DNOs ‘complacent’ on line losses, says Sustainability First, as it struggles to compare ‘inconsistent’ distribution network business plans

Distribution network operators (DNOs) have taken a “step up” on customer engagement and taken on board the Net Zero target, Sustainability First (SF) said in a report on the DNOs’ business plans for the next five years. But there are some key gaps in their plans, and the lack of readily comparable metrics across the network plans made it hard to assess individual plans, benchmark them against each other and hold the companies to account for delivery.
That was the message from authors Maxine Frerk and Judith Ward, who responded for SF to an Ofgem consultation on the companies’ business plans.
Highlighting the “critical customer issue” of affordability and the need for more support for vulnerable customers, SF nevertheless sought a balance between minimising current bill impacts and the need for strategic investment to deliver Net Zero at best cost. It said there was a need for a “clear, overarching and consistent vision around the role of the DSO [distribution system operator]”.
One key issue of concern was line losses. Sustainability First (SF) described losses as “neglected but vital”, saying it has “significant concern about the very limited attention”. It noted that losses cost customers £15-20/year – a significant proportion of the typical DNO share of the customer bill of £100/year. It was visible in terms of the UK’s carbon emissions (1.5% of the total) but often excluded from DNO Net Zero targets
The DNOs’ own loss strategies included a wide range of actions that could be taken, but they were “complacent”, having persuaded the regulator that “losses are outside their control and that the carbon impact will be addressed anyway as the grid decarbonises”.
SF was concerned about Ofgem’s decision to remove financial incentives on losses, saying DNOs have no incentive to pursue initiatives. It said, “this is a prime example of a whole-system issue where action (or inaction) by the DNO imposes wider costs on the system. Ofgem urgently needs to acknowledge and signal the importance of this issue and provide appropriate financial incentives or regulatory mechanisms to redress this balance.”
A “significant gap” in the Business Plans was energy efficiency, especially thermal insulation, which could have been considered as an alternative to reinforcement, as happens with flexibility. That gap persisted despite this being a licence requirement, SF said. SF has previously argued for a “beacon energy efficiency pilot” of this type in ED2 to build learning before heat electrification takes off at scale.