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A future energy system operator (FSO) could be given a statutory duty to provide advice to government, Ofgem, code managers, councils and other bodies.
In their consultation on the roles and structure of the FSO, the Department for Business, Energy & Industrial Strategy (BEIS) and Ofgem set out an array of new and enhanced roles the body could fulfil.
As well as an advisory role, the consultation suggests an FSO could also be tasked with taking on some secretary of state functions with regard to the Capacity Market and playing an active part in the rollout of hydrogen and carbon capture, utilisation and storage (CCUS).
Ofgem and BEIS say advice from the FSO could be “hugely valuable” in informing their decisions, especially how they will impact future system operability or network investment.
However, they believe this advice could also be of benefit to a much wider range of decision-makers, citing devolved administrations, specified organisations with responsibilities in the energy sector, including the Committee on Climate Change (CCC), code managers and potentially local authorities.
The consultation moots introducing primary legislation setting out a power to request advice or information from the FSO, and a duty for it to respond.
It acknowledges the need to avoid “undue burden” on the FSO so conditions may have to be set to trigger the power. The consultation says: “This could include satisfactory arrangements for allocating or sharing the costs to the FSO of providing this advice or information.”
One area where the FSO could provide advice to councils is around heat and transport decarbonisation, the paper says, including assisting local energy mapping and ensuring councils’ net-zero plans align with the national perspective.
There is scope for the FSO to take on additional duties in relation to the Capacity Market, the consultation says, including some of the functions currently sitting with the BEIS secretary or Ofgem. The consultation also foresees a broader role for the FSO in the design of energy markets “were any reforms to become necessary in future”.
This will be discussed in the upcoming five-year review of the Capacity Market.
The consultation says there is clear scope for the FSO to have an active role in supporting the growth and diversification of hydrogen networks over the 2020. However, it says the exact nature of these responsibilities will be “dependent on greater certainty over (the) future role of hydrogen”.
It suggests that because of the potential level of interaction between hydrogen and electricity and decisions over any control room operations for hydrogen, there could be a case to bring the gas control room into the FSO.
Meanwhile, the FSO could eventually take on oversight of network build-out and expansion of CCUS.
The consultation suggests a range of functions the FSO could take on in system planning and network development, with regard to both electricity and gas. These include holistic and co-ordinated planning for onshore and offshore networks, developing an overall electricity transmission network design and taking a greater role in planning and co-ordinating the gas transmission network, evaluating investment proposals as part of price controls and identifying where new technology is needed.
These would initially be principally advisory functions to support Ofgem decisions but the paper says this could develop further so that the FSO could eventually be required to recommend network designs and contract the work.
An early example of where the FSO could be involved is the work on the holistic design to connect offshore networks with onshore transmission infrastructure.
The FSO is also seen as a “strong candidate” for running electricity network competitions and could also advise Ofgem on areas where network competition would be in consumers’ interests. While it is suggested that the FSO could run tenders as part of an electricity networks competition regime, Ofgem would make the final decision on granting licences.
As well as advising code managers, the FSO could also take on this role for some codes. The FSO is also considered a suitable candidate for an integrated rule making body overseeing energy codes development. However, a separate consultation on energy codes reform did not cite this as a preferred option.
Other areas where BEIS and Ofgem see the FSO playing a role include dispute resolution and co-ordinating and maintaining data standards.
The consultation also stresses that the FSO would work closely with distribution networks in both electricity and gas and could take on new distribution system operator functions as that model develops.
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