Electricity distribution price control
The Centre for Sustainable Energy (CSE) recently responded to Ofgem’s Framework consultation: electricity distribution price control (ED3). A consultation on how the electricity grid is managed. The grid – this network of lines and sub-stations – transmits energy to our homes and connects most electricity generation to the system.
Put simply, without major reinforcement of the electricity network, we cannot achieve three crucial goals:
- Decarbonising our energy system (and therefore economy).
- Connecting new renewable energy developments.
- Rolling out the heat pumps and EV chargers needed to meet growing demand.
As widely reported in the media, the electricity grid is under extreme pressure, with delays of up to 14 years for renewable energy developments to be connected. These delays are already causing significant problems and with the growth in renewable energy, heat pumps and electric vehicles, these pressures are likely to grow even further in the future.
What is the electricity grid and why should I care?
The companies that own and operate this network (for example Western Power Distribution in the south west where CSE is based ) are monopolies within the areas they operate in.
The consultation is about:
- How they’re to be regulated.
- What they are paid for.
- How they are to manage their part of the network.
- The objectives they should seek to meet.
So, this framework is a vital bit of long-term planning for how we get to a zero-carbon electricity system.
It’s literally the energy transition in action.
Why we support the ED3 consultation
CSE strongly supports the approach taken. The consultation represents a very un-British piece of long-term planning because, instead of muddling through and letting the market manage our already creaking network, it proposes to invest heavily in network capacity ahead of need.
Plans drawn up independently (Regional Energy Spatial Plans and the Strategic Spatial Energy Plan) will model what growth in capacity is needed where. Network operators will be required to build it and be paid based on their delivery.
Meanwhile a new organisation, the National Energy System Operator (NESO) has been set up, tasked with ensuring that this all happens. Very un-British. Very straight-forward. Very welcome.
How does it impact the economy
Quite apart from any objectives to reduce emissions, our overloaded electricity system is already impacting economic growth. Delays are affecting not only renewable energy projects but also housing developments and datacentres. This is additionally impacting technologies that can reduce household bills and decrease our reliance on international gas prices, such as electric vehicles, heat pumps, and smart technologies.
Consequently, over-investing in our electricity system is now less risky than under-investing, and probably cheaper. Given the likely continued increase in electricity demand, why go back to repeatedly upgrade the same bit of line every few years, when you could do it properly, just once?
Building the net zero workforce
We need a government-led workforce strategy, to scale and skill up our workforce. We need electrical engineers, installers, project managers, data analysts, community engagement specialists, and many other skilled workers to deliver the energy transition. Currently, almost every country in the world is investing heavily in clean energy and their electricity grids, creating strong competition for skilled workers. Meanwhile here in the UK, more people are retiring from the sector than are joining it.
Having long-term infrastructure plans like those proposed can only help with getting orders in order books, but what about a workforce strategy? If we’re serious about upgrading our electricity system, we should have a plan for replacing those retirees and expanding the workforce.
From CSE’s work with schools and young people, we know they’re concerned about climate change and want to take action, but there’s little steering them into skilled careers that can harness this interest. We need pathways and guidance for young people to pursue careers that align with and contribute to the net zero transition, specifically aligned with zero carbon skills gaps.
Reliable methodologies are needed to for regional and strategic energy plans
We think it’s good that an independent body (NESO) will model the infrastructure needed, which should mean that vested interests aren’t pandered to, and that public money isn’t wasted. Big questions need to be asked and answered – such as:
Given we’re gradually phasing out gas central heating, in the long-term, will we need a gas grid?
However, having a plan is only as good as the thinking which goes into it. In writing Regional Energy Spatial Plans, there’s a need to develop agreed assumptions, common methodologies, and mechanisms for dispute resolution.
Improving network visibility & making data available
We need improved data sharing across all areas. In a recent project installing heat pumps into existing homes, we couldn’t access basic information about whether the local power cables had sufficient capacity. This is a common problem that affects everyone trying to deliver clean energy projects – from installers and local authorities to community energy groups. Without better access to network data, we’re all planning in the dark.
Prioritising connections for community energy
The connection queues are so long, and there’s so much renewable energy development in the pipeline, that if everything currently planned is built out we will have a clean power system. Consequently, there’s a risk that community energy projects could get elbowed out the way by commercial projects. Given their local and social benefits, and their ability to harness public support, there’s a strong case for requiring DNOs to prioritise grid connections for community led projects.
Distribution Network Companies need to act fairly and inclusively
The framework provides few measures to assess whether DNO services are being delivered fairly and inclusively. Whatever framework is agreed for planning, funding and regulating investment in our energy networks from 2028 onwards, electricity distribution network companies need to be encouraged and incentivised to monitor and understand who their investments and flexibility services are benefiting. They should proactively plan to deliver a fair transition and should be required to report on what they are doing to ensure they aren’t ‘leaving people behind’.
Promoting Flexibility and reducing demand
Demand flexibility (rewarding people for changing the times they use energy) is vital for decarbonising the power system, however, it should not be used to substitute the reinforcement of the grid (what we call muddling through). We do however support DNO’s having a Demand Reduction Obligation. This would promote savings cheaper than energy supply or support demand reduction during expensive energy periods, incentivize domestic flexibility and address market failures. Costs could be recovered through fuel bills, leading to overall cost reductions for consumers.