Introducing Digitalisation to Component Risk Models: Enhancing Regulatory Effectiveness

Ensuring the reliability and efficiency of electricity distribution networks requires a proactive framework that effectively manages and mitigates the risks associated with grid component failures. The Common Network Assets Methodology (CNAIM), widely used for regulation in the United Kingdom, stands as a state-of-the-art example of integrating Component Risk Models in incentive regulation. However, its limitations become apparent when it comes to accurately reflecting the impact of digital applications, such as dynamic line rating. To address this issue, this paper proposes a novel approach by incorporating the impact of digitalisation into CNAIM’s risk calculation, utilizing Digitalisation Key Performance Indicators (KPIs) specifically designed for Distribution Network Operators (DNOs). This offers a promising pathway for further advancements in accurately representing asset risks and the impacts of digital applications. Embracing this comprehensive consideration, along with a risk-based approach to managing distribution grid assets, becomes fundamental in navigating the challenges faced by DNOs both in the present and the future.