Ofgem must move closer towards grid charges which will attract new investment in renewables

08 December 2020
Posted by: Rob Norris

Commenting on this morning's announcement by Ofgem on the outcome of its RIIO-2 review of grid charges from 2021 to 2026 in Great Britain, RenewableUK's Head of Policy and Regulation Rebecca Williams said:

'Reaching net zero emissions as fast as possible will require significant investment in our electricity infrastructure. We're glad to see that Ofgem has listened to some of the concerns we raised about its plans to reform the network price control framework with £30bn grid investment to connect low carbon generation across Britain, and a further £10bn on standby, over the next five years. But the plans are still treating net zero as if it is a future aspiration or even an uncertainty. We've been urging Ofgem to put net zero at the centre of every decision it makes, to benefit current and future consumers. To ensure that they do this, it is now vitally important that Ofgem's legal duties and responsibilities are linked more firmly and more specifically to achieving the UK's legally-binding net zero target, not least because this will achieve decarbonisation at the lowest cost to consumers as renewables are the cheapest sources of new power.

'It's good to see that Ofgem recognises the importance of attracting investment to connect offshore wind farms along the east coast of England as well as higher levels of renewable capacity in Scotland including onshore wind, but it's still unclear whether grid charges will be set at the right level to bring forward the investment that's needed.

'Ofgem has also highlighted the need to support the development of hydrogen as a vital step towards decarbonisation - we're calling for a rapid scaling-up of renewable hydrogen produced using electricity from offshore wind to reach net zero.

'We all want to decarbonise at the lowest cost, and the RIIO-2 settlement is rightly designed to minimise costs for consumers. But there's still a risk that Ofgem is underestimating the scale of much-needed grid investment that needs to happen in the next five years, which could mean delaying or restricting the growth of renewable generation on the system. This could in turn result in higher charges for consumers if we fail to capitalise on renewables as our lowest-cost power sources, which calls into question whether this regulatory regime is the right one to support the delivery of net zero going forward.

'The Prime Minister has set clear targets for 2030: reducing emissions by 68% and quadrupling the UK's offshore wind capacity to 40GW. We will continue to work closely with Ofgem to ensure that these goals are achieved'.

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