Utility Week

UTILITY WEEK | MARCH 2021 | 23 Policy & Regulation posals. And there isn't a clear proposal on delivery, delivery for a programme that will be going on for decades and will have such an enormous impact and will need to be well coordinated at national, regional, local and household levels. "There needs to be a body that is compe- tent to do that." New institutions Maclean believes the best option would be to split National Grid into three parts: the trans- mission owner, the system operator and a system architect, with the latter ful• lling the design function. Meanwhile, the delivery role could be undertaken by a new "Olympic-type authority". Ofgem did acknowledge in its review the calls for some kind of energy agency or sys- tem architect but argued that system opera- tors (SOs) would be "better positioned" to take on this role "given the importance of real-time system balancing experience for eƒ ective system planning". The regulator said: "There are important synergies between the SOs' current control room operation, market development and network planning functions. The 'feedback loop' between these functions enables the sharing of information, technical knowl- edge and expertise vital for performing these functions eƒ ectively." It said: "Separating system balancing and system planning functions could also lead to security of supply risks over time by mak- ing it more challenging to give unequivocal clarity on responsibility for system security between the SOs and an energy agency. "The SOs would retain responsibility for securely operating the system in the short term but the energy agency would be respon- sible for creating and developing many of the tools the SOs would need to perform this function. The closest possible feedback loop is required between those operating the sys- tem and those creating the tools for them to do so, with minimal barriers to the ‡ ow of information." However, Maclean says the feedback loop described by Ofgem does not require the architect and operator to "sit in the same room at the same time. The timescales are so diƒ erent." He says the operator is looking from days and weeks ahead down to "sub-second" timescales, "whereas the system architect is looking at the design of the system over dec- ades, because that's what the lifetimes of the assets are. "There's a much stronger argument to be made for having a whole-system architect than having the architect be in permanent contact with the operator," he states. Patrick Erwin, policy and markets direc- tor, Northern Powergrid, does not believe divorce between the ESO and National Grid is "absolutely necessary" but says "the poli- tics have taken it there". "I think National Grid sowed the seeds of this separation a long time ago by being less transparent than it could be," he explains. That said, Erwin also sees advantages to separation: "There's quite a lot of adminis- trative complexity at the moment – there's quite a lot of government bodies – so I think there's an opportunity, if you are going to carve it out of National Grid, to see what things it can pick up to simplify the land- scape, because there are a hell of a lot of interfaces already in the energy system." He says the energy system is undergoing two major transformations at the same time: decarbonisation and digitalisation: "Having a system that is not too complicated makes all of that easier because it's easier to under- stand, it's easier for people who aren't in the market to enter it and it keeps the account- abilities clear." He says it should be possible for "a rea- sonably intelligent person" to get a basic grasp of the energy system: "Once you've made a decision to completely separate the system operator, I think makes sense to say can we do some administrative tidying up." Erwin is less concerned about the exact arrangements. What really matters is that there are clear roles, responsibilities and accountabilities and that those to which they are assigned have the resources and powers to discharge them: "And then you can worry about the institutions." A National Energy Agency, for instance, would just be "a manifestation of govern- ment, one way or another. It could just be BEIS doing this or it could be BEIS creating a new agency". Erwin continues: "The engagement I've been doing with local authorities has really shown me that we need to – at the simplest level – get much better at integrating spatial planning and network planning, and there's a bit of a gap between national policy and local delivery. There's a lack of capacity in local authorities, which government really needs to solve, but even a lack of capacity in central government. "Part of the argument for institutional reform is actually a cypher for saying we need more resources in the centre." He says achieving net zero is "not quite a moonshot but it's in that spectrum. It's about 1 per cent of GDP between now and 2050. That's a lot of money. But that's the kind of scale of programme we need to do this, if we're actually going to do˜it." Erwin says BEIS's announcement of a review of energy system institutions and gov- ernance shows that "the penny is dropping". He says the government and Ofgem are now "getting their heads around the enormity of this challenge and working out how they're actually going to deliver it". "I think the weather's changed," he says. "Even two or three years ago, we were talk- ing about this in policy terms, and now the front's come through and we're talking about this in delivery terms. "That's subtle, but a really important change. And it's going to mean organisations like us and local authorities and government are going to have to really think about the roles they play." Tom Grimwood, energy editor

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