Energy regulator Ofgem has outlined a major programme of work that could fundamentally alter the way the energy market works.
The programme is primarily focused on electricity and aims to set out rules of engagement in a smarter power system. That system will be more reliant on flexibility than baseload, instead, says Ofgem, continuously matching supply and demand.
While setting out its intentions, the regulator has also launched a significant review of how the power network is paid for.
While the regulator has recently cut Triad export payments, this review of ‘sunk cost’ recovery will be much broader than that of embedded benefits – and will probably take much longer.
Ofgem says it is looking at changes to network charges because more businesses are taking actions to avoid network charges, meaning that those that do not or cannot take evasive action, have to pay a greater share of the bill.
The outcome may well impact businesses in terms of how much they pay to use power, and when they pay more or less to do so. Incentives for generation both in front and behind the meter, may be equally affected, although storage is not within scope. However, Balancing Services Use of System (BSUoS) charges, which recover the cost of day to day operation of the transmission system, will be reviewed.
See the charging review launch letter here.
See the future energy strategy here.