Written evidence from Ofgem (EVD0065)

Summary of key points

• The energy system is changing rapidly. This creates real opportunities for consumers to benefit from new services and technology and to get better value out of the energy system. Regulatory and market arrangements, as well as industry participants, need to respond to these changes to ensure that the energy system continues to meet the needs of all consumers. We are taking action to address this.
• There is uncertainty about the take up of electric vehicles (EVs) and the subsequent impact of EVs on the grid (eg in terms of timing and location).
• We consider that the current price control pushes network companies to facilitate the connection of new EV charging infrastructure and actively to manage uncertainty on the take-up of EVs without overloading the network and without undertaking expensive or unnecessary network reinforcement. We are considering what further changes may be required in the next phase of our price control framework (RIIO-2).
• We consider that the impact of EVs on the electricity grid can be mitigated if we have a smarter, more flexible electricity system that incentivises customers to charge their EVs when it is lowest cost or rewards customers for being flexible about when they charge EVs. We are taking steps to enable this through our work on network access, charging reform and the Smart Systems and Flexibility plan. We are considering what further changes might be required to ensure that we optimise the benefits of EVs for the electricity system.
• We do not consider that network companies are best placed to lead the rollout of EV charging infrastructure. Instead, we consider that a competitive market is better placed to deliver this.
• In general, we consider that network users should face charges that are reflective of the costs they make on the system. This principle remains relevant for network reinforcement costs that are triggered by the rollout of EV charging infrastructure.

About Ofgem

1.     Ofgem is the Office of Gas and Electricity Markets. We are a non-ministerial government department and an independent National Regulatory Authority recognised by EU Directives. Our principal objective when carrying out our functions is to protect the interests of existing and future electricity and gas consumers. We do this in a variety of ways including:

• Promoting value for money
• Promoting security of supply and sustainability for present and future generations of consumers, domestic and industrial users
• Supervising the development of markets and competition
• Regulating and delivering government schemes

2.     We work effectively with, but are independent of, the government, the energy industry and other stakeholders within a legal framework determined by the UK government and the European Union.

Our response

3.     This response focuses on the issues raised by the Committee that fall within our remit. Our response, therefore, focuses on:

• Our regulatory strategy for the changing energy system
• The impact of EVs on the electricity grid
• The actions needed to manage the impact of EVs on the electricity grid. The actions needed to make the most of the opportunities afforded by vehicle-to-grid technologies (V2G)
• How new infrastructure for EVs and associated grid reinforcements should be sustainably funded

4.     We would be pleased to provide the Committee with further information if it would be useful.

Our regulatory strategy for the changing energy system

5.     Our energy system is in the midst of a significant transformation. The way energy is produced, generated, transported, stored and supplied to consumers is changing. Innovation in technologies and business models has also led to rapid evolution in the energy system. The growth of EVs forms part of these wider changes.

6.     These wider changes in the energy system are presenting both challenges and opportunities. We consider that if these changes are harnessed to develop a more flexible and efficient system, consumers will benefit from an affordable, secure and responsive energy market. These changes are also challenging the regulations and market rules that govern the energy industry. We are working to keep pace with changes to the industry. For example, we are:

a.   Considering how future network regulation, access and wholesale markets may need to evolve to support a wider range of outcomes. This includes the Smart Systems and Flexibility Plan with Government,[1] the future role of the System Operator (SO)[2] and our framework for network regulation (RIIO).[3]

b.   Addressing how some network charges are recovered from users, so that distortions are reduced and all users are treated fairly. This includes our work on the Targeted Charging Review,[4] embedded benefits[5] and access reform.[6]

c.    Facilitating the key enablers of this transition to ensure the critical infrastructure is in place. This includes our work on smart meter rollout[7], half-hourly settlement[8] and the Innovation Link.[9]

7.     These initiatives are modernising our energy market and enabling novel business opportunities to develop in a way that benefits consumers. The electrification of transport is an important part of this.

The growth of EVs

8.     The global EV market grew by 60 per cent last year.[10] There are currently more than 100,000 EVs in the UK.[11] National Grid (NG) predicts that there will be around one million EVs by the early 2020s and potentially almost nine million by 2030.10 Although European EV sales figures are still relatively small, we see that in some markets growth has quickened. For example, Norway has over 130,000 EVs (and 29 per cent of new car registrations in 2016) and the Netherlands has over 112,000 EVs (and 6 per cent of new car registrations in 2016).[12]

9.     There are a number of factors that may accelerate the growth of EVs. Government policy - such as the ambition to end the sale of new diesel and petrol cars by 2040, government grants for new EVs and reduced vehicle tax rates for EVs – can incentivise the growth of EVs.[13] The current growth of EVs is also influenced by falling battery prices, improved EV offerings from manufacturers and growing consumer confidence in EVs.

