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Ofgem unlocks funding to boost green investment

Investment is local grids has been confirmed, Ofgem announces.

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By Matt Maynard · 17th December 2020

Ofgem has confirmed that funding has been unlocked to help boost green and smart investment in local grids via RIIO-ED2.

RIIO-ED2 is the price control for electricity distribution networks (DNOs) which run for five years from April 2023. 

Electricity distribution networks (DNOs) transport electricity locally to Britain's homes and businesses, and are crucial in eliminating emissions. As we move to greener methods of energy generation, our DNOs will have to enhance their capacity to deal with the demand, and Ofgem's investment will help to do this. 

Local grids are expected to support up to 11 million electric vehicles by 2030 and harness company data to drive smarter and more flexible energy. Ofgem have also suggested a fairer balance between shareholders and consumers, re-directing investment to support Net Zero while keeping costs as low as possible. 

According to Ofgem in their most recent press release, its proposed price control for DNOs will: 

  • Support strategic investment to deliver net zero emissions targets ensuring companies can increase capacity to support growing demand, for example providing more charge points ahead of an anticipated uptick in electric vehicle use, with appropriate protections in place for consumers.
  • Require DNOs to grow their capacity using ‘flexible’ solutions where they can, such as battery storage or smoothing peaks in demand, before building expensive new network capacity.
  • Increase digitalisation of the energy system, requiring electricity network companies to better share and coordinate data on local energy use – including sharing this with flexibility providers.
  • Ensure the companies support an accelerating and increasingly decentralised energy market, requiring new Distribution System Operation (DSO) responsibilities, with enhanced capabilities in planning, operation, and market services.
  • Retain a strong innovation stimulus through direct funding and access to the new £450 million Strategic Innovation Fund, with more if needed, to drive the decarbonisation of power, heat and transport at a lower cost than current technology allows.
  • Maintain the current high levels of reliability and customer satisfaction while making sure that the most vulnerable consumers get additional support when they need it.
  • Ensure less of consumers’ money goes towards network companies’ profits, and more towards investing in network capacity to fight climate change.

Here's what Ofgem’s Chief Executive Jonathan Brearley said in its most recent press release:

“Local electricity networks will be at the forefront of meeting the climate change ambitions laid out recently by the Governments in the UK, Scotland and Wales. They will need to, make sure the right arrangements are in place to support the capacity and charging infrastructure that will drive the electric vehicle revolution and the solutions needed to provide cleaner energy for heating our homes."

“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.”

To see Ofgem's original source regarding this story, click here

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