Future System Operator risks overload, Energy UK warns

Energy UK has warned that the “creeping scope” of the Future System Operator (FSO) will lead the new body to lose focus on its core functions.

The concern is raised in the industry umbrella body’s response to Ofgem’s consultation on the future of local energy institutions and governance.

The regulator is proposing that the FSO, which is being established in the Energy Bill, is the lead option to take on the roles of regional system planer (RSP) and market facilitator.

This proposal has sparked a call in the response for “urgent clarity” on the functions and governance structure of the FSO, which is being lined up to oversee the development and planning of both the electricity and gas systems.

It says: “We are concerned that the creeping scope of the FSO creates a risk that it is unable to manage its range of roles, without losing focus on its core functions, which will include an increasingly significant role in shaping the energy system and driving forward competition.”

The response says most EUK members “tentatively consider” the FSO the “best candidate” to take on the RSP and market facilitator roles outlined by Ofgem in its consultation.

But this is neither a “risk-free nor cost-free option”, the response says, adding there needs to be clarity on how the FSO will be regulated. It also calls for answers on how the FSO’s interactions with Ofgem and the government will ensure the new body remains accountable to industry.

While most members believe that expanding the FSO’s national gas and electricity planning remit to the regional level makes sense, more detail is needed, it adds: ‘Without knowing exactly what the Regional System Planner is expected to deliver in practice, it’s hard to say whether the role is correct or the FSO is the correct body to deliver it. It is important that the RSP adds value, rather than simply replicating functions within the remit of existing network operators.’

And the response expresses concern about the ability of National Grid’s Electricity Systems Operator (ESO), which is evolving into the FSO under the government’s plans, to be delivered in a “timely fashion” and whether it will have adequate skills and resources to take on the RSP role.

The ESO’s difficulties delivering on its planning roles, such as significant delays to its Holistic Network Design follow-up exercise, is already creating barriers for those seeking to connect infrastructure to the grid.

The response adds that Ofgem must ensure the RSP adds value, rather than creating another cog in the connections process, resulting in more bodies having to communicate with each other and a requirement for additional sign offs by the regulator.

The response says there are a number of interim “low-hanging fruit” items, which Ofgem could encourage the Energy Networks Association to deliver through its Open Networks programme and thus ensure progress continues in the absence of the regulator’s proposed governance changes.

EUK says more information is also required on how the proposed new market facilitator role, which would deliver greater standardisation in order to create more joined up flexibility markets, will deliver the outcomes Ofgem wants it to.

Noting that it is “important that the market facilitator isn’t marking their own homework”, EUK encourages Ofgem to continue to consider other viable options, such as an independent market platform or Elexon, which are licensed and already have experience with some of the necessary functions.