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Operations & Assets UTILITY WEEK | 15TH - 21ST JUNE 2018 | 15 Operations & Assets of 53 concrete rings, each 2.5 metres long and weighing 4.9 tonnes. About 3,700 tonnes of earth was excavated for the tun- nel, which is the last section of a 13-mile water main that links the Amlaird Water Treatment Works to the Highlees district service reservoir near Dundonald in East Ayrshire. If you have an asset or project you would like to see featured in this slot, email: paulnewton@ fav-house.com T he GB energy sector is going through a period of rapid transformation. For RIIO2, Ofgem has emphasised its responsibility to "support innovation into providing the intelligent, flexible networks of the future". There are two approaches, at either end of a spectrum to deliver a co-ordinated and efficient energy system. l Centralised system plan- ning. A system developed by an informed planning agency or "single buyer" could internalise trade-offs across the energy networks, and between competing technologies. l Market-based planning. A system that leaves the development of the energy system to market forces could encourage competi- tion between different technologies. Of course, there is no "silver bullet" and intermediate approaches are possible. Find- ing the right balance within this spectrum is a key regula- tory challenge. There are two broad catego- ries of action that Ofgem could focus on to address this bal- ance: innovation and informa- tion sharing. Ofgem could encourage innovation by rebalancing the risk-adjusted returns that networks can earn on new technologies. This would effectively increase potential returns on relatively risky investments, or lower the risk of investments via regulatory mechanisms. Innovation funding cre- ates "options" that may be exercised in the future in order to meet policy objectives. These include, for example, security of supply and decarbonisation targets. For instance, if the govern- ment does not provide a clear policy on how to decarbonise heat, the value of these options could increase over time as the deadline to meet the carbon budget approaches. Collaboration increases the quality and success of innovation and allows compa- nies to share the costs and risks of innovating. Innovation funding mecha- nisms like the Network Innova- tion Competition (NIC), and the Network Innovation Allowance (NIA) could help. If used by Ofgem in RIIO2, these mechanisms could provide a "public good" by continuing to promote greater cross-network and third-party collaboration. For example, two-thirds of Wales & West Utilities' NIA pro- ject portfolio has been delivered in collaboration with one or more of the networks. With its stated aim of facilitating the development of a flexible energy system, Ofgem's focus should now be on defining what a "whole system" view entails, and what mechanisms will lead to the efficient develop- ment of the system as a whole. To read the full article visit www.oxera.com/ EnergyFramework Sahar Shamsi can be contacted at sahar.shamsi@oxera.com, tel: +44 (0) 20 7776 6624 EXPERT VIEW SAHAR SHAMSI, PRINCIPAL, OXERA Creating a flexible framework for energy regulation Innovation and information sharing are the keys to balancing central and market-based planning.