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Ofgem launches review into UK energy system

4/5/2022

Pylon over a residential area in UK Photo: Adobe Stock
New independent bodies could oversee local energy systems across the UK, according to Ofgem Photo: Adobe Stock

Ofgem has launched a review into how the energy system is planned and operated locally in the UK, to ensure it is ready for the expected increase in green, more affordable homegrown power. This could result in the creation of new independent bodies separate from network companies to oversee local energy systems across the country, the UK’s energy market regulator has said.

Local power grids are expected to play a critical role in helping to reduce the UK’s reliance on imports of gas, bring down energy bills and meet the country’s climate goals. Ofgem says that to do this most quickly and at the lowest cost to customers will require ‘a strategic, co-ordinated approach at a local level’.

 

Currently in the UK, each electricity distribution network company is responsible for operating its local power grid and planning for future energy demand. Local authorities also play an important role and need to make sure that these network companies meet the needs of local transport and housing.  

 

Ofgem believes that the current arrangements ‘have gaps, lack co-ordination and could create potential conflicts of interest’ which could add unnecessary costs to customers and delay the transition to net zero.

 

For example, new local markets could play a bigger role in the future to balance power supply and demand flexibly and reduce the need for building expensive new grid capacity. However, if electricity distribution network companies are responsible for these new markets, they face a potential conflict of interest as building new grid capacity would boost their revenues.

 

The Call for Input seeks views from industry, local authorities and other interested stakeholders. In it Ofgem has set out four possible alternative arrangements. These range from separating the local system operation function internally within electricity distribution network companies to setting up new fully independent regional bodies. The Call for Input will close on 7 June 2022.  

 

Click here to find out more about how UK Distributed Network Operators are changing to adopt flexible network operation as Distribution System Operators.

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