direct Impact on their network as 1.8M of avoided network investment has been identified under DCPR5. No explicit mention of how the project outputs are expected to feed into DCPR6. The project will be testing active demand and generation management as alternative to P2/6 reinforcement or providing P2/6 generation support. The project will look at a range of advanced active network management techniques. The London network is a dense urban network and so may not be fully reflective of typical UK settings. Some of the learnings will be applicable in terms of proof of concept. May not be directly applicable but depends on exact trials. The set of trials are identified and while the differentiation between network and wider industry are evident in the way the trials are described. It is not explicit in the boundaries between network, mixed and pure external trial benefits. The project consists of a set of trials that will be conducted separately but relate to testing a wide range of smart grid type activities. Some are directly network related, others are purely matching flexible demand to wind generation with no direct network benefit Directly contributes to the planning, development and operation of an efficient distribution system. No indication of the MW scale of the project. It is not clear how many individual units are assumed and their relative concentrations on feeders. No explicit mention of how the outputs will feed into DCPR6. The London network is a dense urban network and so may not be fully reflective of typical UK environments or networks. (DNO Clarification states that the Generic Distribution Network will be used for extrapolation studies and that London suburbia is typical of other UK environments) 3.2. The size of benefits that can be attributed to the Distribution System, taking into account the level of funding requested. Some of the trials are explicitly for external benefit whereas others do have direct network benefit, and others required combination of external party cooperation in order to provide network benefit. It is not explicit in the boundaries between network, mixed and pure external trial benefits. EDFE Low Carbon London - Final Public.doc 11

12 4. Generates new knowledge that can be shared amongst all DNOs Summary: The project outputs are based around formal reports from ICL, seminars, and visits to the Learning Laboratory. The project learning appears to be focused around data analysis and operational methodology conclusions rather than practical site experience and implementation. There is a web portal mentioned but this appears to be a holding location for reports only. The project will produce 20 formally identified reports. These appear to be staggered across the project but predominantly back-end loaded, i.e. late 2013 to early The formal reports cover the full range of activities and being split into separate formal reports is advantageous as it means that the individual learnings should be clearly identifiable. The project states default IPR conditions and as it is using existing commercial technology, they are not expecting any new IP generation. Learning Chain Summary: The project will be creating data and has analysis to convert this into information and knowledge. Learning will be generated from the physical network implementation of the active network management. There is a good spread of industry participants directly involved with the project. The learning capture methodology appears acceptable Robust methodology to capture the results from the Project The primary concern is whether the "learning" is restricted to Imperial College London and the Learning Laboratory and how much of this will be actively absorbed by the technical teams of EdF, Suppliers etc. (DNO clarification: further detail on the learning laboratory role and integration within EdF Future Networks organisation has been provided in the response) Individual trials and experiments will be prepared and conducted by partners in collaboration with EDFEN Future Networks. Learning Laboratory will be the channel for reporting results and outcomes as well as undertaking analysis, etc Applicability of the new learning to the other DNOs 4.3. Effective plans to disseminate learning from the Project The London network is a dense urban network and so may not be fully reflective of typical UK environments or networks. (Clarification has stated that While the electrical infrastructure serving central London does have some unique features London suburbia, and the electrical infrastructure that serves it, is typical of suburbia anywhere in the UK the 'technology' that we are deploying is directly transferrable to every DNO s future approach the commercial innovation we are extensively testing is of course relevant to the whole country) No clear learning outcomes from project partners or EdF directly on the installation experience, other party experiences. Better clarity required on how these other parties will be reporting learnings, i.e. Is ICL actually the reporter or just a channel to focus the reporting? EDFE Low Carbon London - Final Public.doc 12

13 4.4. Knowledge generated is novel including innovative plans, tools and techniques which will be shared openly and easily with DNOs Effective treatment of IPR. (Where a DNO wishes to deviate from the default requirement for IPR) Quality will be dependent on whether this is post-graduate researchers or industrial experienced reporters. Depends on level of direct engagement with the project, or if reporting on a third party basis. Unclear if raw data from the trials will also be made available. (DNO clarification: Raw data will be made available provided any potential privacy concerns can be resolved) Default conditions and using existing commercial technology means not expecting new IP generation. Not clear on what is meant by the final paragraph and the non-charging of development costs? EDFE Low Carbon London - Final Public.doc 13

