Ofgem is consulting on proposals for the Future System Operator (FSO) to become a “central network planner” as part of its joint review of offshore electricity transmission with the Department for Business, Energy and Industrial Strategy (BEIS).
The regulator had already suggested this as one of its key roles and responsibilities when outlining its intentions for the FSO – a fully independent system operator for electricity and gas – in an earlier consultation in June.
In the latest document, Ofgem proposed to introduce a new “centralised strategic network planning model” that would be led by “a single, independent, expert body”. It said this “central network planner” should be the FSO.
The regulator said the new model should promote the identification and progression of low-regret strategic investments; encourage the efficient co-optimisation of network design with new generation and demand; ensure onshore and offshore networks are planned holistically; provide a coherent framework for the coordination of planning and delivery; create viable routes for third parties to develop innovative and/or non-network solutions; and provide clearer information to planning authorities and local communities.
It said the process should cover all load-related electricity transmission investment in Great Britain, potentially including interconnectors.
Giving an example of how this new planning model might benefit the energy system, Ofgem said hydrogen production could be located close to offshore wind generation, or at least close to where it connects to the onshore electricity transmission, ensuring that a majority of the electricity produced is consumed by the hydrogen plant.
“This hydrogen could be used to provide energy to the local area via distribution networks or be connected to the gas transmission network to be transported to other parts of the country,” it added. “This may lead to savings in costs that would have been required to install new electricity transmission network links from the north to the south of GB.”
The central network planner would model supply and demand; identify system needs based on the outcomes; identify potential options to meet these needs; conduct cost benefit assessments; and then select the preferred options. The detailed design and delivery of these projects would be carried out by incumbent transmission owners or third parties selected through competition.
The regulator said the FSO would be best placed to fulfil this role as it would have a “rounded and fully formed” view of energy system requirements “without being constrained by network ownership boundaries.”
By combining system operation and planning functions, the FSO would be able to anticipate the impacts of new technologies and cross-system solutions on operability and “proactively consider opportunities and challenges across a range of energy markets and networks.” Its independence and integration of electricity and gas planning would “mitigate potential bias” in the identification of solutions and decision-making.
It would also possess “unparalleled insight into how the system operates, established engineering expertise, expert knowledge on existing interactions across the energy industry, an understanding of the challenges and opportunities of different technologies and approaches, as well as access to industry-wide data.”
As well as enabling greater network coordination, thereby improving efficiency, Ofgem said the new network planning model would also give greater confidence to itself and planning authorities to approve projects, network users to make their own investment decisions and BEIS to set energy policy accordingly.
The regulator said a centralised strategic network plan would not be produced every year, as currently happens with the ESO’s Network Options Assessment. The plan would be subject to a periodic review but this would not be “so frequent or mechanistic such that it affects deliverability of options by pausing them and restarting them repeatedly”.
Ofgem recognised that implementing this new model may take some time and therefore proposed that the ESO starts making some incremental steps towards its “enduring vision” by introducing “pragmatic” transitional arrangements from next year.
It said the main purpose of these arrangements should be for the ESO to identify key strategic investments on the onshore transmission network that will be needed to connect to the 40GW of offshore wind generation that the government is targeting by 2030.
As “quick wins”, Ofgem said transmission owners should strongly consider clustering two of more large, interrelated projects for the purposes of regulatory consideration and planning consent during the transitional period.
The regulator said it will make a decision on whether to proceed with the centralised strategic network planning model and any transitional arrangements in early 2022.
The proposals align with another consultation published by BEIS in September as part of the offshore transmission network review, which suggested that the government take a more centralised strategic approach to offshore wind development. It said the current developer-led model is unlikely to facilitate the necessary level of coordination to achieve the 2030 target and that the new approach could include combining offshore wind leasing rounds with Contracts for Difference auctions.