Strategic energy plan can provide ‘rallying place’ for debate and decisions

A Strategic Spatial Energy Plan will provide a “rallying place” for “good decision-making and sensible debate” by industry, the government and regulators, the electricity networks commissioner has argued.

Giving evidence to the House of Lords Science and Technology Committee, Nick Winser said the plan will “narrow down the universe of possible outcomes” and help people to understand the implications of key decisions.

The creation of a Strategic Spatial Energy Plan by the soon-to-be Future System Operator was one of the headline recommendations of Winser in his recent report to government on how to accelerate the build out of the electricity transmission network.

Winser said the plan should be overseen and approved by Ofgem and produced with input from the Department for Energy Security and Net Zero (DESNZ). He said both the government and the regulator should regularly endorse the plan, which should be incorporated into the government’s National Policy Statements.

The electricity networks commissioner told the Science and Technology Committee that the plan will not “represent a definitive view of the future”, but will instead provide “a rallying place for good decision making and sensible debate”.

“Clearly some parts of the plan will be speculative,” he explained. “Some parts will have decisions that we’re not yet ready to make as a country.”

He said there is “a lot of good will in the industry and enthusiasm to move quickly” to work through “what is quite a complex set of interacting technologies and needs”.

Winser said: “The mere process of starting to do that will help us tremendously in terms of identifying what needs to be decided when and the indeed the implications of not deciding things, which may be legitimate in some cases.”

He said: “That will also enable us to look at whether we’ve got the right regulatory and market signals in place to get each part of that plan delivered, mainly by private investment.”

When asked which areas are subject to more or less uncertainty, Winser told the committee: “We’re probably in a position to be reasonably hard on offshore wind, solar volumes and the distribution thereof.

“There’s obviously a big call to be made on domestic heating and the National Infrastructure Commission had a lot to say on that last week. That’s not what today is for but that decision at the moment is forecast for 2026.

“You could leave that unmade in the plan – it doesn’t mean you can’t have a plan – but you’d have to have some assumptions in there which the government, DESNZ, might not be prepared to endorse, and legitimately so if they still think there’s some discovery to be done.”

Claire Dykta, head of markets at the Electricity System Operator (ESO), backed up Winser on the benefits of such a plan: “The regulator could use it in its regulatory decisions to understand the impacts of choices it’s making. The government could use it in terms of policy decisions.

“Whilst I agree with Nick that it doesn’t create a definitive central plan, what it does allow you to do is remove any outliers or understand the consequences of decisions you might have otherwise made without that spatial plan being there.”

Responding to queries about when the Future System Operator (FSO) will be created and how soon it will be able produce a Strategic Spatial Energy Plan, Dykta said subject to the passage of the Energy Bill, the current intention is for the FSO to be established by 1 July next year.

She said the FSO would look to publish an early version of the plan “towards late next year or early the year after”, adding: “We’re in discussions with the department at the minute as to when is practical in terms of publishing something meaningful.”

Despite the remaining uncertainties, Winser said: “I think we’ve absolutely got enough information to create this. In fact, just the activity of bringing together what we do know would narrow down the universe possible outcomes so quickly.”

He said: “I think it would bring some much needed certainty to the private sector in bringing investments right across the industry and help us in competing in the international space for resources against the [Inflation Reduction Act] in the States and the legislation passed by the European Parliament.”

They were both were speaking to the committee as part of its ongoing inquiry into long-duration energy storage. Winser said an important part of the plan would be modelling where long-duration storage would be located: “To give you a straightforward example of that; if you’re going to have long-term storage of hydrogen in the north of Scotland in substantial amounts then that will have an impact on what size of hydrogen pipes you need to come south but also what size electricity cables you need to come south.”

Winser noted the recent findings of the National Infrastructure Commission in its second National Infrastructure Assessment, which called for 30TWh of low carbon “persistent flexible generation” annually by 2035. Winser said this would equate to around 12GW of generation capacity, which could include, but not be limited to, hydrogen generation and gas generation with carbon capture and storage.

He said the commission – which he sits on – had also called for the creation of a 25TWh strategic energy reserve by 2040, consisting mostly of hydrogen: “That’s about two months’ worth of the non-renewable part of the system that we would see in the future.”

“We haven’t gone into whether we need discrete physical storage for those two things,” he remarked.

Winser was additionally asked for his thoughts on the introduction of locational power pricing, which is being considered by government as part of its Review of Electricity Market Arrangements.

“I think there’s a real tension between economic purity and urgency,” he responded. “There is, on many components, a real need for speed.”

He said: “The current electricity trading arrangements were set up 30 years ago and I’ve been involved in discussions for 30 years around locational marginal pricing. It has a lot to commend in terms of economic purity but this is a tough thing for an existing market to transition from a wholesale price to locational marginal pricing.

“And there is a worry in my mind that we spend several years or more debating that and that creates a hiatus for private investment”.

Winser said his suggestion is to keep the current “postage stamp” model for wholesale power pricing and overlay this with “a series of locational and temporal markets where we need to encourage particular behaviour from both the demand side and the generation side”.

“It wouldn’t get to quite the same place but it may get a substantial amount of the potential benefit of clearer locational and temporal pricing without having to go through an enormous debate over the overall market structure and the consequence of delay,” he concluded.