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14 | 22nd - 28th January 2016 | utILIty WEEK Policy & Regulation This week Ofwat defines audit of water market opening Review of the cost/benefit of opening household water retail market to competition detailed Ofwat has set out how it plans to conduct a review of household water competition. Following an announcement from the Treasury, the regula- tor published its dra terms of reference, stating how it will conduct a review of the costs and benefits of introducing competition into the household water retail market. The review will look at different scenarios in which this could happen, for example a "thin" retail market, where market activities provide only core retail activi- ties; or a "thick" market, which includes a wider scope of activities including resource procurement and local distribution. A "narrow" market will also be considered, in which a specific subset or subsets of household customers are contestable, allowing different regions or segments of the market to open at different times; and a "wide" mar- ket, in which all household customers are contestable. Because of the constraints of the timescale, Ofwat said it has already begun its work on the review, but it added it would welcome stakeholder views on any pos- sible refinements or gaps in its proposed approach that it "might take into account as the review progresses". Ofwat chief executive Cathryn Ross said: "Opening up choice is a decision for government. We have com- mitted to a rigorous review that is open, transparent and evidence based." Ofwat will reveal its initial findings in July for com- ment, before publishing a full review by September. LV EnErgy UKPN joins storage reclassification call UK Power Networks (UKPN) has added its voice to industry calls for the reclassification of energy storage as a separate licensed activity to help drive develop- ment of the technology. UKPN is undertaking a two- year trial of large-scale storage with the largest battery on the UK electricity system at its Smarter Network Storage project facility at Leighton Buzzard. The project has already made a number of recommendations on future regulatory and market frameworks for storage to the Department of Energy and Cli- mate Change and Ofgem, includ- ing a change in classification. Martin Wilcox, UKPN's head of future networks, said: "We recommend it be classified as a distinct 'licensed' activity to pro- vide clarity within the regulatory framework for storage, recognis- ing its distinct characteristics, and also removing some of the barriers to wider adoption." WatEr Resilience taskforce will review progress The taskforce for water resilience will meet again to check on the implementation of its ten recom- mendations to Ofwat. Chair Jacob Tompkins said the taskforce would hold a "task and finished" meeting in about a year's time, to evaluate progress. The taskforce of 12 water experts was created as an arms-length body by Ofwat in response to a new statutory duty for resilience in the Water Act. It began scrutinising water firms' plans and documents in July, and in December produced ten recommendations to help meet challenges such as trends in demographics and the impact of climate change. ELEctrIcIty PM cool on Swansea Bay Tidal Lagoon The future of the proposed Swansea Bay Tidal Lagoon has been cast into doubt aer the prime minister expressed concerns about its cost. The 320MW project would be the first of its kind, providing clean, reliable power for more than 155,000 homes according to Tidal Lagoon Power, the company trying to get it built. But cost has already been raised as an issue, with a report in March 2014 by consultancy Poyry suggesting a strike price of £168/MWh might be required. Speaking last week, David Cameron said: "The problem with tidal power, simply put, is that at the moment we have not seen any ideas come forward that can hit a strike price in terms of pounds per megawatt- hour that is very attractive." Go with the flow: Ofwat has already begun work Political Agenda Mathew Beech "Storage and small nuclear now top the PM's wishlist" "I completely disagree. I couldn't disagree more fundamentally. That is total and utter nonsense." Those were the words of the prime minister when quizzed on whether the government was reneging on its environmental responsibility and becoming less attractive for those wanting to invest in green energy. David Cameron was adamant his government is the greenest ever, and that the UK remains an attractive place for investors in renewables and low carbon. Tidal energy suffered simi- larly, despite the PM's keenness on the idea. "My enthusiasm is reduced slightly by the fact that the cost would be quite high," he told the committee. Storage and small modular nuclear reactors now top the PM's wishlist, with both set to benefit from extra funding, some of which could be from the £1 billion pulled from CCS. He will just be hoping that investors in the UK share his enthusiasm. He told the Liaison Committee that 98 per cent of the solar pan- els in Britain had been installed while he has been in Number 10. Counter to this, and the argument put to the PM by ECCC chair Angus MacNeil and Efra committee chair Neil Parish, is the cooling of support for two renewables technologies – or the complete removal of £1 billion in the case of carbon capture and storage (CCS). The response was the same on both fronts. Cost. Cameron said the £1 billion for CCS would not have been worthwhile as the price of CCS-generated electric- ity remains too high and would put too much burden on bills.