Impact of EVs on the electricity grid

10. An increase in the number of EVs will lead to an increase in the total amount of electricity that is consumed. 

11. This could lead to an increase in the electricity peak demand, if not managed flexibly. Peak demand is the maximum amount of electricity required at any one moment in a year. Currently this is about 61 gigawatts (GW). NG’s Energy Insights states that the growth of EVs could contribute 4-10 GW to peak demand by 2040.[14]

12. Any increase in peak demand will require additional sources of generation to meet higher maximum demand levels and ensure that we maintain security of supply. Alternatively, this demand could be met at off peak times using renewable electricity or other generation that might otherwise be curtailed. In this response, we focus on the impact of EVs on the electricity grid, as directed by your inquiry.

13. Firstly, new EV charging infrastructure may require new connections assets to be built. These new connections may trigger the need for network reinforcement. The installation of EV charging infrastructure at existing premises may also require customers to increase the amount of electricity that they can import. For example, many domestic households may not be supplied with fuses or connection cables that are large enough to accommodate the use of rapid chargers.

14. Secondly, the distribution network is not designed to provide the maximum household consumption to all households simultaneously. If the take-up of EVs reduces the diversity of customer behaviour (eg if all households have an EV that they charge up in the evening) then this could result in thermal[15] and voltage[16] constraints and a need for the network operator to take action (eg network reinforcement).

Factors that could affect the effect the extent that EVs affect the grid

15. There are a number of factors that could affect the extent to which the rollout of EV charging infrastructure affects the grid. A number of these factors are dependent on the behaviour of EV users. Due to the diversity of EV users, the impact on the grid may be different in different locations (eg rural and urban locations) and at different times (eg in the shorter and longer term).

16. Firstly, the impact of EVs is dependent on the amount of existing spare capacity on the electricity grid and the extent of EV take-up. If few customers use EVs, and these customers are located in unconstrained parts of the network, then the impact of EVs will be limited.

17. Secondly, the impact of EVs on the electricity grid is dependent on the type of EV charger installed and its charging speed. There are three main EV charger types:

a.   Slow charging – (up to 3kW) which takes about 6-12 hours to recharge an EV and is best suited to charging overnight.

b.   Fast charging – (7-22kW) which can which can recharge EVs in about 3-4 hours.

c.    Rapid charging – (greater than 43kW) which can provide about 80 per cent charge in 30 minutes. Most domestic connections are unable to accommodate a rapid charger.

18. Thirdly, the impact on the electricity grid is also influenced by the model of EV charging adopted. There are two main models used for EV charging infrastructure:

a.   Private EV charging points (eg home or office EV charging points). Home charging using a slow or fast EV charger is currently the norm for most EV users. This approach is problematic for customers with no off-road parking. Evidence so far indicates that EV users who charge at home tend to do it after returning from work, which adds to evening system peak demand. Home charging mainly has impact on the local low voltage distribution networks, but may also require reinforcement of higher voltage levels.

b.   Public or semi-public EV charging points (eg EV points at the roadside or for shop customers). This could involve slow, fast or rapid chargers. Centralised public EV charging points with fast or rapid charging that maintain steady usage throughout the day may help smooth peak demand and mitigate the impact of EVs on the network. Public charging may be more likely to connect to the higher voltage levels and could affect either the transmission or the distribution network (depending on the point of connection).

19. The impact on the grid is also influenced by when consumers charge their EVs, which is dependent on the type of charging device, the tariff, and any restrictions on charging. In the shorter term, new models of car usage (eg car sharing and ride hailing) and car ownership of EVs (individual ownership or shared ownership) may influence the impact of EVs on the electricity system. In the longer term, the development of new technologies (eg autonomous EVs or inductive EV charging) could also affect when and how EVs are charged. This could have consequential effects on the electricity grid.

20. The rollout of EVs is also likely to be uneven across demographics, with affordability and opportunity likely to result in EV take-up being concentrated in specific areas (which could include locations with off-street parking and consumers that are able to afford the upfront cost of EVs). It is likely that hotspots will develop. The immediate risk is that increases in load from EV charging will reach criticality in specific pockets of the low voltage (LV) network, rather than across the network as a whole.

