Ofgem has indicated a growing interest in devolved areas and regions taking ownership for the net zero transition with the release of a guide on creating devolved regional or local (DRL) energy plans alongside its Sector Specific Methodology Decision for RIIO-ED2.
Issued in late December, the guide from the Scottish Government sets out key steps for developing DRL energy plans, including that the ambition, objectives and outcomes for the energy system are clearly articulated, which could be either target or narrative based. It stressed the importance of demonstrating legitimacy, meaning it is representative of local stakeholder reviews and relevant statutory and legally binding targets, policies and duties, while the plan should also be independent of the needs of the energy networks sector.
It then outlined different elements for an actionable pathway, such as ensuring the key aspects of the energy system that need to change are clearly identified and described, as well as the organisations that can impact these changes; a set of actions to deliver the changes discussed, including a timeline for them; and describing which policy levers will be used to deliver the plan, along with clear evidence the relevant level of government will use those levers in the way that is required.
Evidence of how each element of the plan will be financed, evidence of engagement with and commitment from stakeholders set to be directly involved in delivery, and clear evidence that potential risks to delivery have been considered were also all highlighted as necessary.
In terms of analysing and assessing the plan, the guide recommended starting from a clear, representative baseline; showing recommendations are technically feasible and allow for a balanced energy system; showing development timelines are credible; and demonstrating that the energy system plan is well positioned in the wider social-economic-environmental transition. Non-energy impacts should be considered as well, such as jobs, skills and supply chains. While whole system analysis is optimal, the guide acknowledged it may not be viable if certain targeted plans are focused on just one aspect.
The guide also considers the way DRL plans integrate with wider energy network planning, stating that although they do not need to directly consider the impacts on the networks – as they should be driven by ambitions – it is still important to coordinate with DNOs. As for DNOs, they are not bound to use the plans, but could find them useful in distribution future energy scenarios planning, and should look to support timetable development in the plan as consideration needs to be given to how activity could potentially be constrained by the price control process and regulatory frameworks.
While the Sector Specific Methodology Decision did not mandate the use of Local Area Energy Planning in developing business plans for RIIO-ED2 (using either the Scottish Government DRL template or the methodology developed by CES and Energy Systems Catapult), it did stress the importance of engaging with local stakeholders. Furthermore, the decision that requires DNOs to use centralised assumptions, rather than local plans, is predicated on the fact that the exact pathway to net zero is not yet clear. This leaves a possibility that local area energy planning could be more readily embraced in future price control periods.