Centre of energy expertise Regen has released a new report signalling that a strategic and planned approach to network investment could help deliver transformational value.
The report, created in partnership with SP Energy Networks and dubbed Networks Unlocked, provides an overview of how the current regulatory model works before exploring how that model could be reformed and adapted to meet: the challenges of decarbonisation; electrification of major energy demand sources and an increasingly digital economy.
The report outlines a number of key takeaways for network investments. This includes the need for a much more strategic and planned approach to network investment, at both a national and regional level, which requires a partnership with regional and local stakeholders, integrated planning, and a greater level of civic governance.
The report also proposes that the regulatory mode consider a much broader definition of network value and incentivise behaviours that will deliver that value to consumers, communities and wider society.
Alongside these conclusions, several recommendations have also been made. This includes:
- Reforming the existing regulatory model could form the basis for an enhanced framework.
- The future regulatory model must provide greater support for strategic investment.
- The regulator and industry need to adopt a value-based and more responsive model.
“Whilst a lot has been said about the failure of privatisation in the water and rail sectors, the electricity networks are in a different position,” said Johnny Gowdy, director at Regen and co-author of the report.
“An objective appraisal would find that over the past decades the regulated power networks have reduced costs and provided improved services, but that the current model now faces an extreme challenge (and opportunity) to massively increase the rate of innovation and investment to support the transition to net zero and meet far higher customer expectations, such as the power required for millions of new EVs.”
In late May 2023, Regen released another report calling for the UK Government and Ofgem to reform grid investment processes to ensure the grid is net zero ready, as reported by Current±.
According to Regen, network companies must invest between £100-£140 billion in the grid up until 2050 to ensure it is net-zero ready.
To enable and incentivise this investment reform Regen called for Ofgem and the UK Government to ensure investment is provided ahead of need rather than in a reactive manner.