Ofgem’s reforms to network charging are no longer a niche issue for network nerds – politicians, campaigners and the media are all picking up on the significance of the changes. It’s likely to be a prominent issue at our upcoming annual symposium for the Electricity Storage Network (ESN), where we’ll have the opportunity to go beyond the negative aspects (although I’m sure they will crop up), and figure out how network charging can be used as a tool for encouraging flexibility and storage deployment.
What’s the latest?
Given that the activity on network charging reforms is ramping up momentum, it’s worth recapping some of the recent developments.
The Targeted Charging Review, addressing residual network charges, is close to being finalised (expected summer 2019), but the final decisions disadvantage storage, renewables and behind-the-meter flexibility. We have been raising this point with Ofgem, BEIS, the Energy Minister and parliamentarians for some time now and two recent reports from Aurora and Oxera have put concrete figures to these concerns. We’re pleased to see Ofgem push back implementation to 2023 in response, and commission further modelling on the impacts of the changes.
The lost revenue may be replaced in the redesigned forward-looking charge, which pays for future costs on the network. This charge aims to incentivise behaviours which are efficient and of low cost to the network, but the review is still ongoing and we won’t know the final outcome until this time next year. We’re working closely with Ofgem on the design of these charges through their Challenge Group and want to ensure renewables, storage and flexible technologies are fairly rewarded.
A flexible system must have equally flexible regulation; the new charging regime must be dynamic and incentivise flexibility. We aim to unpick this premise at the annual symposium for the ESN next week, particularly during our session on “the next chapter of flexibility provision”, where our assembled flexibility experts will map out a future for flexibility and storage in the UK.
Merlin will also be interviewing Frances Warburton, the director in charge of the network charging reforms at Ofgem, giving us an opportunity to better understand Ofgem’s reasoning and trajectory.
What next for network charging?
We do still hold concerns that Ofgem is divorcing network charging from real-world effects and vital issues such as decarbonisation. Their narrow focus on consumer bills and cost efficiencies is blinkered. We will help design the forward-looking charge to work in the best way possible, but if Ofgem continue with their inflexible ‘level playing field’ argument, then the UK electricity system won’t make the most of this vital moment of reform and redesign the fundamental charges for the network in a way that works for a decarbonised, decentralised energy world.
Ofgem’s reforms to network charging are complex and can be difficult to engage with. Through our events, we aim to bring much needed clarity and critical thought to the debate – next week’s symposium is a unique opportunity to bring this debate to the storage world.