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NETWORK / 10 / SEPTEMBER 2018 INDUSTRY INTERVIEW we have set up groups, and the purpose of those groups is to bring systematic user and consumer challenge to the spending plans. "In the past we've done these things in a relatively transparent way. We publish plans on the website and do a lot of consultation. But it's tough to engage people on what are quite technical issues. So in RIIO2 we're going to try – though public hearings – to have a much more structured contest of ideas, arguments and evidence that is open to everyone. We'll be saying to people: These are the areas of contention, this is why they matter to you, this is what the crit - ics are saying – now come along and have your say." Innovation Ofgem's Network Innovation Competition (NIC) and the Network Innovation Allow- ance (NIA) are both funding stimuluses that have helped drive innovation across the sector. Whether or not they remain during RIIO2 in their current form is a question that's still up for debate. "We're still thinking about the particu - lar form that it should take," states Kaul. "So far the decision we've made is that some funding stimulus will continue to be required. It can't all switch to business as usual. In the next decade there are going to be quite a few R&D challenges for our net - works and they will have to evolve to meet the challenges." According to Kaul these challenges will include the rollout of electric vehicles, hydrogen in energy systems and active demand management. "We also need to think about cyber security and how networks stay secure and resilient to much greater physical pen - etration than there's been before," Kaul continues. "These are areas that need some R&D spending and I think if there's no in- novation stimulus then the risk is that the R&D spending just vanishes. As to whether we still keep it in the same form, by running an innovation competition or giving an al - lowance to companies, we haven't decided that yet. "We will liaise with stakeholders to work out what they think is the best way of providing that R&D stimulus. We are also quite interested, and Network readers might have a view on it, as to whether we open it up to third parties. A lot of great ideas are coming from outside of the network sector. We don't currently have the means to have direct third-party engagement in our in - novation programmes. They do engage with us via the network companies, but I think it's an interesting question about whether we should open it up to anybody – as long as the idea they have can be implemented on a network." Electric vehicles Ofgem recently set out proposals to reform network access arrangements which will allow more electric vehicles to be charged from the existing grid. Research from the energy regulator shows that more flexible use of the energy system will allow at least 60 per cent more vehicles to be charged if EV owners only top up outside peak demand times on the grid. "Penetration [of electric vehicles] is still relatively modest. We're keen to push for a reform of how network charging operates to facilitate the rollout of EVs," states Kaul. "The second thing we want to see is distribution companies doing more active management of demand in their area. "These are things we're doing to help the system respond better to the EV revolution. Ultimately, I think it will come down to the charging network. The question is who should pay for the rollout of the charging network across the country. Should the costs go on energy bills or should the users of EVs and manufacturers pay for the rollout of the charging network?" Keeping networks safe When asked about the cyber security of networks and the work that needs to be done in this area, Kaul provides an honest assessment. "We take it very seriously. Ofgem along with BEIS has taken on a role as a compe- tent authority on cyber security for enforc- ing the standards that are published by the Cabinet Office in the energy networks space. I think it will be a theme in RIIO2 which companies have to consider carefully." Ofgem will extend the scope for open- ing up high value network upgrades to the benefits of competition across the gas and electricity sectors in the next price controls. To signal its intent Ofgem has confirmed that National Grid can build the grid up - grade to connect the new Hinkley Point C nuclear power station. However, Ofgem will set the revenue National Grid can earn from the upgrade based in part on its experience in cutting the costs of connecting offshore wind farms to the grid by tendering the ownership of these links. "We've essentially said to National Grid that they can build it out, but the price they get for building it out will be benchmarked using the cost of capital that we observe in the offshore transmission programme." Summary Kaul is excited about the role that RIIO2 will play in the energy sector going forward. "Whether the networks like it or not the change is going to happen in the system. It's already happening around them and although we can facilitate the change we're not the drivers of it and the change will happen anyway. I think the choice the companies have is whether they embrace it or resist it. Where I think the price control can make a difference is in helping them become agents of positive change." Whatever happens it appears that RIIO2 is going to be a challenging settlement, but one that the networks will need to be ready for. The Network Awards will feature a stake- holder engagement initiative of the year category. 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