Introduction
Limiting the use of the DNO / DSO network during congested hours is a well established process as part of Active Network Management (ANM). This allows loads and generators to connect to networks faster and at lower cost than would otherwise be normal. The basic deal, is that by allowing an ANM scheme the load or generator accepts that the DNO may restrict their output during peak demand times. The DNO / DSO will typically provide a simple curtailment report indicating the percentage of time that the conectee would expect to be curtailed / restricted. Depending on the type of plant the conectee operates this can be an excellent way of reducing the connection costs and improving the connection times, but it is essential they understand what the curtailment will mean in real terms of downtime and lost revenue.
What is often not understood, is that when (during the day) a site is curtailed, may be just as important as to how often. For example a Battery Storage plant that is curtailed for a few hours at peak times of load in morning and evening peak, may lose much more revenue than a similar plant with more curtailment hours, but that occur during midday at lower revenue trading times.
While zero or low curtailment is, of course, preferable, areas of the network can offer that is naturally limited. Does this mean other parts of the network are not worth considering? Not necessarily. To answer that question accurately, you first need to understand the DSO Curtailment Report and what those percentages actually mean for your project.
Calculation Method & Changes in Methodology
Historically, the calculation methods and implementation have varied between operators, with some DNO / DSO providing very detailed assessments, and others being less clear. However, since 1st April 2023, all DNOs / DSOs are now required to use the same methodology, as defined by the DCUSA DCP 404 working group. This Working Group set out to define, calculate, and measure curtailment in a formal process and to add transparency. The aim is to align the approach and thereby encourage the acceptance of curtailable connection offers [1].
The main driver behind this change is to make better use of the network’s capacity before costly reinforcement work becomes necessary. That said, curtailment limits can introduce uncertainty around the return on investment. Understandably, investors may question whether a project is commercially viable, if the DNO / DSO shows a high curtailment level.
While there are some legacy curtailment arrangements for the earlier applications. Curtailment limit for all curtailable connections applied post 1st April 2023 applied are calculated by DSOs using the same methodology. Some DSOs may also provide a curtailment estimate assessment — a non-binding estimate intended to help you evaluate the potential return on investment. The method used to calculate this curtailment estimate may vary between DSOs, but in many cases, it is similar to how curtailment was calculated prior to 1st April 2023.
The curtailment limit stated in the connection offer is more formal and contractually binding. Once accepted, it permits the DSO to reduce your site’s access to the network to manage network congestion. In practice, this is done by sending an instruction to reduce the site export or import for certain amount of hours as the result of access reduction, such hours are measured and accumulated annually. No curtailment compensation will be made until the agreed annual curtailment limit is exceed.
A good summary of the changes can be seen in the table below, which is taken from UKPN, and compares the key differences between the two methodologies used to calculate curtailment figures.
As we can see from the comparison above, differences between generation technologies, network topologies, seasonal ambient temperatures, and so on are not taken into account. The main aim is to standardise the methodology and focus on describing the unavailability of network access — which is not necessarily proportional to the amount of energy your site generates, particularly when using intermittent energy resources such as wind, solar PV, or BESS.
Why a DNO Curtailment Analysis is Probably Not Sufficient For Your Project!
As mentioned above, DSO curtailment limit is calculated by the loss of network access, not the loss of energy output, the formula of calculating the curtailment hour is as follows [2]. The annual curtailment percentage is then calculated by dividing the hours of curtailment by 8760 hours. Noting that 8760 is generally used as the nominal hours per year.
While the above image and formulas define curtailment mathematically, they show the reduction in accessible capacity from the network, rather than the lost energy and revenue. While the former can influence the latter, a reduction in access does not necessarily translate into a reduction in energy. What if your site does not require network access at the time the reduction occurs? Conversely what if your revenue model requires network access at high revenue times?
In reality, such scenarios are quite plausible, and the majority of new connection applications relate to renewable energy, whose export patterns are naturally intermittent, or designed to trade at high demand periods. This can be seen in the figure below. For the same network access reduction i.e. curtailment, the volume and frequency of impact on energy export loss is significantly different. The generation pattern seen in Figure 2a can be driven by the change of demand curve, to provide support/maximise the profit such as BESS. The generation pattern curve in Figure 2b, is most likely driven by the availability of resources such as PV and Wind.
Therefore, while a curtailment limit based on simple network access reduction is sufficient from a DNO / DSO’s stand point, it misses crucial data on what and how the curtailment will occur and how it will affect an assets revenue. The impact of such reduction in energy export/import losses needs to be assessed on a case-by-case basis, for any complex trading asset.
Knowledge is Power – A Way Forward!
The current methodology may enable DNOs to process a large volume of applications and account for the most onerous scenarios, but it does not provide generators with any insight into how they can maximise network capacity utilisation or improve the return on their investment. In a market with tight margins and high competition, gaining a granular understanding of what a curtailment will mean in terms of lost revenue is of huge benefit and can help with financial modelling and understanding project and asset lifecycle risks. At Aurora Power, have the knowledge and expertise to carry out a in depth analysis, include:
- Validate the DSO curtailment estimation or curtailment limit
- Carry out detailed analysis to understand the loss of energy export/import
- Analyse the curtailment triggers advise on curtailment derisk options.
- P&L modelling and provide optimisation strategies under the influence of curtailment.
Summary
The curtailment limit in a connection offer does not represent a fixed number of hours during which your site’s output will be constrained. Rather, it refers to periods where your site’s access to the network may be partially or fully restricted. Whether this has a material impact on your site’s energy export or import depends on its specific operational profile.
If you need clarity on your curtailment limit, assurance on the DSO’s assessment, or insight on how to protect the value of your investment – get in touch with Aurora Power. We’ll be glad to assist.
References
[1] DCUSA “DCP 404 Access SCR changes to terms of connection for curtailable customers” 2022
[2] UKPN “Curtailable Connections Curtailment figures issued post 1st April 2023”, 2023