Who’s connecting the dots?

Only WPD’s business plan has been fast-tracked by Ofgem, but the company has billed for much less green generation to be connected to the grid than Decc says is coming down the line. Megan Darby finds the sums don’t add up for distributed generation.

Everyone involved in modelling the future course of the energy sector is at pains to stress that they produce scenarios, not targets or, heaven forefend, predictions. Will gas prices rise? Will we go for electric cars? Will economic growth return and boost demand? With so many moving parts, it would not do to put too much faith in any particular technology or outcome. Yet somehow, policymakers hope these technologies will combine to allow the UK to meet its climate change obligations.

This unpredictability poses a challenge for network businesses, which must make sure the wires are ready to take on new sources and sinks of power, wherever they might arise. Emerging low-carbon technology adds a new layer of complexity to their maintenance schedules. Distribution network operators (DNOs) have a duty to hook up rooftop solar panels, electric cars and heat pumps, with limited notice of where the next bit of demand will come from. These bits of kit put extra strain on the network. Despite the uncertainty, DNOs plan ahead where and when to replace a substation or upgrade a power line.

The latest evidence dug out by Utility Week reveals a huge gulf between the government’s ambitions for low-carbon technology and what the networks expect to happen. While ministers pull out big numbers for the prospects of this green industry or that, most DNOs are quietly planning for much slower green growth. Their business plans for 2015-2023 do not paint a promising picture for the UK’s ability to hit its legally binding 2020 renewable target or meet its carbon budgets.

What is more, the regulator appears to be encouraging this approach under its RIIO-ED1 price review. Ofgem has praised the DNOs for finding price cuts that can be passed on to consumers, while keeping quiet about their low baseline investment plans to prepare for green technology. At the end of November, after reviewing all the business plans, Ofgem announced that it is fast-tracking Western Power Distribution (WPD), which had adopted some of the lowest forecasts for low-carbon technology. Subject to consultation, WPD will be spared the task of revising its plans to the regulator’s satisfaction, as its five rivals must. It could also be used as a benchmark for the others.

The disparity between the figures put forward by the Department of Energy and Climate Change (Decc) and WPD is starkest when it comes to solar generation. Climate change minister Greg Barker has a well-documented “personal ambition” to see 20GW of photovoltaics installed by 2020. His department has a range of more modest scenarios for the contribution solar can make to the UK’s green obligations. Under the lowest of these, the UK fails to ramp up renewable generation fast enough to meet its 2020 target.

WPD, despite covering sunny Cornwall, is even more conservative in its assumptions. It is forecasting solar installations of just 600MW across its four regions by 2023, based on specially commissioned research from the Centre for Sustainable Energy. That is less than half the volume in Decc’s most pessimistic scenario for the area, and a bare 19 per cent of the 3.2GW high end estimate.

When it comes to electric vehicles and heat pumps, WPD’s “best guess” projections are broadly in line with Decc’s low scenario. The exception is a higher estimate for heat pump uptake in the South West.

Zoltan Zavody, head of grid at RenewableUK, warns that low expectations for low-­carbon technology could become a self-fulfilling prophecy. The danger is that DNOs will seek to pass on the full charge for grid upgrades to would-be developers in the form of prohibitive connection fees.

“Inevitably, there will be a confidence question within distributed generation and particularly the renewables industry,” says Zavody. “As the networks get towards the threshold, there is more uncertainty over whether that grid will be available.

“What will happen is, once you make your application [to connect] the DNO may say: ‘Actually, we are obliged to connect you but it is going to cost you a lot of money because we have not developed the wider infrastructure.’ In an extreme example, you might get a 100kW wind turbine, which is pretty small, being asked to pay a £15 million connection fee.”

He argues that in its zeal to get price cuts for today’s hard-pressed consumers, Ofgem may be failing in its duty to the next generation. “It’s right that expenditure should be carefully regulated,” says Zavody. “However, this should not come at the expense of the connection of distributed renewable generation, which is a key tool for reducing reliance on costly imported fossil fuels and for fulfilling Ofgem’s duty to protect the future consumer.”

Leonie Greene, head of external affairs at the Solar Trade Association, says members are “very concerned” about access to the network. “Some of the local grid operators are trying hard and doing some good stuff but it is all happening rather late. For one developer, 70 per cent of their projects are being derailed by grid issues.”

Accommodating new connections is not all about building up assets, however, and DNOs have been experimenting with lower-cost options. Some solar developers are prepared to accept occasional constraints on their generation rather than having to pay for grid upgrades. In other cases, they team up to share the cost. There are also trials of storage technology, which could help smooth out generation peaks and ease the strain on distribution assets.

Ofgem is satisfied that despite the low starting point, WPD is prepared to flex up for higher demand if need be. Hannah Nixon, the senior partner leading RIIO-ED1, says: “We have been clear that the network companies have to connect whatever comes along in a timely fashion. They have to demonstrate how they are going to flex their work programme to reflect higher levels up to and beyond those needed to fulfil Decc’s targets. This is about what gets funded upfront and how they plan to be flexible.

“WPD did a good job of showing how it would flex to accommodate demand in that area.”

Asked about the implications of the DNOs’ plans for the UK carbon budget, a Decc spokesman simply refers back to Ofgem. He says: “The price controls are the responsibility of the independent regulator Ofgem… Ofgem believes WPD has provided sufficient evidence to demonstrate it has considered the cost implications and resourcing challenges of both higher and lower low-carbon technology volumes.”

WPD declined to comment.

By law, Ofgem has a duty to protect the interests of future consumers, “including their interests in the reduction of greenhouse gases”. What it does not have is a duty to help the government pass any specific target. But if it will not take responsibility for making the networks gear up to the challenge of renewable generation, who will?