Step change needed in RIIO2 to meet decarbonisation goals

Current proposals for changing the price controls of distribution network operators (DNOs) go “nowhere near” enough to help decarbonise the UK’s energy system, according to one of the sector’s leading academics.

Catherine Mitchell, professor of energy policy at Exeter University, said last week that the UK had “no chance” of meeting the decarbonisation goals set by the Committee on Climate Change unless RIIO2 resulted in a step change towards a more flexible energy system.

Speaking at the launch of a report by the Energy and Climate Intelligence Unit, she said that RIIO2 is due to end before 2030 when the electricity system is expected to be substantially decarbonised in order to meet the UK’s Paris climate change agreement commitments.

“If we really want to make it happen, we have to make sure that RIIO2 is set up to make it happen.

“The incentives they (Ofgem) are currently talking about and payments they are currently allowing for DNOs and the requirements to move to DSOs [distribution system operators] are pitiful: nowhere near what is going to be needed to have a decarbonised energy system.”

Mitchell said that the price control regime must be retooled for this “21st century new energy system” but the regulator’s current thinking remained in hock to an old model of top down delivery from big power plants to passive consumers.

She called on Ofgem chief executive Dermot Nolan to ensure that top level messages about the need for a smarter and more flexible energy system are translated into the nitty gritty of detailed rules.

“This really requires Dermot to say this is going to happen and stand up to the network companies that like doing what they are doing.

“In a world where everything has changed it’s not easy for them but I really believe there are great opportunities out there.”

The academic also said that the requirements on DNOs to plan the transition to become distribution system operators are not far reaching enough because they do not extend as far as people’s homes where much of the flexibility in the system is emerging with growing uptake of electric vehicles.

She said: “The requirement on DNOs is breathtakingly inadequate, nowhere near.”

Mitchell was backed up by Paul Massara, chief executive of energy blockchain platform Electron.

The former Npower CEO said: “We need a flexible dynamic system that allows flexible assets to come into the system.”

He also predicted that as the price of wind and solar continues to fall to eventually become marginal, no new combined cycle gas turbine power stations will be built.

Conservative backbench MP James Heappey, who chaired the launch, said: “It is hugely important not to allow the perpetuation of the myth that renewables and clean tech only happens when government writes a big cheque: there are market led solutions and plenty of money in the City ready to fund this.”