A ‘step change’ in investment in Great Britain’s local electricity networks is essential to achieve the government’s growth mission and lower long term energy costs for consumers, according to the government’s independent infrastructure advisor.
The National Infrastructure Commission’s new report Electricity distribution networks: Creating capacity for the future says that with demand for electricity set to double by 2050, the current pace of additional investment in the country’s electricity distribution networks must also double to ensure the system can cope with rising demand and connect both new sources of renewable power and new electricity demands to the grid faster.
However, current regulation by Ofgem is too complex and doesn’t encourage distribution network operators (DNOs) to make the proactive investments needed to boost network capacity and provide resilience to future climate impacts. In response, the Commission’s report calls for a more proactive approach to both energy regulation and system planning.
Commission analysis finds that while delivering the level of investment required could add between £5 and £25 to the average annual household electricity bill by 2050, electricity bills are still expected to be lower than today even after this additional cost – but only if government implements all of the Commission’s advice in the second National Infrastructure Assessment on supporting low carbon energy and decarbonising heat.
A failure to improve the process of connecting to electricity distribution networks will also constrain economic growth and impact the government’s timetable for clean power delivery. The Commission says customers should expect to receive a high quality of service and be able to connect to the network when their project requires it, but connection times have been slowly increasing and customers experiences vary widely.
To address this, it recommends Ofgem brings in new service standards for DNOs to ensure commercial customers receive a consistent experience when connecting to the network, and introduces more robust incentives for larger connections, with stronger performance expectations, to drive improvements across the whole process.
Sir John Armitt, Chair of the National Infrastructure Commission, said, “The UK is heading in the right direction on decarbonising power, but we can’t be complacent. We must learn the lessons from playing catch-up on transmission grid expansion and get ahead of the curve on investing in our local networks, so people can enjoy the benefits of electric vehicles and heat pumps safe in the knowledge the network will back them up, and businesses can connect where and when they need to.”
“That requires a new approach to regulation which encourages operators to make prudent local investments that anticipate future demand. Asking consumers to make a small contribution up front to enable this won’t be welcome, but we should remember there’s a big prize on offer: harnessing the benefits of cheap renewable generation sooner rather than later and building a secure network optimised to support economic growth and decarbonisation, with resilience baked in.”
The Commission’s year-long study says a more proactive approach to planning the distribution network is needed to provide more certainty to operators and planners about where and when investment is needed, and ensure any new investments are fully aligned with the objectives of the new Regional Energy Strategic Plans, which are crucial to delivering the government’s decarbonisation goals.
Ofgem’s price control process must also be simplified and have a broader focus on enabling growth and decarbonisation, beyond simply prioritising low costs for consumers in the short term; the Commission recommends government should give new strategic guidance to Ofgem on how to manage the outcomes required.
Barriers constraining future investment should also be tackled and the report proposes a series of procedural changes to the planning system aimed at reducing uncertainty for network operators, adding to existing Commission advice to government on speeding up approval of new infrastructure projects.
The report supports expanding the use of flexibility measures to manage demand and provide whole system benefits, including lowering the cost of electricity through enabling more households to use power at times of lower demand, for example to charge their electric vehicle.
It also encourages government to urgently review the skills gap and take action to attract and retain the workforce needed to complete the energy transition. And to look at further supporting supply chains, by considering how new mechanisms for managing the electricity transmission supply chain could also be applied to the distribution network.
Nick Winser, National Infrastructure Commissioner, said, “The days of our electricity coming from a few fossil fuel plants are over. A third of our generation already connects directly to the local network and more will follow over coming decades, and we also expect the future of heating and transport to be mainly electric. So we need an electricity distribution system that’s flexible and smart enough to optimise the benefits of this bigger and more complex network and drive down costs for consumers as quickly as possible.
“Every part of our electricity sector must play its part in supporting economic growth, and distribution networks are no exception. But that requires a more strategic approach that empowers proactive investment and ensures network operators do more to make connections easier and faster for more businesses.”
This report builds on existing Commission recommendations to government on decarbonising energy and separate proposals by Electricity Networks Adviser and current Commissioner Nick Winser on speeding up the deployment of transmission network infrastructure.
