Renewable UK has said the RIIO2 price controls as currently proposed by Ofgem will hold up investments in Britain’s electricity transmission network that will be vital to meet the government’s target of building 40GW of offshore wind capacity by 2030.
The trade association said Ofgem has failed to deliver on its promise to align its decisions with the UK’s net zero emissions target and that embedding the commitment with the regulator’s remit “looks like it’s increasingly necessary”.
The organisation was speaking to Utility Week about its response to the RIIO2 draft determinations published by Ofgem in July. The window for feedback on the proposals closes today (4 September).
“Yet again Ofgem has prioritised short-term cost savings over the long-term value or the delivery of net zero,” said Barnaby Wharton, director of future electricity systems at Renewable UK.
“Whilst they set out good words in the decarbonisation action plan, they’ve not actually put their money where their mouth is and I think it’s something we saw similarly during the charging reforms. It focuses on the immediate costs rather than the big picture.”
“Take for example, the pre-construction funding,” he remarked. “We need to do a lot of groundwork in order to deliver the ambition for 40GW of offshore wind. That’s been cut back significantly so there’s a question about how much work can be done ahead of time.”
Wharton highlighted particular concerns over the arrangements for proposed uncertainty mechanisms such as the Large Onshore Transmission Investment (LOTI) programme: “They’re saying they’re going to take 30 months to reach a decision for that. Will that take two-and-a-half years? That’s half of RIIO2.”
Along similar lines, he noted that the net zero reopener mechanism will be opened once every six months “so decisions are going to be made quite slowly”.
Wharton continued: “What we’d really like to see, with the other uncertainty mechanisms as well, is just a lot more flexibility and nimbleness and speed from Ofgem to enable all of this to happen, because we know we’re going to need upfront investment.”
Whilst acknowledging that Ofgem does have limited time and resources, he said: “I think this is too slow and I think they could do things much more quickly if they really wanted to.”
He pointed to the introduction of the new Optional Downward Flexibility Management service by National Grid Electricity System Operator as part of its response to the coronavirus lockdown as an example of how fast decisions can be made: “That went through the process of code mods and changes and was signed off by Ofgem in a matter of weeks and that was a really big deal, so it is possible to get this stuff through much more quickly.”
Wharton said the RIIO2 proposals as they currently stand would “put at risk our ability to meet net zero and the ambition for 40GW by 2040″, adding: “I don’t think we see that as possible within what’s stated so we clearly want to see something done to ensure we can deliver that.”
He said although Ofgem has given assurances that it does give due consideration to decarbonisation within its decision-making, “we don’t think they’re delivering on that and actually having an explicit obligation to meet net zero within its requirements looks like it’s increasingly necessary”.
Scottish and Southern Electricity Networks also took issue with the long lead times introduced by proposed uncertainty mechanisms such as LOTI in its response to its draft determination for electricity transmission, warning they will “bind up network investment in red tape”.