Former Ofgem chief executive Dermot Nolan has told Utility Week that Boris Johnson’s green plan has “shone the spotlight even more brightly on RIIO-ED2”.
Nolan, now a consultant with Fingleton, said the work carried out by distribution network operators (DNOs) in the period 2023-2028 would provide the platform for the prime minister’s ambitions on decarbonisation of transport and heat.
He pointed to the move to bring forward the ban on petrol and diesel car sales to 2030 as having major ramifications for DNO’s business plans for the ED2 price control, adding: “It brings a real focus on how much needs to be invested to support electric vehicle (EV) take-up. It won’t be a shock to anyone but now there’s a clear need for a plan and there will inevitably be tensions between the companies and Ofgem over delivering that at the lowest possible cost to consumers.”
Having committed to the new cut-off point, government must now address longstanding questions about the transition to decarbonised transport, Nolan insisted.
“Having that date is extremely important but now the challenge is how society is going to co-ordinate that mass transfer from petrol-powered cars to electric vehicles (EVs) in a decade? How will the charging points be rolled out, and who will pay for them – especially in rural areas? How will the government deal with people who still find EVs expensive?
“It places a real imperative on EV manufacturers and energy companies to give people incentives to charge their vehicles at non-peak hours, by offering them cheaper tariffs at such times, as well as allowing them to sell power to the grid. Some companies are already doing this, but this needs to be rolled out to all car users to avoid having to build lots of new electricity generation.”
He said Johnson’s support for hydrogen and heat pumps was “symbolically very significant” and added “it’s one of the first times I’ve seen a politician actually accept heat is an issue and talk about it”.
While details are also scant in this area, Nolan said it was telling that the government had not risked “picking a winner” on decarbonisation of heat and that it was pragmatic to see a role for both technologies in the future.
He said: “There is some forming opinion that there may well be regional solutions on heat. Hydrogen does seem a good fit in the north and north east but then you look at the South West and think, is there really going to be mass production of hydrogen in Cornwall and Devon? Probably not and so heat pumps are a sensible solution.”
However, he pointed to the risk of increased fixed costs and to the difficulties in ensuring take-up of the new technologies.
He said: “We administered the Renewable Heat Incentive (RHI) while I was chief executive of Ofgem. While it had its successes it didn’t reach as many homes as had been hoped. If the heat pumps programme is going to be a voluntary one, how will the government ensure it meets what are not insubstantial targets? As with EVs, how do you make sure this isn’t just benefitting the well-off?”