UK energy regulator Ofgem has opened consultation on proposed changes to the electricity distribution price control mechanism (ED3).
The ED3 price control period will begin on 1 April 2028 and will, according to Ofgem, be critical in delivering the energy system transformation required to enable increased electrification and the integration of more renewable power generation into the electricity system in line with government targets.
The companies that own and operate the electricity distribution network are regulated by Ofgem under the price control framework. The feedback that distribution network operators (DNOs) provide will inform Ofgem’s final framework.
It has requested input on the overarching objectives, regulatory models, consumer outcomes and specific measures to address the upcoming challenges and opportunities in the electricity distribution sector.
Ofgem suggests that ED3 is the point at which a more proactive approach to the provision of new capacity will be delivered through asset investment. Ofgem’s Regional Energy Strategic Plans (RESPs) will be central to the proactive approach, and the consultation explores various regulatory models to achieve this.
Next, in a bid to strengthen the voice of the consumer in the setting and delivery of the ED3 price control, Ofgem says its approach to cost assessment could evolve to ensure DNOs are financially responsible and resilient.
The consultation says: “We think that a progressive regulatory approach, taking a long-term view and providing greater certainty to supply chain and investors will be in consumers’ interest.”
Another area for change would be to establish resilient and sustainable networks; ensuring networks are able to cope with effective asset stewardship is central to ensuring that networks remain resilient to increasing climate, cyber and deliverability risks.
Finally, the consultation addresses how to achieve smarter networks, establishing a smarter, more flexible and digitally enabled energy system. Ofgem states that distribution system operators (DSOs) have made “good progress” in developing decentralised flexibility markets and should build on these gains by enabling greater access and participation for demand-side response, storage, and distributed generation.
The regulator references its Strategic Innovation Fund (SIF) and Network Innovation Allowance (NIA) as initiatives to support disruptive technologies and business models, with innovation noted as a key priority.
SIF support enables network innovation
At the beginning of October, Electricity North West received a £500,000 funding injection from Ofgem’s SIF for a project exploring how homes and businesses could use air conditioning flexibly to help balance the grid.
SSEN was awarded £1 million from the fund across two projects and SP Energy Networks secured a further £914,130 for two projects focused on grid balancing and flexibility services.
Ofgem has changed its approach to the scheme, opening three application windows each year and allowing projects to apply to any one of the three development phases depending on the project’s progress, rather than having to start at the earliest stage, and projects will now be able to move through the SIF process in as little as 23 months, eight months less than the current fastest times.
