Utility Week

UTILITY WEEK | FEBRUARY 2023 | 19 Electricity D ecarbonisation targets are driving government policies worldwide, and the energy sector has a big part to play. Enabling the changes required to reduce CO2 emissions will mean both a signi cant expansion in low-carbon generation re• ect- ing a shi• from fossil fuel to renewable sources, and an increased demand for electricity based on a shi• towards electri cation for heat and transport. This is turn requires increased investment in the energy networks. How funding is provided and the areas in which it is focused varies, but a common theme is the need for investment to ensure the future reliability and resilience of energy networks. In Great Britain, energy industry regulator Ofgem has put decarbonisation at the heart of its current revenue-setting process for the electricity distribution utilities. This is re• ected in a signi cant emphasis on investing in networks for the future, with an increase in allowed revenues from previous periods as well as mechanisms to allow for amendments to funding as investment requirements change. In the US, recent federal packages have put a strong emphasis on network investment. Under the Infrastructure Investment and Jobs Act, around $13Šbillion has been made available over ve years under a range of di‹ erent programmes for projects to modernise and expand the US power grid. This includes a number of components speci cally focused on enhancing reliability and resilience. This funding augments a range of grid modernisation programmes already under way across all US states, although the levels of activity and areas of focus vary signi cantly. Whether it is central government funding, local initiatives, or decision making by independent energy regulators, the emphasis worldwide is the same. Leaders recognise the need to invest in network infrastructure to support decarbonisation goals. This should not be surprising, both the growth in renewables and the increased levels of electri cation mean a growing reliance on those networks for our future energy security. To be successful in meeting decarbonisation goals, the pace of change will likely need to accelerate. Networks need to be ready for that change if they are to provide the world class levels of reliability and resilience required to support the demands of users. This requires investment in the networks now, and is why an increase in initiatives such as those Great Britain and the US are a welcome sight. EXPERT VIEW GRANT MCEACHRAN, REGULATORY AFFAIRS DIRECTOR, S&C ELECTRIC Network investment is the key to successful decarbonisation D ecarbonisation targets are driving government policies worldwide, and the energy sector has a big part to play. Enabling the changes required to reduce CO2 emissions will mean both a signi cant expansion in low-carbon generation re• ect- ing a shi• from fossil fuel to renewable sources, and an increased demand for electricity based on a shi• towards electri cation for heat and transport. This is turn requires increased investment in the energy networks. How funding is provided and the areas in which it is focused varies, but a common theme is the need for investment to ensure the future reliability and resilience of energy networks. In Great Britain, energy industry regulator Ofgem has put decarbonisation at the heart of its current revenue-setting process for the electricity distribution utilities. This is re• ected in a signi cant emphasis on investing in networks for the future, with an increase in allowed revenues from previous periods as well as mechanisms to allow for amendments to funding as investment requirements change. In the US, recent federal packages have put a strong emphasis on network investment. Under the Infrastructure Investment and Jobs Act, around $13Šbillion has been made available over ve years under a range of di‹ erent programmes for projects to modernise and expand the US power grid. This includes a number of components speci cally focused on enhancing reliability and resilience. This funding augments a range of grid modernisation programmes already under way across all US states, although the levels of activity and areas of focus vary signi cantly. Whether it is central government funding, local initiatives, or decision making by independent energy regulators, the emphasis worldwide is the same. Leaders recognise the need to invest in network infrastructure to support decarbonisation goals. This should not be surprising, both the growth in renewables and the increased levels of electri cation mean a growing reliance on those networks for our future energy security. To be successful in meeting decarbonisation goals, the pace of change will likely need to accelerate. Networks need to be ready for that change if they are to provide the world class levels of reliability and resilience required to support the demands of users. This requires investment in the networks now, and is why an increase in initiatives such as those Great Britain and the US are a welcome sight. EXPERT VIEW GRANT MCEACHRAN, REGULATORY AFFAIRS DIRECTOR, S&C ELECTRIC Network investment is the key to successful decarbonisation AFFAIRS DIRECTOR, S&C ELECTRIC Network investment is "A common theme worldwide is the need for investment to ensure the reliability and resilience of energy networks." Another signi cant move in is to ease the process of exiting from CM contracts, which is designed to make it easier for temporary shutdowns of gas plants so they can be upgraded with carbon capture equipment. This is another sensible move, says Buck- land: "We don't want the CM to be a barrier to retro tting lots of plant." Alongside proposals to tighten emissions from CM generation, the consultation paper also introduces new three-year contracts for • exible low-carbon technologies, such as demand-side response (DSR) and storage. In a bid to stem a stagnation in the level of the DSR coming forward via the CM, the three-year contracts will help such projects to cover costs, such as for setting up and maintaining metering and communications equipment, says the paper. Until now such projects have had to rely on the one-year contracts that the CM o‹ ers. "A three-year contract is probably more appealing than a one-year contract: provid- ing a multi-year framework certainly pro- vides a stronger signal," says Hollister. But he is not sure that these longer time- frames will provide investors with su› cient comfort to undertake investment. A place for batteries? For battery projects, the CMN tends to provide top-up revenue with arbitraging of prices and service contracts providing stronger streams of cash, says Hollister: "It's not a thing at the moment that is going to make people jump and invest in batteries." Buckland, who advised Theresa May on energy and climate change issues during her spell as prime minister, says: "The chal- lenge with those technologies has always been the fact that they haven't necessar- ily been proven at scale and in a security relatedŠevent. "It's a really important next step in ensur- ing that • exible capacity comes forward but we need to be realistic that we have a consid- erable way to go." Consultation on the paper's propos- als only ends on 3 March. This means the changes outlined in the consultation paper will not come in time for the next round of the CM, which is due to take place this month (February), says Marlon Dey, GB head of research for consultancy Aurora. However, the proposals send "a very clear signal" about the scheme's future direction, he say s: "While there might not be a direct link to the contracts people are bidding in for here, people will see this and take it into consideration when bidding." David Blackman, policy correspondent

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