The actions needed to manage the impact of EVs on the electricity grid and the actions needed to make the most of the opportunities afforded by vehicle-to-grid (V2G) technologies.

21. We consider that the existing price control includes features to push network companies to manage the impact of EVs on the electricity grid. In the longer term, we consider that the impact of EVs on the electricity grid can be mitigated, and the benefits optimised, if arrangements are in place to provide signals to consumers to be flexible about when and where they charge their EVs. We are taking steps to achieve this. We are also committed to assessing any short-term regulatory, network and tariff implications of EVs to maximise the opportunities they provide and proactively address any risks.

Features of the existing price control framework (RIIO) that should drive network companies to manage changes in how the electricity grid is used

22. The existing package of output and incentives, which runs until 2023, should help distribution network operators (DNOs) to respond to changes in how energy is used because of EVs, while still meeting the needs of customers. For example:

a.   The interruptions incentive scheme (IIS)[17] encourages companies to anticipate the increased loads from low carbon technologies so that they do not overload network assets and cause interruptions.

b.   We incentivise the delivery of health, criticality and load indices to ensure that DNOs are not making efficiency savings at the expense of the network condition.

c.    The efficiency incentive[18] ensures that the network companies do not over-invest to avoid interruptions. It incentivises the companies to look for the most cost efficient solution, which will drive DNOs to adopt flexible solutions (eg demand side response (DSR)).

d.   The package of connections incentives[19] (time to connect incentive, customer satisfaction and connection engagement) encourages the DNOs to consider the needs of connection customers (eg parties wishing to connect EV charge points).

e.   The innovation stimulus[20] package encourages network companies to try new operational, technical, commercial and contractual arrangements in their business. Many projects are looking to maximise the use of existing network capacity to defer or avoid reinforcement and several relate specifically to EVs. For example, we approved £28.3m funding for UK Power Network’s Low Carbon London, which trialed alternative ways of managing the impact of EVs on the electricity network.[21]

f.     The stakeholder engagement incentive[22] drives DNOs to identify and engage stakeholders (eg EV users) and use this to inform how they run and plan their business. The incentive financially rewards companies where the company can demonstrate that the engagement leads to high quality outcomes.

g.   Uncertainty mechanisms[23] will help to manage the uncertainty over the timing and take up of low carbon technologies. For example, if load related expenditure is 20 per cent higher or lower than set in the price control (eg as result of EVs), the DNOs or we can trigger a reassessment.

23. There is uncertainty around the take-up of EVs. Network companies have to manage this uncertainty without overloading the network (causing interruptions) and without expensive or unnecessary reinforcement. Network companies are obliged to comply with relevant technical standards (eg the Distribution Code[24], Grid Code[25] and The Electricity Safety, Quality and Continuity Regulations 2002 (ESQCR)).[26]

24. In the short term, we plan to undertake a piece of work assessing any regulatory implications of EVs, so that risks can be mitigated and the benefits of EVs optimised within this price control. We also intend to review the package of outputs and incentives for our RIIO-2 price controls to ensure that network companies are ready to manage the potential developments in the system, including growth of EVs. This will be important to complement other changes, including smart charging solutions.

25. Through our work on ‘quicker, more efficient connections,’[27] we have also been pushing DNOs to get more out of the existing network capacity without the need for expensive network reinforcement. This could help facilitate the rollout of EV charging infrastructure at lower cost.

Incentives for stakeholders to manage the impact of EVs on the electricity grid

26. We consider that the impact of EVs on the electricity system can be mitigated if we have a smarter, more flexible electricity system that incentivises customers to charge their EVs when it is cheapest or reward customers for being flexible about when they charge EVs. For example, the Low Carbon London (LCL) innovation project demonstrated that EV users reduced their usage by 30 per cent within certain time-periods following the introduction of a Time of Use (ToU) tariff.[28]

27. Flexibility in the electricity system is required to ensure reliable electricity supply. There are two main broad routes for achieving flexibility:

a.   Price signals for flexibility – when any party varies its network requirements in response to the price of network access at a particular time and/or location. For example, ToU tariffs could offer pricing signals to consumers to charge their EVs during pre-established time periods. This could allow EV users to reduce their electricity bills and should ultimately result in lower costs for all network users. Alternatively, a customer may negotiate ‘non-firm’ access rights that allow the network operator to constrain off the customer without compensation during certain time periods, in return for a lower connection charge.

b.   Contracted flexibility - where parties trade and directly contract with one another to procure flexibility. This could involve EV users being contracted and paid by industry parties to shift when (or how quickly) they charge their EVs, either directly or via an aggregator. V2G technologies could also allow plugged-in EVs to export electricity back onto the grid. This could help maintain reliability of supply. Contracted flexibility provides network and system operators with higher certainty of response than price signals for flexibility.

