National Grid consults on locational onshore security factor for RIIO2

National Grid Electricity System Operator (ESO) is consulting on potential changes to the locational onshore security factor representing the level of redundancy designed into the transmission network.

The value, which is set at 1.8 for the current regulatory period, is used as a multiplier in the calculation of locational transmission network charges.

As the first step towards establishing locational tariffs, the ESO models a completely unconstrained network with all circuits in service to ensure they provide stable long-term price signals that are not affected by short-term operational measures.

The prices calculated based on this unconstrained network are then “stretched” using the locational onshore security factor to reflect the extra capacity required to accommodate planned and unplanned outages. The wider zonal tariffs are derived from these stretched prices.

For the RIIO T2 price controls covering the charging years 2021/22 to 2025/56, National Grid has proposed to adopt a security factor of 1.7555 but round the figure up to one decimal to produce a value of 1.8. The ESO said this is in line with the reference number given in the Connection and Use of System Code (CUSC) and the approach it took for the current regulatory period.

National Grid presented its proposals to industry stakeholders at a meeting of the Transmission Charging Methodology Forum (TCMF) in September.

In a letter to interested parties, the ESO said: “Feedback received during the September TCMF was that we consider retaining the decimal places. Since then we have had further discussions with the industry at the TCMF, and the opinions from TCMF were divided, with some favouring not rounding and retaining decimal places and better accuracy, while others were concerned about the weakening of the locational signal in doing so”.

It continued: “In the meantime, we also reviewed the CUSC text to see if it provides any guidance or requirement on whether and how we should apply rounding, however CUSC is silent, though practice to date in this context has been to round the security factor to one decimal place, but in other places decimal places are retained.”

The ESO has therefore put forward the alternative options of rounding the figure to two decimal places to align it with the approach to onshore expansion factors – giving a value of 1.76 – or extending it to eight decimal places to align it with the approach to offshore expansion factors – giving a value of 1.75547656.

“In light of the implication of the locational onshore security factor, we believe it would be helpful to seek wider industry participants’ views on the approach,” the body said.  The deadline for responses is 18 December 2020. The security factor will be finalised and published by 31 January 2021.

Ofgem recently decided to fix the number of transmission charging zones for generators at the current number of 27.