UK needs a new investment mechanism to help networks reach net-zero


New financial mechanisms will be required to speed the energy transition in the UK, according to a report released by utility Scottish Southern Electricity Networks (SSEN).

The report Delivering DSO outlines how the utility is investing over £160 million in the RIIO-ED1 project to support its transition to a smarter, flexible electricity network.

The report comprises seven policy recommendations to ensure the UK’s network infrastructure is prepared for net-zero.

The seven policy recommendations are: 

  • The introduction of a clear mechanism that supports anticipatory investment to help electricity networks prepare for net-zero.
  • The introduction of requirements for new homes to be ‘EV ready’ with appropriate charging infrastructure.
  • Mandating the installation of smart EV charging to ensure infrastructure is being efficiently utilised.
  • Encourage households to adopt flexibility by providing a financial incentive above market value.
  • Improving transparency of anonymised EV-use to support the smooth transition to electrified transport;
  • Improving transparency of Low-Carbon Technology uptake to improve investment decisions; and
  • Adopting a whole-systems approach, with communities taking a leading role in the journey to net-zero. 

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Electricity networks operators are supporting the low-carbon transition by shifting from a Distribution Network Operator (DNO) to a Distribution System Operator (DSO) role.

The report details how these principles have been put into practice and are already delivering tangible benefits to SSEN’s customers. 

These benefits include identifying how customers can play a more active role in the UK energy system and ensuring opportunities are widely understood, and engagement encouraged.

The report provides case studies and projects that SSEN has led that supports a fair and equitable transition, including: Project Local Energy Oxfordshire (LEO), one of the most wide-ranging, innovative, and holistic smart grid trials ever conducted in the UK; and Solent Achieving Value from Efficiency (SAVE) that supports community groups in providing flexibility to the system, reducing their carbon emissions, while receiving payment in the process. 

Andrew Roper, Director of DSO at SSEN, said: “Climate change is, rightly, now the first-order issue and the adoption of net-zero targets in the UK and Scotland, while ambitious, are absolutely necessary and absolutely achievable.

“This action from industry needs to be matched with a supportive and flexible policy environment. We believe the seven policy recommendations we have identified will not only help us on our transition but also create a foundation for the delivery of net zero within the electricity system.” 

Electricity networks have been instrumental in connecting renewables and decarbonising the UK’s power generation. However, net-zero will require significant and extensive electrification of the UK’s transport and heating sectors.

Transport is the largest emitting sector in the UK, and domestic, commercial and industrial heating is responsible for around a third of the UK’s overall carbon emissions. Currently, electricity network operators are not permitted by Ofgem to invest in network or flexibility solutions in anticipation of this increased demand. With a sharp and rapid uptake in electric vehicles expected to meet net-zero targets, a more flexible regulatory mechanism, based on robust data, is required to avoid the risk of delay to the roll-out of necessary charging infrastructure.

SSEN’s policy recommendations reflect that as we move to a smarter electricity network, customer expectation and the demand on the network will also change. Utilising and using data can support efficient investment decisions and the cost-effective transition to net zero. 

Andrew explains further: “To ensure the nation’s electricity networks keep pace with the net-zero transition, it’s clear to me that data will be the ‘killer app’. This means the ability to access to real-time, transparent, data on the low carbon technologies connecting to our networks and in the use of rich analytics and projections to make a robust case for strategic investment for net-zero.

“It is also critical that the benefits aren’t just seen by the early adopters and those with means. That’s why we are working with the Centre for Sustainable Energy on its ‘Smart and Fair?’ research programme, that is studying how to secure an equitable transition to ensure no customer is left behind.

“Our progress update includes a series of questions for our stakeholders and we are seeking their views to ensure our priorities are aligned with theirs. We will not lose sight of the essential service we provide, and the needs of the customers we serve as we prepare our network to accommodate a net-zero world.”

SSEN is inviting stakeholders to answer a series of questions to help shape the network’s DSO transition journey and provide feedback on the network’s progress to date. 

For the full report please click to