Utility Week

UTILITY Week 29th September 2017

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Page 19 of 31

20 | 29TH SEPTEMBER - 5TH OCTOBER 2017 | UTILITY WEEK Policy & Regulation Event Network Asset Performance conference 21 September, Birmingham Views from the speakers: Phil Lawton, practice manager – power systems, Energy Systems Catapult "The future is not just going to be an exten- sion of the past." Under pressure Energy networks must cope with a fast-changing landscape while satisfying a tough-talking regulator that they're delivering value for money. T he next regulatory settlement for net- works will be tougher on investors, but simpler, Ofgem's senior partner for net- works, Jonathan Brearley, told delegates at the Network Asset Performance conference in Birmingham last week. Brearley reiterated comments, first made in an open letter to the market this summer, that "the next set of price controls will be tougher on investors than this one". He said it was crucial to maintain public confidence in the price control. Brearley promised that a tougher price control wouldn't mean the end of invest- ment, including investment in innovation. He said: "It does look as if returns may come down, and we think we can do that within a price control that delivers the sort of cus- tomer benefits we have seen to date." Ofgem recently concluded its first consul- tation on the overarching framework for the next regulatory settlement, RIIO2. Two of the main points for debate are the length of the settlement, with some suggesting it should go back to five years from the current eight to mitigate growing uncertainty; and the ques- tion of whether the transmission and distri- bution price controls, and the gas electricity price controls, should be aligned. Brearley acknowledged: "It's pretty clear nobody is very good at predicting the future." A key architect of Electricity Market Reform during his time as the senior civil servant Suleman Alli, director of strategy and regulation, UK Power Networks "Innovation is not about spreadsheets, it's about the people in the business." Philip Dingle, director, Lucy Electric "We must understand the value and implications of the data available." at the Department of Energy and Climate Change, he referenced the recent contracts for difference auction which saw offshore wind clear at £58/MWh, saying: "That's 60 to 100 per cent less than we would have thought at the time." Brearley added "uptake [of renewables, eg solar panels] has accelerated way beyond what we would have thought". Other speakers at the conference, organ- ised by Utility Week's sister title Network, highlighted the rapid growth in renewables and the pressure this puts on network capac- ity. They also highlighted the innovation that has emerged to mitigate the pressure. UKPN's head of regulation and strategy, Suleman Alli, said: "In 2010, we would have had 800 connection applications [for genera- tion] per annum – that's gone up to 9,000 per annum. You can't cope with an influx like that unless you innovate." There was a consensus among speakers that a series of solutions will be required as networks meet the energy transition, or what Alli called a "medley" of solutions. These include innovation and new technology; whole-system solutions and new models of cross-vector working; changing consumer behaviour and smart technology in the home and on the grid. This will drive the smarter use of assets, with maintenance and replace- ment carried out on the back of risk assess- ment rather than more simple models such as the age of the asset.

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