Ofgem has set out its proposals to rewire Britain at a local level to deliver a “greener and fairer energy system for British consumers” which extends to commercial and residential prosumers, and the electrification of the British transportation network. The proposals include support for the sector most impacted by the plan – local utilities.
Electricity distribution networks, Ofgem says, have a crucial role in eliminating harmful carbon emissions from Britain’s energy sector in line with the government’s 2050 decarbonisation target. As the UK moves to greener forms of transport and heating, and more households and businesses become prosumers, local networks will have to expand their role and capacity to manage new sources of demand.
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Ofgem is now consulting on the methodology for the next price control for the local electricity networks, which runs for five years from 2023. This follows proposals earlier in July on the price controls for the gas and electricity transmission and gas distribution operators.
Unlocking green investment
Ofgem’s proposals aim to unlock investment needed to ensure local electricity networks can drive forward green energy and transport in the country, and help deliver the capacity and charging infrastructure needed to support a projected 11 million extra electric vehicles on UK roads by 2030, as well as the infrastructure needed to deliver clean heat to UK homes and businesses and help connect the increase in renewable energy being produced locally.
This includes proposals to help companies speedily and reliably upgrade the network in anticipation of forecasted increases in local demand for electricity.
This also includes a new strategic innovation fund across all energy networks, worth an initial £450 million, to help drive more research and development into green energy.
A system wide ‘net zero’ fund – proposed in recently published draft determinations for the transmission and gas distribution sectors – will unlock significant, potentially unlimited, additional funding to drive good value green infrastructure upgrades, Ofgem says.
Companies will be able to access funding over the course of the price control as needed – provided they can make a robust business case. This could fund, for instance, co-ordinated upgrades to the transmission and distribution power grids to enable a nation-wide charging network for electric vehicles.
Managing energy flows
Ofgem is proposing measures to make sure that network operators can efficiently manage the electricity flowing through their grids, as increasing generation from local renewable sources requires them to take on greater system operation responsibilities.
This includes requiring companies to grow their capacity using ‘flexible’ solutions where they can, such as battery storage or smoothing peaks in demand, rather than building expensive new network capacity.
It also includes increasing coordination and planning across the energy system, digitalisation of the energy system, and making better use of electricity network companies’ data – including sharing this with flexibility providers.
Flexible solutions can be less expensive for consumers and delivered quicker. According to Ofgem analysis if owners of electric vehicles use ‘flexible’ charging – where they only top up outside peak demand times on the grid – at least 60% more electric vehicles could be charged up using existing capacity compared with vehicles charged only at peak time.
Cutting costs to consumers
In common with Ofgem’s approach to the wider RIIO-2 price controls, Ofgem expects to see lower returns for investors in ED-2. This means less of consumers’ money goes towards network companies’ profits, and more towards improving the network and fighting climate change.
This package of measures will help keep the costs of delivering a green emissions-free economy for Britain as low as possible for consumers.
Ofgem’s CEO Jonathan Brearley commented: “Our proposals will help turn Britain’s streets green, putting in place the wires and technology for families to travel in electric vehicles and heat their homes and businesses with clean energy.
“The green energy transformation is not just about putting more copper in the ground. We need a modern, digital grid that uses all our energy assets as efficiently as possible.
“Local electricity networks will be at the forefront of eliminating harmful carbon emissions from the country, helping tackle climate change, so it’s vital they have the investment they need to do this whilst keeping costs as low as possible for consumers.”
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