14 5. Involvement of other partners and external funding Summary: Key parties involved in the project are summarised below. Organisations with an asterisk represent organisations which could have been categorised as collaborators Collaborators Equipment/ service providers Siemens Smarter Grid Solutions (Logica) Comms. providers Energy retailers EDF Energy Customers plc Project managers / consultants / advisors Logica Public sector players Greater London Authority Transport for London London Development Agency Other organisations National Grid EnerNOC Flexitricity Institute for Sustainability Partners npower Sainsburys Others mentioned EDF Energy R&D Collaborators EDF Energy Customers plc (key partner) and EDF Energy R&D are both under the same ownership as the DNO. It is noted that neither of these businesses will be under the same ownership as the DNO by the time of commencement of this project (given the current process of sale of ownership of EDF Energy Networks). EDF Energy Customers plc has exposure on the success of the project due to their role in deploying 5,000 smart meters and use of Feed In Tariffs and Time of Use tariffs. There are no critical gaps among the collaborators and key collaborators appear to have a strong track record. There is no explicit mention of organisations to manage personal data security through the assignment. Though there is a milestone within the programme plan relating to information security governance. Also further clarification from EDF has described practices which will be adhered to and the strong track record of Logica in managing information security services. It is not clear which organisation is leading activities related to communication. Following further clarification from EDF, this will be led by EDF Energy Networks and draw from the specialist communications capabilities of multiple partners (e.g. operational data store - Siemens ; head end interface solution - Logica ; Communications methodologies with I&C customers - commercial Aggregators ) However the project consists of a very large internal project management team. It is not clear on the dedicated resources (beyond funding provided) to be committed to the specific LCN project by each collaborator. EDFE Low Carbon London - Final Public.doc 14

15 Partners npower has "expressed a strong interest" in Low Carbon London. It is not clear how both energy suppliers would be co-ordinated by the project management. External Funding Key collaborators propose making significant contributions which appear to be commensurate with benefits; the initial proforma did not provide a breakdown of contributions made. Also some collaborators are able to capture costs to their organisation elsewhere (e.g. software licence requirements of SGS is also part of the 465,000 cost item). Further clarifications from EDF have provided further descriptions of these contributions (see EDFE001 Response Attachment Rev D 14 Sept 10 ). These contributions include items such as decreased profit margins, licences contributed, direct investment into energy efficiency and renewable measures, plugged-in places funding, time contributed, and reduction in charge rates. EDFE Low Carbon London - Final Public.doc 15

16 6. Relevance and timing Summary: Evidence provided in the proposal indicates a number of parallel activities happening within London over similar periods. The timing of this project appears to be appropriate. The project focus on matching demand against low carbon generation is in line with the drive on electricity sector decarbonisation. It addresses the network flexibility issues and reinforcement avoidance/deferral using DSM or Generation. The project indicated that learnings will feed into DCPR6 submissions, but from programme, the timescales are such that these may be too late to affect decisions and business processes The timing of the project is appropriate 6.2. Use of solution as part of their future business planning and how it would impact on its business plan submissions in future price control reviews, including DPCR Focus on developments associated with a move to a low carbon economy that are more likely to happen. The pro-forma proposal makes the statement in first paragraph of Box 24 stating that such developments are more likely to occur in London than elsewhere. No clear evidence provided to support this. (DNO comment: explicit reference was made to London Plan, London EV Infrastructure Strategy, GLA Low Carbon Zones, Green Enterprise District, London Plugged in Places, The Electric Ten. Space limitations precluded further detail. Additional detail was provided in the response on these projects and programmes to support the Box 24 statement) Indicated that learnings will feed into DCPR6 submissions but from programme, the timescales are such that these may be too late to affect decisions and business processes The project focus on matching demand against low carbon generation is in line with wider drives on decarbonisation. It addresses network flexibility issues and reinforcement avoidance/deferral using DSM or Generation Time to tangible results Formal reporting of learnings is relatively late in the project and clusters. While this is pragmatic, it means this is not delivering fast results. (DNO clarification: While final reports are clustered towards the end of the project, learning and knowledge from the planning, design and execution will have been shared over the course of the project) Appendix D provides additional detail on the project plan and optional Appendix 2 on the use cases. Detail on the through-project dissemination is not shown. EDFE Low Carbon London - Final Public.doc 16

17 7. Demonstration of a robust methodology and that the Project is ready to implement Summary: The project fundamentally uses existing technology applied to a new application but requires new IT/software to implement the scheme that is on a scale that may be difficult to deliver on time and or budget No active control is included on domestic customer equipment but the scheme is employing full range of equipment and techniques to influence customer demand response. This includes installation of smart meters, advice on energy efficiency and equipment upgrades and trialling of time of use tariffs. The implementation of demand side management, via aggregators is restricted to I&C customers only. The plan is presented as a number of discrete packages outlining use cases, solution design, defined responsibilities, etc. The technical solution phase for each work package is expected to be completed before 16/02/2012. An attempt has been made to provide links on Gantt chart. The proposal also includes links to external activities. Activities prior to start-up are mentioned within the plan but not discussed in detail given the number of partners and project complexity m has been included for contingency, primarily based on estimates of underlying uncertainties for key infrastructure components required for the project Detailed Project plan, with responsibilities clearly established and interdependencies identified. The plan is presented at a high level with insufficient detail in a number of areas although it is recognised that the provided PDF format detailed project plan has 1600 activities; Given the complexity of project it is difficult to judge overall credibility of the programme. Given complexity of different work packages it is difficult to work out if appropriate interdependencies have been made. Linkages to external projects illustrates the approach taken by the project team to place the LCN project in the context of other initiatives Resources to deliver the Project are of a sufficient size and quality to be reasonably expected to ensure its delivery. All activities appear to have appropriate resources, but specific roles of each collaborator per task have not been outlined in project organisation or project programme in detail. It is not clear who is playing the role of a communications provider. Imperial College London is listed as leading the Learning Laboratory, however the specific roles of other organisations in the large team such as Institute for Sustainability, LDA, among others is not clear. There are major players with track-record are included in proposal. However additional collaborators e.g. Smarter Grid Solutions Ltd (SGS) do not mention overall organisation size or track record. (DNO clarification: SGS has have been responsible for implementing the only commercially operational ANM scheme in the UK incorporating novel commercial arrangements SGS formed in September 2008 as a spin-out company from the University of Strathclyde licensing Intellectual Property related to ANM. SGS secured venture capital finance to establish the EDFE Low Carbon London - Final Public.doc 17

