National Grid loses £1.1m of NIC funding

National Grid Electricity Transmission (NGET) will not receive £1.1 million of funding set aside for it through the Network Innovation Competition after failing to meet criteria set by the regulator.

Ofgem said NGET had failed to justify the cost of building a new battery storage facility over using an existing one, as required before the company is allowed to access the funds for its Enhanced Frequency Control Capability (EFCC) project.

Ofgem required NGET to investigate existing battery storage facilities and trials in the UK to determine if any were suitable for the project, and present a cost benefit analysis, after the NIC’s expert panel “raised some concerns” over the economic benefits of the project.

While NGET demonstrated that existing facilities are not suitable for the project, it failed to present a “robust cost benefit analysis” despite being given two opportunities by Ofgem.

Ofgem said: “The cost benefit analysis includes a number of assumptions that have not been explained or supported by evidence.

“Although we acknowledge the inevitable uncertainty with any assumptions, we would expect to see thorough analysis and robust justification of the assumptions adopted to make the case.”

NGET said it was “disappointed to be refused funding as it thinks there is “potential for new types of frequency control if storage can be combined with solar PV”.

It added it was continuing to explore ways to take the project forward with its EFCC project partners and is “optimistic” it can explore future frequency control without the NIC funding.

NGET presented a first report in June 2015 which Ofgem said was a “cost analysis only” and therefore failed to satisfy the funding conditions.

Ofgem gave NGET the opportunity to submit a second report including an “evidenced-based projection of the number of solar farms that would roll out the hybrid solution which would provide an input to the cost benefit analysis”, which it failed to do.

Ofgem said £1,122,820 of the project costs will therefore be returned to customers using the NIC Funding Direction for 2016.

NGET was awarded £6.9 million, of which £1.1 million was held back, in November 2014 through the NIC to undertake the EFCC project.

The project intends to test the capability of low carbon technologies in providing rapid frequency response to help control system frequency, in place of traditional gas and coal power stations.