Storage ‘risks competitive market objectives’

The original objectives of the UK’s competitive energy market structure are at risk from the growth of distributed resources such as solar and storage, unless rules are changed to allow DNOs to play a more active role.

Navigant’s global head of energy, Jan Vrins, warned energy regulators to take a “hard look” at market structures because “the last thing you want is for all this new technology to lead to higher prices, lower reliability and a significant challenge on society around the large number of stranded assets.”

Vrins said DNOs are in the best position to get the “full value” out of distributed resources, but many regulators are only “tweaking” the framework to incorporate solar and storage.

Instead regulators need to take a “big step” and “stand back and design a new regulatory framework that is geared towards a much more distributed cleaner grid infrastructure.”

DNOs are currently prevented from owning storage assets as they are categorized as generation. The government told the Energy and Climate Change Committee in April it is open to creating a separate license category in the future, but will not make the change immediately.

In contrast regulator Ofgem essentially ruled out creating a new licence so a competitive market can develop.

Vrins said this approach risks more stranded assets “than we have seen in the history of mankind” and urged utilities to present their “very strong business case” to regulators.

“Some of the business cases of large utilities show they can manage community solar or microgrids much better than having them as standalone isolated resources that are not being optimised as total grid.”

“A system that is more distributed can become very complex to manage, and become very expensive to manage. Ultimately customers are going to pay for that.”