Grid consultancy Roadnight Taylor has written to Ofgem on behalf of energy scheme developers for a reform of the mechanisms for charging for supergrid transformer reinforcement.
The company states that Ofgem’s current charging mechanism for supergrid transformer (SGT) reinforcement is creating stalled and cancelled projects due to funding risks for investors.
Roadnight Taylor’s open letter urges reform to create a better mechanism for SGT charging, and remove the high costs and uncertainty that energy suppliers face. This would remove the differences in distribution connections in different locations, and between distribution and transmission connections.
Roadnight Taylor sits on the NGESO Connections Reform Working Group and on the ongoing Department for ENergy Secuirty and Net Zero (DESNZ) Solar Taskforce Electricity Networks Subgroup. The company says it hopes to “drive positive reforms in the connections community wherever possible, and this is why [we] have chosen to write this open letter.”
The letter highlights the problem at hand, in that the cost for reinforcement of supergrid transformers is currently split between being socialised and being charged directly to distribution customers, and that this is based on the categorisation of the nearest grid supply point (GSP). This is leading to a distortion of connection charging across the country, creating stalled and cancelled projects caused by funding risks for investors.
According to the letter, Ofgem acknowledges that the issue exists, but the urgency of grid upgrades means the problem should be prioritised. Although no action has been taken so far, there are upcoming opportunities to make changes to SGT charging.
The letter gives three options to change the mechanism:
- Socialising all SGT reinforcement through Transmission Network Use of System charge (TNUoS)
- Socialising all SGT reinforcement through Distribution Use of System (DUoS)
- Continuing to pass reinforcement charges on to triggering distribution customers, but allow DNOs to use a Cost Appointment Factor (CAF) approach to SGT reinforcement charging, though this is “the least preferred approach”, according to the letter.
Hugh Taylor, chief executive of Roadnight Taylor commented: “Roadnight Taylor and Ofgem alike recognise the worsening situation and we appreciate that they have promised further work. However, the urgency of the issue should not be understated, with many investors unable to accept the funding risks created by the current situation. There are an increasing number of distribution customers now facing SGT reinforcement charges, but Ofgem still have an opportunity to help prevent this and make needed changes.”
“Socialised SGT reinforcement charging would allow network operators to be more strategic, would reduce connection costs for distribution customers, and would therefore better facilitate meeting net zero targets. At Roadnight Taylor we constantly strive to enable mission critical projects by toppling the most stubborn connections barriers. This has become one such barrier, and we hope that we can work collaboratively with Ofgem to help advise on this issue.”
Socialising SGT reinforcement through TUDoS “would effectively turn all present ‘connection asset’ sites into ‘infrastructure sites’ and would mean that SGT reinforcement charges are not passed on the DNOs or to distribution customers,” the letter states. This would give NGESO and transmission operators a stronger signal to take a “more holistic view in relation to SGT reinforcement”.
Socialising SGT reinforcement through DUoS would require the DNOs “to be given appropriate mechanisms within ED2 to request reinforcement of SGTs, and to increase the annual ‘pass through’ costs to customers.”
The question of who should pay for grid upgrades is becoming more important as grid constraints become a serious factor in delaying the rollout of renewable generation.
In April, National Grid announced its ‘Great Grid Upgrade’, which the system operator called “the largest overhaul of the grid in generations.” The work is part of the ESO’s programme of works which will see £16 billion invested from 2021-2026 to support the UK’s net zero goals.
