The Department of Energy and Climate Change (DECC) has issued a consultation on the reform of the UK’s electricity network. The consultation, which will remain open until 17th November, is seeking opinions on three ‘connect and manage’ market models which may be implemented to instigate ‘timely and effective’ reforms of the grid.
The electricity network needs to be improved to allow greater access from renewable and low carbon sources, ensuring security of supply and enabling the government to meet climate change targets. The UK will also need to connect ‘other essential generation’ to the grid, replacing existing nuclear and fossil fuel plant over the next decade.
DECC recognises that uncertainty concerning current grid access arrangements may ‘delay or stop’ crucial investments in the network. The consultation is thus seeking to facilitate the reform process so that ‘generators do not have to wait for network reinforcements to be completed before they can connect to the transmission network’.
Three models are being considered in the consultation:
Connect and manage (socialised): A model that fully socialises any additional constraint costs. Under these arrangements costs will be shared between all users of the network and ultimately borne by consumers.
Connect and manage (hybrid): A model that targets some, but not all, of the additional constraint costs on new entrant power stations. These costs may be limited because of the incentive for new entrants to reduce their impact on overall costs through their choice of location and operation profile.
Connect and manage (shared cost and commitment): A model that requires new and existing power stations to commit to the network in return for greater creativity over charges, or to opt out and be exposed to additional constraint costs.
The government will publish its reaction to the consultation responses alongside a further technical consultation early next year, which will provide detailed drafting proposals for changes to industry licences and codes. These changes will need to be implemented quickly in order to ensure that the new regime can take effect from June 2010.