Ofgem to launch £500 million low carbon technology fund


London, U.K. — (METERING.COM) — December 8, 2009 – The British energy regulator Ofgem intends to launch a £500 million fund to trial the new technologies, systems and commercial and network operating arrangements required to deliver a low carbon electricity sector.

The Low Carbon Networks fund, which forms part of the final proposals of the electricity distribution price control review, is aimed at encouraging the U.K.’s 14 monopoly regional distribution network operators (DNOs) to innovate to deliver the networks that users will need in a low carbon economy.

Examples of such low carbon initiatives include the take up of electric vehicles, significant investment in local community or household generation, and the use of demand response as a balancing tool.

Up to 90 percent of project finance will be covered by the fund, with DNOs expected to fund the balance. Approximately £80 million of the fund will be allocated directly to each DNO to use for small scale projects (Tier 1), while approximately £320 million will be awarded on a competitive basis to a small number of flagship projects (Tier 2). The £100 million balance will be used to provide discretionary awards to Tier 2 projects that successfully deliver against a set of pre-agreed criteria as well as to Tier 1 and Tier 2 projects that bring particularly valuable learning to the industry.

A condition of participating will be that DNOs will have to share learning, including the lessons learned from projects that "fail," to maximize industry benefit, Ofgem says.

The price control proposals, which cover the period 2010 to 2015, will see the DNOs being able to raise their charges by an average 5.6 percent per annum, with a range from  -4.3 percent to 11.1 percent across the country. For a typical household, this represents an extra £4.30 a year.

Other requirements include improved customer service by the DNOs, with tougher new standards for all stages of the connections process, tougher targets for network reliability that reflect customers’ willingness to pay and a new broad measure of customer satisfaction. DNOs will have to meet all their licence and statutory obligations, or face the prospect of penalties set to have a proportionate impact on shareholder returns, Ofgem warns.

Ofgem says the companies have until January 6, 2010 to accept or reject the price review proposals. If the proposals are accepted, a statutory consultation on the licence conditions will be published by February 2010 to bring the proposals into force. Proposals that are rejected will be referred to the Competition Commission.