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                                                      Ofgem awards National Grid and UK Power Networks NIC funding in a step towards a Distribution System Operator

                                                      National Grid and UK Power Networks have received £9.5m in funding from Ofgem for trialling a market solution that will better manage distributed generation in a step towards a Distribution System Operator.

                                                      From

                                                      Press releases
                                                      – 30 November 2016 12:00 AM

                                                      • National Grid and UK Power Networks partnership wins £9.5m through Ofgem’s Network Innovation Competition for new regional power market model.
                                                      • A world-first trial will maximise network capacity to connect more renewable energy and storage technology in the South East region.
                                                      • Trials could potentially expand to 59 other GB locations with potential savings of up to £412 million for UK consumers by 2050.

                                                      National Grid and UK Power Networks have received £9.5m in funding from Ofgem for trialling a market solution that will better manage distributed generation in a step towards a Distribution System Operator.

                                                      The pioneering whole system approach will help connect additional renewable energy and storage technology in the South East. The proposed solution will reduce the need to build additional electricity infrastructure in the area, saving consumers in the South East up to £1m by 2020 and £29m by 2050.

                                                      Renewable energy, such as solar panels and wind turbines, are becoming more of a feature in today’s electricity network. This is especially the case in the South East where distributed generation around London’s metropolitan area has increased significantly over the last five years.

                                                      The new regional power market trial will improve interaction between National Grid’s System Operator (SO), UK Power Networks’ role as regional electricity distributor and renewable energy generators connected to the distribution system.

                                                      The market will help renewable energy generators to offer their services to National Grid’s System Operator via a UK Power Networks’ Distribution System Operator (DSO) platform. This approach will also provide additional services to UK Power Networks.

                                                      Improving communication, coordination and developing new commercial frameworks will maximise network capacity by better managing system constraints, giving National Grid’s System Operator access to previously unexploited power. It will also introduce new revenue streams for renewable energy generators.

                                                      If successful, the regional power market model could be introduced to 59 other sites and potentially save up to £412m for UK consumers by 2050.

                                                      Richard Smith, Head of Network Capability Electricity at National Grid, said: “This is an innovative world first that will be a major step towards solving a challenge that impacts bill payers across Great Britain.”

                                                      Barry Hatton, Director of Asset Management at UK Power Networks, said: “We are delighted we have been given the go-ahead and we are looking forward to delivering this pioneering project with National Grid.  As highlighted in a recent Government and regulatory consultation, closer coordination with National Grid is required to unlock system-wide benefits and make the most effective use of distributed energy resources.”

                                                      Find out more about Ofgem’s Network Innovation Competition and the five other successful projects here.

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                                                      Ofgem Consults on National Grid’s Intended Sale of its Gas Distribution Networks

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                                                      • Ofgem Consults on National Grid’s Intended Sale of its Gas Distribution Networks

                                                      Ofgem Consults on National Grid’s Intended Sale of its Gas Distribution Networks


                                                      • 21Jul



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                                                      Gas is transported through the National Transmission System to eight Gas Distribution Networks (GDNs) to reach around 22 million consumers in Great Britain. Each GDN covers a separate region. All eight GDNs were originally owned by National Grid PLC. On 1st June 2005, National Grid sold four of the eight GDNs. These are now operated by Northern Gas Networks, Scotia Gas Networks and Wales & West Utilities. National Grid has retained ownership to date of the remaining four GDNs and its distribution network delivers gas to around 10.9 million consumers. In 2005, National Grid also retained obligations with regard to gas distribution that cut across all GDNs (for example providing the emergency call handling service on behalf of all GDNs and acting as the backstop meter provider of last resort). In November 2015, National Grid publicly stated that it plans to sell a majority stake in its UK Gas Distribution Network business, presently owned by National Grid Gas PLC. National Grid has now formally informed Ofgem that it is in early stages of discussions in relation to the sale.

                                                      Ofgem regulates the GDNs as they have a monopoly over the region served to ensure consumers receive the service at an efficient cost using an RIIO (Revenue = Incentives + Innovation + Outputs) price control model. In preparation for the proposed sale, National Grid will seek to transfer the assets and licence of its gas distribution business to a new subsidiary company. Ofgem must decide whether to consent to these proposed transfers. The proposed sale will require its consent in two key areas. Firstly, it is expected that National Grid will transfer its gas distribution network assets placing it outside of its operational control. Second, Ofgem expects National Grid to request consent to transfer its gas distribution licence to the subsidiary company which may result in the need to modify the gas transmission licence held by National Grid.

                                                      Through this consultation, Ofgem is seeking views on the impact of the intended asset disposal and transfer of the distribution licence to the new company. To date there are two areas that have been raised as concerns. Firstly, the new company may not retain responsibility for the current obligations regarding the Backstop Meter Provider of Last Resort (BMPOLR) which places an obligation on National Grid through its distribution licence that requires it to comply with any reasonable request by a relevant GDN to provide, install and maintain a traditional (i.e. not smart) domestic gas meter. The rationale for BMPOLR, introduced from 1st April 2014, is to improve the provision of metering services, during the transition to smart meters. This is achieved by allowing a GDN that may not have significant metering capability to use the backstop provider enabling benefits from economies of scale. Should the obligation not pass to the new company the consumer may suffer a detriment through insufficient metering. Secondly, National Grid currently operates the emergency 24-hour gas and carbon monoxide emergency helpline dispatching engineers in each of the GDNs when called. There is concern that the service level, and the resultant safety standards, may decrease should this be devolved from a centralised control point.

                                                      Ofgem is keen to hear your views on the intended sale particularly in relation to the areas of concern that have been raised. The consultation closes on 9th September 2016. We are formulating our response to the consultation and would welcome your feedback to incorporate into this. To have your say, please email the compliance team at [email protected] or alternatively complete the contact form. To discuss this further please call Melanie Kendall-Reid on 01252 87 87 22.

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