18 business, market ANM solutions and develop the SGCore product. SGS is trading profitably, is expanding rapidly and will be announcing the opening of a new office in the South of England later in SGS are working with a number of other network operators in the UK and Europe including SSE, EON, Scottish Power, Elia and Ores. SGS is also working with both National Grid and Scottish Hydro Electric Transmission Limited.. SGS own a significant amount of Intellectual Property required by EDF in order to deliver the ANM solutions as described within the project. SGS is based in the UK As of 1 September 2010 SGS has 19 members of staff [and] expect that the core team will have grown to 25 by project commencement (1 Jan 2010) ) 7.3. Demonstration that the Project can be started in a timely manner Risks to costs and benefits of the Project have been reasonably estimated. The project appears to be ready to go and has progressed as far as realistically expected until funding approved Signed collaboration agreement in place; and proposed delivery contract; project appears ready to progress immediately. The contingency is included but there is no specific breakdown provided. The anticipated benefits are estimated to be lower than DNO contribution. Risks affecting timing such as installation of smart meters, availability of DG, and installation of measurement equipment are included. However implications of risks in terms of timing not discussed in detail 7.5. Assessment of proposed cost overrun percentage (if non-default?) No protection sought 7.6. Assessment of Direct Benefit protection (if nondefault?) No protection sought 7.7. Identification of appropriate risk mitigation processes 7.8. Direct Impact on Distribution Networks on rollout has been correctly identified Risk procedures and processes in place, risk register in place and mitigation and contingency applied. Currently limited and at a high level covering viability of project not the technical or operational risks Nothing explicit but successful roll-out will result in the installation of increased monitoring allowing active network management and dynamic rating of equipment. Demand side management through new commercial arrangements and tariffs and direct control of customer equipment will become an option. All will have an impact on planning, design, operation and maintenance of the network. EDFE Low Carbon London - Final Public.doc 18

19 7.9. Immediate Project impacts on the proposer's network have been correctly identified Customer Impact and change required have been correctly identified Have identified the risk or need of outages during installation. Load control is proposed either directly (Vehicle charging posts) or through commercial arrangements though voltage control is implied but no new equipment is being installed on the system hence this would be very limited on LV systems. Employing full range of equipment and techniques to influence customer demand response including installation of smart meters, advice on energy efficiency and equipment upgrades and trialling of time of use tariffs. No active control is proposed of customer equipment though real time control of the network based on customer feedback (meters) will be trialled. Demand side management, via aggregators is restricted to industrial & commercial customers only Technology Viability This is a very large scale ambitious project, exploring 10 cases over 11 London boroughs, with a relatively high number of contributors. Consequently there is higher level of risk of part of the proposal not working or being delayed. The discrete nature (cases not explicitly linked) of the individual cases however limits the risk of one case not proceeding impacting on other cases. The project fundamentally uses existing technology applied to a new application but requires new IT/software to implement the scheme on a scale that may be difficult to deliver on time and or budget. Actual technical risk is quite low as the trial predominantly monitoring and the application of new commercial arrangements It Include the monitoring of load demand, and demand control/management through both active management of the network utilising improved monitoring for both voltage and thermal control and through application of variable tariffs & commercial arrangements Successful Delivery Criteria Revised successful delivery criteria align with project milestones and timescales provided Contractual proposals New contracts include those with aggregators to provide demand response services, demand customers with on-site or stand-by generation, distributed generation, changes to charging tariffs, new tariffs for electric vehicle charging, new "wind" tariffs to follow generation. There may be challenges in meeting all of these commercial arrangements While the proposed commercial arrangements being tested are a (positive) risk to the project, there is no evidence to suggest they are not credible at this stage. EDFE Low Carbon London - Final Public.doc 19

20 7.14 Derogations and exemptions EDFE Low Carbon London - Final Public.doc 20