Ofgem ‘rewiring’ UK electricity grid to boost renewables and electric cars
Energy regulator Ofgem has set out proposals to help deliver a smarter and cleaner energy system designed to boost the use of renewable energy and electric cars.
Under its “rewiring” of the electricity grid, Ofgem said it will “press ahead with network charging reforms to squeeze more capacity out of the electricity grids to cut the cost to consumers”.
This includes incentives for drivers to charge electric vehicles outside peak times, to allow more electric vehicles to be charged from the existing grid
More flexible grid access arrangements could also be introduced to incentivise the use of renewable generators. This will help to cut costs by reducing the need for expensive new power lines and stations and free up existing grid capacity for generators and other users.
Ofgem also said that limits will be placed on how much energy network firms can pay to their shareholders.
The regulator proposed to keep adjusting the costs which companies face in borrowing, so that “consumers continue to benefit from the fall in interest rates since the financial crisis”.
The lower overall cost of capital is expected to save consumers £6.5bn in the next price controls from 2021 onwards, Ofgem said.
Ofgem has proposed baseline cost of equity returns at 4 per cent, down 50 per cent from previous price controls.
Jonathan Brearley, executive director for systems and networks, said: “Our proposals for the new network price controls and charging reforms will help build a lower-cost, fairer energy system which is fit for this smarter, cleaner future.
“We want to cut the cost to consumers for accommodating electric vehicles, renewables and electricity storage, and make sure that all consumers benefit from these technologies.
“This will mean driving a harder bargain with network companies to ensure that households who need it always have access to safe and secure energy at a fair price.”
However, National Grid said that Ofgem’s cost of equity range does not reflect the risk borne by the operation of transmission networks, adding that the new framework needs to ensure fair returns to shareholders as well as consumers.
“In order to deliver the major capital programme required across our networks in a rapidly changing energy market, we need to ensure the regulatory framework also provides for fair returns to shareholders and enables us to continue to deliver world-class networks for consumers,” National Grid said in a statement.