Leading industry bodies have welcomed Ofgem’s proposal for a new overseer of strategic planning for the UK’s energy system, and have called for both grid capacity and local energy delivery to be enhanced to meet the country’s future energy needs.
Last week, Ofgem published a discussion paper, floating the possibility of an independent Future System Operator (FSO) as part of plans to develop a net-zero, home-grown energy system.
It was one of a series of reforms put forward by Ofgem, which will be consulted on with the Department for Business, Energy and Industrial Strategy.
RenewableUK has urged Ofgem to ensure the FSO will help boost grid capacity in line with the vast influx of renewable energy expected over the coming decades, with the Government targeting 50GW of offshore wind and up to 70GW of solar power as part of its supply security strategy.
Daniel de Wijze, policy analyst for networks and charging, told City A.M. that the country’s net zero goals had to be the key factor in its policy making, to ensure it had the scope to make the reforms and changes necessary to the UK’s energy system.
He said: “The Future System Operator must accelerate the rate at which crucial new grid infrastructure is built as a matter of urgency, so that we can make the most of the enormous amounts of clean electricity we’re generating, particularly from onshore and offshore wind. To enable this, Ofgem needs a new remit which specifically ensures that net zero is a central consideration for every decision it makes.”
Meanwhile, trade association Energy UK suggested that the FSO was a potential first step – and that more focus needed to be on regional and local plans to help meet people’s energy needs.
Charles Wood, deputy director, said: “We are glad to see the Future System Operator (FSO) being developed in order to improve how we plan for, and operate, our increasingly complex energy system, incorporating more low carbon generation, transport and heating at the most efficient cost to consumers. The FSO is the first step toward improving that process but local delivery will prove increasingly important to ensuring we use regional strengths and attributes to deliver the best outcomes for local customers.”
Ofgem also put forward the idea of reforming the electricity wholesale market, including limiting the price setting potential of natural gas, after spikes on key benchmarks over the past 12 months drove up wholesale costs.
This could be done by splitting the wholesale market – with renewables and gas being priced separately, an idea hinted at last month by Prime Minister Boris Johnson.
In an interview with BBC Radio 4 last month, he said: “People are being charged for their electricity prices on the basis of the top marginal gas price, and that is frankly ludicrous. We need to get rid of that system and we need to reform our energy markets as they have done in other European countries. That is one of the ways, by reforming the market, by changing the way things work, you can get prices down.”