Opening networks to competition could delay net zero  

Opening up networks to competition could delay the construction of infrastructure required to deliver net zero emissions, industry figures have argued.

Giving evidence to the House of Lords Industry and Regulators Committee as part of its inquiry into Ofgem and net zero, Cadent director of regulation and strategy Tony Ballance said competition for the delivery of network infrastructure should not be introduced on a blanket basis.

The Department for Business, Energy and Industrial Strategy (BEIS) is currently consulting on proposals to open up the ownership and operation of networks, which are currently local monopolies, to new competing companies.

“It’s horses for courses,” said Balance. “Competition has a significant role to play and we shouldn’t be scared of it, but equally if there is a desire to have competition everywhere, we won’t get on with the things we need to get on with.

“There will be areas where competition makes sense, but don’t underestimate benefit of planning and co-ordination. Selecting where competition is going to be appropriate is key.

“We need to get the balance right between competitive forces and a more planned way of doing things.”

Ballance’s concerns were backed up by Guy Jefferson, chief operating officer at SP Energy Networks

He said: “Introducing a two to three year delay in some projects will cost a lot more money than you will save by putting it into a competitive environment.

“The risk is we introduce time and we don’t have time.”

Ballance, who moved from the water industry to join Cadent 18 months ago, said Ofgem is more “restrictive” in its approach towards funding of projects than Ofwat.

“There is an element of the regulator seeking to get the right answer and what they think an efficient company can provide.

“In a world we need to encourage investment in uncertain technologies, we might need to spend money on certain things that don’t become the right solutions because we don’t know what the right solution is,” he said, giving as an example that there is “no magic answer” to what will be the right balance between hydrogen and electricity in home heating.

Ballance also urged the government not to overburden the mooted independent system operator with too many responsibilities when it is established.

“We have to careful that we don’t chuck everything into the same organisation,” he said, adding that doing so risked creating an “unwieldy” body.

Jefferson told committee that network planning should remain the responsibility of network operators, working with councils.

“We have planning capacity and don’t see replicating that in the system operator would be very efficient. We would have concerns if it were duplicating effort and replicating cost.”