A new report from Regen has detailed how changes to how electricity networks are paid for would have “far reaching” impacts – both positive and negative – on decarbonisation.
The report – which was produced with the support of SP Energy Networks – is looking to inform Ofgem’s network charging review, with Regen specifically analysing the proposals in the Access and Forward Looking Chargers Significant Code Review (SCR) and changes already in progress through the Targeted Charging Review (TCR).
It looked at how these could impact on the operation and behaviour of new and existing customers on the distribution network, with several key themes emerging for distribution network operators (DNOs).
It found that the locational forward-looking distribution-use-of-system chargers (DUoS) as well as more flexible connections imply that networks will need an increasingly granular understanding of network flows and costs in the future.
Additionally, all elements of the review are going to require high quality communication with customers and for networks to take a proactive approach to stakeholder engagement, Regen said. Most of the changes will also require networks to invest more in physical assets, network monitoring and processes and capability.
It will also be important for DNOs to build resource and capability for flexibility within their organisation, according to the trade body.
When it comes to the TCR specifically, the changes are likely to lead to an increase in the highest winter peaks from 2022/23 as Triad avoidance reduces or disappears, and there is also likely to be an associated impact on the availability of flexibility such as diesel generators, gas reciprocating engines and battery storage.
One change expected within the SCR is that the connection boundary on the distribution network may become shallower, which means that new connections might be expected to pay less, or possibly none, of the network reinforcement costs associated with their connection.
This could mean that more new connections occur in constrained areas of the network, which could have “significant impacts” in areas of good renewable resource, Regen said. However, it could also mean customers in constrained areas could see stronger price signals within the DUoS locational charge, and it is likely that the High Cost Cap will be retained.
Another part of the access SCR is the proposal by Ofgem that DNOs should offer more customers the option of flexible connections to the network, which could allow cheaper connections to customers by setting conditions that avoid the requirement for upgrades and reinforcement.
This could lead to better utilisation of the distribution network, which in turn results in higher capacity usage and network revenues.
However, significant amounts of additional monitoring and data would be required for all areas of the network in order to develop flexibility options for new connectees, Regen said, with DNOs potentially having to be dealing with an increased number of connection enquiries, in particular renewable generation, in areas of constraints and good resource.
Poppy Maltby, head of cities and regions at Regen, explained that how and what people pay to connect to and use the networks will “affect how rapidly the network infrastructure can update and evolve to support net zero”.
“The far reaching impact that some of these national policies are likely to have on local areas means we are keen to see Ofgem having more engagement with devolved, local and regional governments to give these stakeholders greater say in how their local energy networks develop.”
