Recommendation 29

HM Government · verbatim extract Accepted

We welcome Ofgem’s work to create a price control framework, through which network projects are approved, which enables strategic investment ahead of need, and its work to accelerate strategic transmission network infrastructure, through speeding up network approvals where appropriate, exempting certain projects from competition to add certainty to network companies so they can prepare their supply chains to deliver these projects, and protecting consumers in doing so. A coordinated and efficient approach to network planning is key to strategic network delivery, and the Government is working with Ofgem and industry to enable this. For example, as outlined above, the Government is working with National Grid ESO, Ofgem and the network companies on the HND, which identifies key strategic transmission projects for connecting new offshore wind specifically. This is the first step towards coordinating planning across the British electricity network and the coordinated, strategic approach is expected to bring significant amount of savings for consumers. Network plans which set out coordinated solutions will inevitably drive demand for the technologies which support and enable coordination, such as multi-terminal HVDC systems. The HND’s recommendations are ambitious but realistic, based on known and well understood technologies. Going forward, the ESO will continue to leverage technologies which are in development in order to reflect these in future network plans. The Government encourages inward investment in UK manufacturing and regularly engages with the supply chain to ensure sufficient investment in renewable energy projects. Ofgem will consider how Anticipatory Investment can be applied to projects included in the HND and have recently published their final policy decision for anticipatory investment capital expenditure recovery for projects pursuing coordination in the Early Opportunities workstream of the OTNR. The policy will reduce the risk associated with anticipatory investment for developers and reduce barriers to coordination. This is done through appropriate allocation of risks between developers and consumers. Ofgem will further be consulting on an early-stage assessment process in early 2023 following feedback from developers. We welcome Ofgem’s work to create a price control framework, through which network projects are approved, which enables strategic investment ahead of need, and its work to accelerate strategic transmission network infrastructure, through speeding up network approvals where appropriate, exempting certain projects from competition to add certainty to network companies so they can prepare their supply chains to deliver these projects, and protecting consumers in doing so. Recommendation 14: In order to utilise the opportunities for renewable energy generation in Wales a system of anticipatory investment in grid infrastructure needs we request further information on the nature of the changes to Ofgem’s powers and the timeline for this to be implemented. The UK Government should also conduct a review with Ofgem of the impact of the current price control mechanism on the level of anticipatory investment in grid infrastructure across the UK.