techUK Welcomes Proposal for Additional £21.5m in Smart Grid Investment
Ofgem Mid Year review calls for a changes to National Grid’s RIIO-T1 price control outputs.
The RIIO (Revenue = Incentives + Innovation + Outputs) framework is designed to promote the delivery of smarter gas and electricity networks. The RIIO price control puts emphasis on incentives to drive the innovation needed to deliver a lower carbon energy network that offers value for money to existing and future consumers. The period runs from 2013 to 2021.
As part of the Mid Year Review Ofgem has proposed a number of changes including
- Reducing National Grid’s gas transmission allowance by £168.8m because the Avonmouth gas pipelines it planned to build are no longer needed;
- Cut the electricity transmission allowance by £38.1m because fewer fault protection works are needed due to fewer generators connecting to the high voltage grid;
- Increase National Grid’s allowance as high-voltage grid system operator by £21.5m for planning the future of the grid and managing additional supply and demand balancing services.
Since the RIIO-T1 price controls were set Ofgem has introduced new obligations in National Grid’s electricity transmission licence under the Integrated Transmission Planning and Regulation project, including the annual delivery of a Network Options Assessment report which requires an assessment of the need and timing of future reinforcements across GB, as well as assessments of cross border interconnector capacity requirements.
Ofgem have also received a request from National Grid for additional funding to support efforts on demand-side response (DSR). Activities relating to raising awareness of the market possibilities of DSR, ensuring sufficient routes to market exist and ensuring a level playing field for demand customers who wish to participate in the DSR market have been classed as additional to Business As Usual activities.
Proposals come as analysis from Barclays Research found a need for £215bn to be invested by 2030 to replace aging assets and decarbonise. As we undergo an “energy revolution” nearly half – £95bn – will need to be spent on disruptive technologies such as renewables, battery storage and distributed generation.
Matthew Evans, Executive Director of SmarterUK and Internet of Things at techUK commented:
“We are pleased to see that Ofgem is looking at National Grid's spending allowances in recognition of the growing importance smart grid technology plays in our energy system. Additional funding will ensure innovation continues to be at the centre of system upgrades.
“Support for new DSR mechanisms is key to achieving a low carbon future, providing tangible and good value benefits for consumers and other network users. However, it will be important that National Grid and the regulator continue to work closely with industry to understand new disruptive business models and ensure appropriate mechanisms are adopted.”
Ofgem are currently consulting on these proposals, making a final decision this autumn, with changes to National Grid’s revenue taking effect from April 2018.
If you would like to be involved in SmarterUK’s response please contact Aimee Betts-Charalambous. A conference call to discuss inputs is organised for 27 September 10:00 – 11:00. If you would like to join please get in touch.
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