Professor Dieter Helm’s cost of energy review is a “blast of common sense and rational thinking”, a leading energy system expert has said.
Simon Harrison, who chairs the government-funded Future Power System Architecture (FPSA) programme, told Utility Week that Helm’s government-commissioned publication “lays bare all the distortions of 30 plus years of market intervention and change, and recognises the transformatory impact that current and future digital developments will have in energy.”
Harrison, who also head up strategy and development for consultancy Mott Macdonald’s power business, also welcomed Helm’s proposals to scrap the existing RIIO regulatory framework for energy networks.
He said: “Proposals for moving beyond current RIIO to a model for networks that recognises the pace of change, and creates greater integration within the system at a local level, are in line with how we see the direction of travel towards integrated energy services, smart cities and energy communities.
Harrison observed that Helm’s findings have a great deal in common with the thinking that the FPSA programme has put forward in its two major reports so far.
He said that, like the FPSA, Helm’s report “argues for radical reform of how the sector is governed – incremental change to today’s ways of working will not deliver anything like the full value of the consumer benefits possible from the transformation already happening around us.”
He added that, in terms of “moving beyond the current RIIO model” for network regulation, the group behind the FPSA has already provided a range of “enabling frameworks” to facilitate this idea.
These frameworks would enable “agile, flexible and inclusive governance” of the energy system he said. And would uncover “the capabilities needed to deliver this future” as well as “the business opportunities that will arise for today’s network companies, energy suppliers and other current and new industry participants”.
Harrison enthusiastically invited interested parties to join the FPSA team in making the radical reforms advocated in its own and Helm’s work, “a reality”.
Helm’s cost of energy review, published yesterday, set out a range of far reaching reccomendations to reform an energy system which, he said, is not efficient and is delivering energy at an uneccessarily high cost.
Among his reccomendations is a proposal to do away with the RIIO framework for energy networks, which he said is being “significantly outperformed”.
He stated that: “For the networks, going forward, there should be no more periodic reviews in the current RIIO framework. Technical change is so fast that predicting costs eight–ten years hence is impractical.”
In addition Helm proposed that changes arising from the decantralisation of energy generation and growing capability for demand side flexibility, will require the establishment of an independent National System Operator (NSO), as well as a set of Regional System Operators (RSOs) to manage the impact of distributed energy technologies and demand response at a local level.
The RSOs would be distinct from distribution network operators, said Helm, and both the NSO and RSOs should be established in the public sector.
Other proposals arising from Helm’s cost of energy review related to energy generation – especially renewables – and the energy supply market, which Helm said will become increasingly characterised by fixed costs in the future, leading to a decline in the scope for price competition and consumer switching.
The Future Power System Architecture programme was originally commissioned by the Department for Energy and Climate Chnage in 2015, to explore the capabiltiies that will need to be developed within the energy system to enable new markets for distributed energy, energy stroage, demand side response and more.
The first report found that 35 new or substantially altered functions would be required within the energy system to accomodate these markets. It also found that current energy system governance would need to be overhauled to deliver these new functions.
A second and third phase of the FPSA programme have subsequently been comissioned to take these findings forward.
Read industry reaction to the publication of Professor Helm’s cost of energy review here.