Ofgem has revealed how it could overhaul current network access arrangements and charges in a bid to address perceived system imbalances and save consumers significant sums.
The regulator made the announcements yesterday evening in two separate working papers and an accompanying blog published by partner Andrew Wright, entitled ‘smart use of grid capacity and spreading costs fairly’.
Within the blog, Wright argued that network charges and access rights need to change to avert potential increases in consumer bills. Changes conducted by Ofgem will therefore be designed to increase efficiency on the network and ensure consumers get the best value for money.
“As well as setting price controls for the revenues that monopoly network owners can earn, and overseeing changes in the roles of network companies Ofgem is also reviewing how the networks are used, how costs are reflected in charges, and how these costs are recovered from customers.
“This is not about adding new costs for businesses and households. Instead it is making sure that these costs are spread efficiently and fairly among all network users,” Wright noted.
However Ofgem has too argued that more efficient use of the network was also necessary with new technologies, particularly electric vehicles and heat pumps, likely to explode in popularity in the coming years.
How EVs may impact on electricity demand – and the grid’s means of coping with it – has been a popular subject of discussion with the industry. National Grid has too been forced to release a number of ‘myth buster’ documents in response to figures taken out of context by national media.
Ofgem has stated that the status quo for network access, operated predominantly on a first-come first-served basis, has led to network constraints, particularly in certain areas of the country, which could further stymie the adoption of new and low carbon technologies. To accommodate these technologies would therefore require network reinforcement works that could result in significant amounts being added to household bills.
However new models are emerging in the supply and demand of power that could alleviate such costs and Ofgem has stated that its new proposals have been drawn up to address “key regulatory gaps” in this area, as identified within its Smart Systems and Flexibility Plan paper released in collaboration with the Department for Business, Energy and Industrial Strategy earlier this year.
Current arrangements, Ofgem said, needed to improve with no or a poorly defined choice of different access options available to generators. Creating more choice had the potential to optimise access rights to suit a generator’s needs and result in more efficient operation of the grid.
One example given by Ofgem was the use of flexible connection agreements wherein a generator could pay less to connect under the proviso that they agree to certain curtailments, a method currently being assessed by UK Power Networks amongst other DNOs.
Another option would be to move away from the current first-come first-served model and enable the reallocation of access rights between different parties.
Households with electric vehicles could also be forced to pay an additional fee to charge during peak times or ensure that smart chargers are in use. Last month’s electric vehicle bill, currently ping-ponging through the Houses of Parliament, sought to establish that all EV chargers installed once the bill comes into force are deemed “smart”, enabling them to adjust charging patterns and open up to control by the respective DNO.
Ofgem also outlined potential changes to the way it intends to recover both forward-looking and residual network charges in its two working papers, with the more significant changes reserved for residual or historic charges.
These changes could see households benefitting from rooftop solar PV hit by a redistribution of residual charges which takes into account how they use the grid less frequently than those without, encouraging greater fairness, according to Ofgem. Sister publication Solar Power Portal has included an in-depth breakdown of those prospective changes here.
The regulator is to spend the coming months assessing its options and intends to have established its minded-to decision by the end of Q1 2018. A number of stakeholder events have been arranged and the regulator is inviting feedback from industry on its proposals.
