Industry groups have called on the government and Ofgem to incentivise network companies to prioritise procuring flexibility services before they take traditional reinforcement measures.
The group call their approach to managing the electricity grid “Flexibility First” and have urged Ofgem to make their proposals central to the RIIO-2 price control.
“The incentive structures that these electricity network companies operate under are not aligned to achieving a smart and flexible energy system, a core part of the Government’s Clean Growth Strategy” the letter states.
The Flexibility First approach centres on six key principles:
- Network companies should be obliged to tackle network constraints by procuring flexibility services as a first measure, rather than by building new network infrastructure.
- Rather than focussing on benefits to themselves, network companies should be incentivised to help achieve carbon reduction targets at the lowest possible costs for consumers.
- Network companies should be rewarded for making better use of the existing network, rather than building new infrastructure. One mechanism to achieve this is to make the network load factor a primary metric for adjusting revenues.
- The cost and availability of new connections for renewable generators should become important output categories for network companies.
- Network companies should be able to make genuine financial gains and losses based on their performance on whole-system outcomes. We recommend that any returns above a base return of 2-3% should be based on achieving whole-system outcomes.
- Ofgem should clarify that network operators may not directly control other distributed energy resources such as electric vehicles and instead use price signals to manage and encourage flexible resources.
Toby Ferenczi, director of strategy at Ovo, said a smart, flexible energy system would offer “significantly better value overall for consumers.”
Leonie Greene, director of advocacy & new markets at the Solar Trade Association, said, ”It’s great to see householders and businesses embracing new technologies like solar, battery storage, smart heating and electric vehicles which will help to slash emissions and clean up our air, but the networks around them need to move faster to capture the big system benefits of these individual efforts. Incentivising networks to focus on buying the flexibility services these new smart homes and offices can offer is an essential first step”
Signatories to the open letter are :
- OVO Energy
- Glen Dimplex Heating & Ventilation
- Solar Trade Association
- Renewable Energy Association
- Chameleon Technology
- Lux Nova Partners
- Green Energy Options
- Dynamic ePower
- Kiwi Power
- Tempus Energy
- Upside Energy
- Caplor Energy
- NES Roofing & Energy
- Grid Beyond
- The Association for Decentralised Energy