Future rules governing the most radical re-shaping ever of Britain’s energy systems are outlined in Whitehall proposals just released.
Emerging out of directions set in December’s Energy White paper, Ofgem and D-BEIS this week co-published the country’s first Energy Digitalisation Strategy, along with a re-vamped Smart Systems and Flexibility Plan.
The latter plan extends its 2017 forerunner. Across six chapters it sets out how new market structures yet to be decided will
- nurture flexibility participation by consumers and prosumers
- remove barriers to flexibility on the nation’s hierarchy of grids
- reform markets to reward flexibility
- digitalise the system and
- deliver on sweeping reforms
Besides best value for every type of conventional users as well as ‘prosumers’ – consumers who also produce power -, explicit principles of interoperability, data privacy, cybersecurity grid stability direct government thinking.
Next year Beis will consult on an appropriate regulatory approach for organisations performing a ‘load controlling’ role – in other words, flex providers who aggregate and remotely control the load from smart appliances and other technologies, in response to changes in price or volume of renewable power available nationally.
Parliamentary time permitting, new laws and regulatory powers will almost certainly be needed to implement solutions, shaping and accommodating an efficient market, composed and behaving in radically different ways to present conditions.
Before January Ofgem will float its ideas for an EV regulatory strategy. With DfT and D-BEIS the regulator will publish a joint policy on maximising the opportunity for V2G – vehicle-to-grid -or V2H – vehicle to home – flexibility from EVs.
One big regulatory focus will be eliminating the current discrimination between free-standing storage and its generation-co-located sister. Power farms subsidised under Contracts for Difference (CfD) rules are banned at present from co-locating batteries.
Spurring innovation in long-duration storage, the government puts emphasis on its competition offering up to £68 million in prizes, and launched through the £1 billion Net Zero Innovation Portfolio.
Would-be storage implementers have long complained of tax penalties on batteries, including punitive VAT and business rates in commercial premises.
Holding HM Treasury’s coat, Beis promises to conclude its review of business rates after Parliament’s summer recess, and continue to “work with industry” on VAT’s implications for storage.
Contemplating market reforms, ministers lean on learnings from the Energy Networks Association’s Open Networks Project. Widening network bottlenecks through changes in the P2 planning standard may offer a solution, the proposals suggest. Open data sharing will assist competitive, efficient procurement across the electricity system, they imply. The ENA’s chief executive welcomed the plan.
Contracts for Difference as a green support mechanism come under the plan’s scrutiny. CfDs may be causing extra costs, hidden outside direct supplier relationships, it says. elsewhere, and as such it will continue to consider how best to strike the balance between supporting investment in generation technology and incentivising efficient behaviours at the system level.
In the context of Net Zero and the Capacity Market, Ofgem will “soon” publish a call for evidence from stakeholders on the longer-term future of CfDs.
