Electricity network reform: where are we now?

In its Energy Security Strategy (ESS), the UK government set out ambitions for 95% of electricity to be sourced from low carbon generation by 2030 and for the UK to have a fully decarbonised electricity system by 2035. In order to accommodate this ambition, the electricity network will need to undergo a significant and fast paced transformation to facilitate the increasing integration of low carbon technologies and rising demand as we transition to greater electrification of heat, transport, and industry. On 4 August, BEIS and Ofgem published their joint Electricity Networks Strategic Framework (ENSF) which builds on these recent government commitments and sets out the direction of travel for future policy and regulation, and the key actions required to achieve this vision. We explore these actions below and consider how recent workstreams from BEIS and Ofgem look to progress development across these targeted areas.

Strategic leadership by the FSO

A key element of electricity system reform will see the implementation of an expert, independent Future System Operator (FSO).

Progress towards the implementation of the FSO had been made prior to the publication of the ENSF, with BEIS and Ofgem setting out key decisions in April 2022 in response to their joint FSO consultation launched in the previous year.

The implementation of the FSO will ultimately facilitate a more strategic network planning approach, with a key focus of this being the coordination of onshore and offshore developments. This will build on the Holistic Network Design (HND) and updated Network Options Assessment (NOA), published earlier this year and evolve these workstreams into a single Centralised Strategic Network Plan (CSNP) for both the onshore and offshore electricity transmission network, with the FSO taking on the central strategic network planner role.

Resilient and forward-looking network development

The ENSF highlights that Ofgem will design and implement the price control frameworks to enable strategic network investment and outlines commitments to consult on the regulatory approval framework for onshore transmission network investment.

The price controls are an integral element of the electricity networks and RIIO-2 offers opportunities to refocus delivery objectives over the next five years and set out funding for key network developments to help provide resilience and deliver on government ambitions. On 8 August 2022, Ofgem published a consultation proposing measures to support investment in onshore electricity transmission under the RIIO-ET2 price control. The consultation highlights that accelerated project delivery will contribute to significant reductions in constraint costs for consumers, outlining the potential long-term benefits of a targeted and forward-looking approach to network development.

Efficient infrastructure build

The government has outlined commitments to speed up planning consents by revising the energy National Policy Statement for the high-voltage electricity network in England and Wales and establishing a fast-track consenting route for priority offshore wind and related transmission infrastructure.

Alongside the review of the National Policy Statement (which closed in November 2021 and is awaiting government response), BEIS recently issued a call for evidence seeking views on the current land rights and consents processes for electricity network infrastructure. On 4 August 2022, BEIS also published the outcome of its Competition in Onshore Electricity Networks consultation which looks to open up electricity network ownership and operation to third parties.

Cost-effective and timely connections

The government and Ofgem have also committed in the ENSF to improve the affordability of connections by reducing costs for distribution network connections and will also implement measures to reduce network connection timescales.

Progress towards these commitments has most recently been seen through reform to electricity connection arrangements through the Access and Forward-Looking Charges Significant Code Review (Access SCR) which concluded earlier this year. This set out changes to electricity distribution network connection charges and how users’ access rights to the distribution network are defined. The revised arrangements will look to provide better signals and options for consumers and reduce the overall connection charge faced by those connecting to the distribution network.

Cost reflective charges

The ENSF highlighted Ofgem’s ongoing review of network charging arrangements for a decarbonising system. The government is also considering the impacts of net zero on consumer costs to ensure they are kept as low as possible, are reflective and shared fairly.

In addition to the Access SCR, the Targeted Charging Review (TCR) has also recently concluded and is being implemented into network charges. Further reform to Transmission Network Use of System (TNUoS) and Distribution Use of System (DUoS) charges are currently being progressed through the TNUoS task forces and DUoS SCR. This is expected to result in further charging reform to ensure that the right price signals are being sent to consumers and that charging arrangements are fit for purpose amid the wider backdrop of system reform.

Electricity networks are currently undergoing a significant degree of reform to ensure that the system can facilitate future energy demands and net zero objectives while facilitating fair apportionment of costs. Cornwall Insight’s latest training course on the Commercial Considerations of Electricity Network Charging Reform can help you stay on top of these developments. The course provides attendees with an understanding of current and future network charging arrangements and an overview of network charging reforms. For more information on this course or wider network services please get in touch with Laura Woolsey l.woolsey@cornwall-insight.com or Tom Faulkner t.faulkner@cornwall-insight.com

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