RIIO must evolve, urges former National Grid exec

RIIO must be allowed to evolve in response to the transformation of the energy system says Energy Systems Catapult chair, Nick Winser.

The former National Grid executive director and architect of the RIIO regulatory framework has said that the RIIO model must be allowed to evolve in response to a changing energy system, including the rise of distributed generation and demand side technologies.

“RIIO was a massive step forward for encouragement of innovation. And it massively moved forward regulation of utilities,” said Winser in an interview with Utility Week.

“But I am sure there will be good debate about what will be fit for purpose as you see the emerging picture of all these different dimensions of change, right across the energy system.”

Winser knocked back the idea that there is a need to preserve the RIIO framework in its current format in order to maintain investor confidence.

“Change is just part of the evolutionary progress. We all need to be ready to see the model evolve in a sensible way to reflect the changing views of the transformation of the energy system,” he said.

Winser advocated the creation of a framework which encourages innovation, not only from power and gas distribution network companies but also from small suppliers and universities. He said there is a need to “think positively” about such reforms to “business models and market structures” because the rise of distributed technologies will “require very many different players to work together with broad based incentives.”

Winser also identified the need to allow network companies to realise more tangible benefits when they take a proactive approach to innovation. “There is no normal market premium return for being innovative in regulated utilities. If you put up the speculative cash and it turns out you’re right, you still get the same return. If you put up the cash and you’re wrong, you eat the downside – there’s no upside.”

Utility Week’s interview with Nick Winser will be made availble online shortly and will be availble in print on Friday 30 October.