The energy industry is changing rapidly – and charging arrangements should evolve to reflect this. Nikki Jamieson, National Grid’s Head of Charging and Access Arrangements, explains why.
The energy sector is going through a period of major change. We’ve seen a massive expansion of renewable electricity, like solar PV and wind, connecting to local distribution networks rather than the high voltage national transmission system.
Demand side response is now part of how we manage a flexible system, and new technologies are also emerging, such as smart metering, battery storage and electric vehicles.
All this means that we need to take a fresh look at current charging arrangements – and evaluate whether they deliver value for consumers, while encouraging investment in new sources of energy storage and production.
It is now six years since Ofgem launched Project TransmiT, which resulted in changes to the way generation customers are charged for use of the transmission network. This has helped facilitate the connection of low carbon generators to the transmission network.
Nevertheless, at National Grid we believe our transmission charging arrangements need to evolve much further, so they cater for a broader range of challenges and create a level playing field for market participants.
This is why in July, National Grid is hosting industry seminars in both London and Glasgow to address the issue. At the events, we’ll gather feedback from generators, suppliers, network operators, large energy users and government on what the future charging regime should look like.
Ofgem is already looking at what’s known as ‘embedded benefits’: the idea that renewable, distributed energy sources are gaining unfair advantage from the current system. This is a welcome step, but we believe that a wider review is necessary.
Such a review will make sure the cost of transmission creates a level playing field across the industry. It will also facilitate new technologies, maintain security of supply and deliver the best possible value for the people and businesses that rely on us.
The case for change:
- Embedded generation has grown faster than most have been able to predict. This has been great news for the nation’s move to low carbon and increasing home and community-level generation, but has created challenges, and the requirement for new investment which will currently fall on end consumers.
- Smart meters with new tariffs will give customers new opportunities to actively control their energy consumption, and potentially encourage them to change their behavior too. We want to make sure that network charging makes such a change possible, but at the same time does not disproportionately disadvantage particular groups of customers who are less able to be proactive consumers.
- An increasingly flexible system means we need to consider how demand side response and storage are supported. Handling those distribution networks which are becoming more active, and therefore require more system management, is another consideration too.
- The current Triad system was set up to encourage particularly large industrial players to avoid using the transmission network at winter peak, thereby reducing overall cost. However, it’s becoming more difficult to predict Triads – and customers have told us we need to look at them. Because of the broader variety of energy sources now in play, and the range of usage, transmission investment is increasingly driven on a year-round economic basis.
- A level playing-field with European counterparts will benefit the market. Under current arrangements generators are concerned that they pay higher charges than continental counterparts, which makes it harder to compete.