28. The rollout of smart meters (which should be achieved by 2020), the integration of smart appliances, greater consumer engagement and more investment in IT infrastructure will provide new opportunities to develop price signals for flexibility and contracted flexibility. The Automated and Electric Vehicles Bill proposes that, in the future, charge points will only be able to be sold or installed if they meet prescribed requirements and are ‘smart enabled’. Most countries with a high proportion of EVs have also rolled out smart meters and smart charging.

Price signals for flexibility

29. We are taking steps to enable the development of price flexibility:

a.   Our work on access reform should provide greater clarity on network access rights arrangements so that EV customers have the ability to obtain network access based on the relative value they place on it. The access reform project should also ensure “forward-looking” network charges more appropriately signal the costs or benefits to the network of charging EVs at different times and locations. We will shortly publish a working paper outlining the issues with the current framework and providing an initial view on the options for change. We intend to work with the industry to develop options, with a view to publishing our initial proposals for reform in summer 2018.

b.     We have launched a Significant Code Review that aims to develop and then (subject to an Impact Assessment, as part of the Business Case) implement an enduring process to enable market-wide HH settlement. This will expose suppliers to the true cost of their customers’ usage and incentivise them to take steps to help their customers move their consumption to times of the day when electricity is cheaper to generate and transport. This could be done using smart tariffs or other innovative products to incentivise customers to charge their EVs during times at lowest overall cost, taking into account both wholesale and price signals (which sometimes may not align).

Contracted flexibility

30. There are currently relatively few flexibility services (eg DSR) contracted from domestic and small business EV owners. We consider that this is due to limited established markets for EV owners to offer these services. We want to establish new markets for EV owners to offer flexibility services to network operators. We also want to maximise access for EV owners to provide flexibility services to existing markets.

31. We note that there is currently no established market for EV owners to sell DSR services and help manage local network constraints. To help establish this market, we are pushing DNOs to take more responsibility for managing their networks and to find cheaper alternatives to network reinforcement. This should push them to consider innovative, market-based solutions (eg DSR services from EV owners). We do not consider that there are any barriers to distribution system operators (DSOs) and are working with the industry to drive progress in this area.[29] We do not want to rely solely on system operators procuring flexibility as the only means of addressing network constraints because this may not deliver the most efficient outcomes for consumers. We are, therefore, progressing access and charging reform as part of the access project.

32. To help create a market for EV users and other flexibility providers to contract for DSR services, we have also reviewed the existing markets that they could participate in. These are the Capacity Market[30], Balancing Mechanism[31] and Ancillary Services market.[32] DSR providers are already operating in some of these markets (eg in the December 2016 Capacity Market auction, 1.4GW of DSR was contracted),[33] but we consider that changes could be made to help DSR providers to compete on a ‘level playing field.[34] As part of the Smart Systems and Flexibility Plan, we committed to further actions to make these markets work better for DSR providers.

33. Specifically in relation to V2G technologies, it is worth noting that as part of our Smart Systems and Flexibility Plan we have committed to taking a number of actions to address undue regulatory and policy barriers to battery storage to allow it to compete on a ‘level playing field.’ These reforms may be relevant for V2G technologies that seek to act as a battery and export electricity back on the grid.

Better information to allow network companies to manage changes in how the electricity grid is used

34. To manage the impact of EVs, it is important that DNOs know where EV charging equipment is installed. We consider that the price control pushes DNOs to get better network data. Under the terms of the voluntary Institute of Engineering and Technology (IET) Code of Practice, the relevant DNO should be notified if a customer installs EV charging equipment. The industry is considering introducing stronger obligations on domestic customers to notify DNOs if they install an EV charger.

35. Following the rollout of smart meters, access to smart meter data may also give DNOs a better understanding of changes in customer usage (eg as a result of EVs). If a DNO wishes to access household smart metering data, it will need us to approve its data privacy plan.

36. Network companies are also analysing their own networks to improve their data. This should allow them to better understand where network capacity exists but is not recognised or used by current network planning and design practices.

