The Energy Transition | Ofgem faces new net zero duty

Tuesday, 13 June 2023

New Net Zero Duty for Ofgem

A last-minute amendment to the currently discussed Energy Bill in Parliament has been proposed by the government. This amendment mandates Ofgem to always consider the impact of its decisions on the UK's net zero carbon emissions targets.

Ofgem's existing responsibilities are established by the Gas Act 1986 and Electricity Act 1989, where the main objective of the regulator is to safeguard the interests of current and future consumers.

This includes reducing greenhouse gases; however, the new duty will now specifically refer to the attainment of the statutory net zero targets and carbon budgets defined by the Climate Change Act 2008.Government has been under increasing pressure to assign a net zero duty to Ofgem.

This pressure is partly due to criticisms that Ofgem has traditionally focused more on reducing consumers' bills instead of investing in electricity network projects that support net zero efforts.

Jonathan Brearley, Ofgem Chief Executive, responded to this week's parliamentary development by saying, "Consumers are best protected by building a low-carbon, low-cost energy system...".

The new net zero obligation is expected to take effect two months after the Energy Bill becomes law.

ESO's Planned Overhaul of UK Electricity Grid Connections

Energy generators in the UK whose connection projects are delayed will be instructed by the Electricity Systems Operator (ESO) to "get on, get back or get out of the energy queue". This statement is part of a press release that details several targeted reforms aimed at accelerating connections to the electricity grid.

Under the planned revamp of the existing grid connection queuing system, generators likely to miss their pre-agreed connection dates and other targets are expected to agree to delay their connection space or completely withdraw from the queue, paving way for other projects.

Hence, projects ready to connect could possibly connect to the grid up to a decade sooner than initially planned.

The ESO reports that 220 projects, roughly equating to 40GW of capacity, are scheduled to connect to the transmission network before 2026. However, only half of these projects have secured planning consent, and some projects have been delayed for up to 14 years.

The current delays, which see around ￡200 billion worth of renewable energy projects facing a 15-year waiting period, significantly threaten ESO's objective of achieving a net zero power grid by 2035.

In an attempt to identify non-viable or heavily delayed projects, the ESO has written to developers aiming to connect to the grid seeking updates.

Solar Industry's Warning Against 'Radical' Changes to the Contracts for Difference Scheme

In response to the Department for Energy Security Net Zero's (DESNZ) call for evidence on the introduction of non-price factors into the Contracts for Difference (CfD) scheme, Solar Energy UK, a trade association representing the UK solar industry, has issued a warning against any radical changes to the existing CfD system.

Such changes could potentially undermine the business case for new projects due to the increased uncertainty and potential decrease in investor confidence.

The call for evidence offered three options for introducing non-price factors. Solar Energy UK believes the most feasible option is the 'top-up payments'. Under this option, projects that pass through the auction and submit high-scoring non-price factors could receive a 'top-up' to their strike price over the initial years of their CfD Contract.

The report also made several recommendations, such as announcing any changes to the CfD system at least two years before an allocation round, and aligning any introduction of non-price factors with the output from the ongoing review of electricity market arrangements.

ESO Says Barriers to V2G Technologies to be Solved "Organically"

In August 2022, Octopus Energy and the ESO carried out a trial to determine the feasibility of domestic vehicle-to-grid (V2G) enabled electric vehicles (EVs) entering the Balancing Mechanism (BM) as a combined unit.

The ESO has now published a report titled "Powerloop: Trialling Vehicle-to Grid technology", outlining its findings from the trial. The report found that customers participating in the Powerloop V2G trial saved up to ￡180 per year compared to smart charging, or ￡840 per year compared to unmanaged charging on a flat tariff.

Additionally, V2G-enabled EVs could offer a cheaper option to balance the system than current alternatives.

The trial did expose several barriers in the current BM framework, the biggest being the current operational metering standards.

However, the report suggests most barriers could be organically overcome with increased adoption of V2G and EV technology in the UK.

The ESO also provided its future plans concerning V2G technology, including programs to stimulate increased participation in flexible technology and investigating the reliability, consistency, and cost of domestic flexibility.