Supplementary evidence from Energy UK (ELV0148)

The Energy UK submission included the following section:

A focus on short-term cost-efficiency within regulation and policy has resulted in significant underspend compared to the ambition in power, heat, and transport. As the level of EV uptake increases in line with the Government’s targets, it is critical that the regulatory frameworks are updated to ensure that networks are investing ahead of need, anticipating not only the connection of EVs but also a significant level of electrification of heating. 

Without more visibility of the state of the connections queue at distribution level and an approach to strategically planned anticipatory investment, the ability of consumers to choose when to decarbonise their transport use may be impacted across GB. We encourage Ofgem to adapt the regulatory framework to enable anticipatory investment, but also to establish standards for open data, network monitoring and network connection processes and timelines in order to ensure DNOs are modernising and streamlining the approach at the same pace across GB. 

Is the statement essentially calling for more anticipatory investment in distribution networks?

Yes. Under the new approach expected to be taken to network planning under the Future System Operator, a Strategic Spatial Energy Plan is expected to deliver an appropriate plan for delivery of national and regional energy infrastructure beyond what is visible in the connections queue. This work will need to include consideration of anticipated take-up of low carbon technologies, heat pumps and EVs, at the demand side. This long-term certainty should encourage the distribution networks to invest in an anticipatory way.

If so does this take into account additional anticipatory investment that was allowed for by the RIIO-ED2 price control for 2023-2028? And is it saying that more is required beyond that – as in the amount allowed for in RIIO-ED2 is not sufficient to support EV uptake/chargepoint rollout at pace? Is it possible to expand a little bit on what the section means/entails?

This does consider the anticipatory investment and ‘net zero reopener’ mechanism within RIIO-ED2, which we deem to be insufficient. Whilst, technically, anticipatory investment was possible in the ED1 price controls, it was rarely used, due to a slow and bureaucratic approvals process. The current wait time for a DNO to approve a heat pump connection is around 40 days, and DNOs do not have visibility of issues on low voltage networks (those final stretches of network leading into homes and businesses) until the network overloads. Given that the UK has clear targets and timelines for the uptake of low carbon technologies at the demand side, there is a need to consider how this information, alongside other data streams like vehicle registrations, smart meter data, and active monitoring of low voltage networks can be used to deliver targeted anticipatory investment to enable faster connection of heat and transport technologies.

The recent Connections Action Plan entirely omits distribution network investment, and it is hard for us to quantify the current challenges at that level because of the lack of clear monitoring and transparent data. We have, however, regularly heard from businesses looking to decarbonise their own fleets, as well as from installers of EV charging at domestic and commercial properties, that delays are being seen across distribution networks. Similarly, new developments are finding it difficult to install low carbon technologies due to the cost and time constraints of seeking a larger connection, resulting in new homes and other buildings being constructed without EV charging and low carbon heating, which will later need to be added at additional cost.

It is vital that the Government and Ofgem look to do the following:

-              Improve network monitoring to ensure networks have an accurate understanding of the state of their own networks.

-              Establish clear frameworks for the delivery of more effective evidence gathering to inform network spend, pulling from data streams across the energy, construction, and transport sectors.

-              Deliver a more accurate assessment of the approach taken to anticipatory investment in networks, both in terms of a faster administrative process and a wider definition of anticipatory investment based on those additional data streams.

-              Establish a single, digital point of registration for demand side technologies from EV to storage to heating, to ensure registration is simple and information is shared with all relevant parties at the same time.

-              Deliver the future homes standard and consult on the delivery of a connections action plan / infrastructure strategy for distribution networks.

Additionally, do you know, are DNOs required in any way to make anticipatory investment? Or does the RIIO price control just create the space for investment, and it is up to the DNO as to whether they do it?

To our knowledge there is no requirement that DNOs utilise the net zero reopener process, it is simply an additional tool for them to utilise if their existing funding is not sufficient to deliver for the local area. This means that unless the DNO sees significant uptake of low carbon technologies causing issues on LV networks, they do not have to use the mechanism.