Short-term plan to address immediate challenges and make the most of the opportunities associated with the growth of EVs

37. In action 2.8 of our Smart Systems and Flexibility Plan, we committed to assessing any regulatory, network and tariff implications that EVs represent. As part of this, we intend to work with the industry and government to identify whether there are any other additional steps that are required to address immediate challenges associated with the growth of EVs. In particular, we will assess the risk or issue of:

a.   ‘Smart charging’ signals failing to mitigate the impact of EVs on the electricity system in the short term (ie before the rollout of smart meters, introduction of HH settlement and network access reform) or long term (eg our reforms do not mitigate the challenging impacts of EVs due to a lack of behavioral response).

b.   System reliability or operation issues as a result of the DNOs’ lack of visibility of domestic EV charging installation (ie lack of notification or lack of access to data) and lack of controllability of EV charging points.

38. Where we identify issues that need addressing, we will focus on developing smart and flexible solutions that are consistent with our wider regulatory strategy. We also believe that the industry should consider these issues and bring forward potential solutions, where possible (eg modifications to the industry codes).

39. In order to make the most of opportunities afforded by the growth of EVs (eg the potential benefits of V2G technologies), it is also necessary to think about the retail environment. The retail environment needs to make it easy and desirable for a consumer to take up an EV and engage in smart tariffs. We also need to ensure the retail market protects consumers’ interests as new services are offered and new business models emerge. We consider that the majority of the necessary changes are achievable within the current regulatory framework. However, we have also begun considering whether current market arrangements that put suppliers at the heart of the energy system are still fit for purpose. This may open up more opportunities for EVs, including by providing this service through an increasing variety of electricity supplier business models. Two examples of innovative business models that have approached our Innovation Link because they have encountered regulatory barriers are:[35]

a.   One company wishes for the consumer to be able to charge their EV at any public charge point and bill the energy used back to their home account, rather than paying the price ‘at the pump’. The industry systems do not currently allow this to happen. Changes may therefore be needed to enable this business model.

b.   Another company wishes to disaggregate EV consumption from total household demand and bill this at a different rate. The company could then automate the decisions on when to charge the EV and when to use it to provide other services (eg DSR). The regulatory barrier with this business model resides with the metering regulations. If we want to enable a world where EVs are disaggregated and billed at a different rate, then these regulations may need to be reviewed.

How new infrastructure for EVs and associated grid reinforcements should be funded sustainably

40. In this section, we first outline who we consider should fund EV charging infrastructure (eg the rollout of EV charging points). Second, we summarise how any associated grid reinforcement is currently funded (ie when it is recovered connection charges and when it is UoS charges)[36] and highlight areas where this may change in the future. Thirdly, we provide further views on when UoS charges should be invested in grid reinforcement to ensure that this is sustainably funded.

Who should fund EV charging infrastructure (eg EV charging points)?

41. We do not consider that network operators should lead on the rollout of EV charging infrastructure. There are a number of reasons for this. Firstly, it would increase costs for all electricity consumers, including those that are not EV users. Secondly, we do not consider that network operators are best placed to manage the uncertainty associated with the take up of EVs and to decide where and how EV charging infrastructure should be rolled out. We believe that any network operator-led rollout of EV charging infrastructure would hold a high risk of investing in EV charging infrastructure that is not used (ie under-utilised assets). Thirdly, there is already a market for installing EV charging infrastructure. If network operators are required to lead the rollout of EV charging infrastructure then consideration would need to be given to the impact of this decision on this market.

42. We do not have a preference for the type of EV charging infrastructure that is installed. Instead, we consider that we should let a competitive market develop and fund the installation of EV charging infrastructure. The market should dictate when, where and how EV charging infrastructure is built. We consider that a competitive market, with appropriate charging signals, will allow the best solutions to flourish and deliver the most efficient system for consumers. Our priority is ensuring that different models and approaches are able to compete against each other on a level playing field. Any government decision to provide funding for a specific type of EV charging infrastructure should consider the preferences of EV users and the impact of any decision on the electricity system.

Who currently funds any associated network reinforcement required for EV charging?

43. Network companies can recover network reinforcement costs from two categories of customer (connection customers and Use of System (UoS) customers). In principle, we consider that network users should face forward-looking charges that are reflective of the costs and benefits they make on the system, are sufficiently simple, transparent and predictable to support efficient investment, are reflective of an appropriate allocation of risk and provide a level playing field across different types of users or technologies. In general, we want to avoid situations where network users incur forward-looking charges for reinforcement costs that are not associated with their own network usage.[37]

44. When a new customer requests to connect to the distribution network (eg a new EV charging point) or an existing distribution customer requests to increase its capacity, and when this triggers network reinforcement, then the connection customer pays their proportion of these costs as part of a connection charge. UoS customers pay for the rest of these reinforcement costs.[38] There are protections in place to ensure that connection customers and UoS customers only pay for their fair share of the costs incurred. The connection charge sends a price signal to locate EV charging points in areas where there is available capacity, because it will be cheaper to do so.

