Ofgem outlines approach to boosting green, smart investment in local grids

Ofgem has confirmed its methodology for setting the next price controls for Britain’s local electricity distribution networks.

On 17 December, it announced its approach to RIIO-ED2, set to run for five years from April 2023, stating that it will support strategic investment to deliver net zero emission targets ensuring companies can increase capacity to support growing demand; require DNOs to grow their capacity using flexible solutions where possible; and increase digitalisation of the energy system, requiring electricity network companies to better share and coordinate data on local energy use, with this shared with flexibility providers as well.

Ofgem’s approach is also set to ensure companies support an accelerating and increasingly decentralised energy market, and will retain a strong innovation stimulus through direct funding and access to the £450mn Strategic Innovation Fund, while maintaining current high levels of reliability and customer satisfaction, and ensuring less of consumers’ money goes towards network company profits and more towards investment in network capacity to address climate change.

Ofgem Chief Executive, Jonathan Brearley stressed that local electricity networks will be “at the forefront” of meeting the climate change ambitions of the UK, Scottish and Welsh governments. This will mean they need to make sure the right arrangements are in place to support the capacity and charging infrastructure set to drive the rollout of electric vehicles and solutions needed to provide cleaner energy for heating homes.

Brearley explained: “This will require a more modern, smarter, digitally enabled grid that evolves in line with rapidly changing demands and maximises the benefits from all available energy assets. Our approach to our price control for electricity distribution will encourage the investment needed to deliver these ambitions while maintaining world class levels of reliability and keeping costs as low as possible for consumers.”