45. Where network reinforcement is triggered by an existing premises below 100 amps per phase (ie domestic and small businesses) installing EV charging infrastructure, all reinforcement costs are paid for by UoS customers. This is because DNOs are unable to identify all customers that trigger these costs. Under standard licence condition 13C of the electricity distribution licence, licensees are obligated to recover the costs of any reinforcement caused by load or generation growth by domestic and small business customers through UoS charges.[39]. At RIIO-ED1 we stated that “this is an interim measure until sufficient smart metering data is available to identify those who trigger reinforcement and incentivise them to manage their consumption in order to avoid reinforcement”.[40]

46. The cost of reinforcing the transmission network is recovered via transmission UoS charges. We consider that this is appropriate because reinforcement of the transmission network benefits wider UoS customers.

47. Although all network users pay UoS charges, the total amount of UoS charges paid by an individual customer is dependent on their impact on the network. The ‘forward-looking’ element of UoS charges is designed to be cost reflective so that the costs of network reinforcement are primarily recovered from customers that drive the need for it. As part of our work on access reform, we are reviewing what changes should made to forward-looking charges to ensure that they adequately reflect the costs and benefits of customer’s usage on the network. We are also reviewing changes to introduce more choice into the type of network access. For example, this may involve households buying additional access rights to have additional capacity. This additional capacity could cost less if it were confined to off-peak periods, or if it allowed network operators to interrupt that additional supply during network constraints. To help support this, network operators will need to engage with network users and provide sufficient information to allow network users to make informed decisions about their access requirements.

48. The total revenue that network companies can recover via UoS charges is capped under our RIIO price control. Network companies must propose and justify the total amount of revenue that they require for the price control period.[41] For RIIO, the network operators’ forecasted changes in the electricity system (eg the electrification of transport and heat) formed part of their proposed revenue allowance amount. EV stakeholders had the opportunity to engage with the companies and Ofgem to inform our decision on the revenue allowance. Both the network companies and Ofgem are required to take into account the need of future consumers.

49. To account for uncertainty, such as the potential growth of EVs, the price control also includes mechanisms to allow for changes to the total amount of revenue that the network companies can recover within the price control period:

a.   All costs are subject to the efficiency incentive. If the volume of reinforcement expenditure work is greater than anticipated, the network operator will share the additional cost with its customers.

b.   During a price control period, a network operator has the opportunity to justify to us that additional revenue is required to account for changes in level or pattern of network usage (under the load related expenditure reopener).

Network companies are not incentivised to invest in network reinforcement ‘ahead of need’

50. Network operators are not incentivised to invest in network reinforcement in anticipation of future changes in usage, unless there is strong evidence that consumers will benefit as a result.

51. Allowing network companies to increase investment ‘ahead of need’ (eg in anticipation of increased demand due to EVs), would reduce the cost for connecting new EV charging points. However, it has downsides:

a.   It would increase the total amount of UoS charges paid for by all network users, including those that are not EV users. This increase in costs to consumers would not necessarily result in benefits to them.

b.   It increases the risk of infrastructure being built and paid for in anticipation of future energy use that does not emerge (ie ‘under-utilised assets’). With uncertainty on the take-up of EVs in terms of timing, volume and location, selecting the exact locations for proactive upgrades of the grid is challenging. For example, DNOs do not know whether to reinforce the local LV networks in anticipation of more home chargers or the high voltage (HV) networks in anticipation of centralised, rapid charging stations.

c.    It would be difficult to ensure that investments benefited EV infrastructure, and not other increases in demand.

52. As part of the current price control, we allowed network companies to submit specific cases for investment ahead of need, which appropriately shared this risk between themselves, connecting customers and UoS customers. UK Power Networks (UKPN) demonstrated a strategic approach for investment ‘ahead of need’ in specific schemes in London, which would deliver benefits to UoS customers.[42] As part of the RIIO-ED2 price controls (which will run from 2023), network companies will be able to submit additional proposals for investment ahead of need to facilitate the rollout out of EV infrastructure and we will consider if these will deliver benefits to network consumers.

November 2017