Source · Select Committees · Welsh Affairs Committee
First Report - Grid Capacity in Wales
Welsh Affairs Committee
HC 218
Published 21 October 2022
Recommendations
2
Acknowledged
Para 41
We recommend that the Government explain the timescales of “today” and “tomorrow” in the context...
Recommendation
We recommend that the Government explain the timescales of “today” and “tomorrow” in the context of grid capacity in Wales. Further to this we recommend that the Government explains the evidence for its statement that the electricity grid in Wales …
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Government Response Summary
The government recognises the challenges faced in Wales and evidence provided and states that network regulation is a matter for Ofgem.
Wales Office
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5
Acknowledged
Para 50
We recommend that the UK Government task the new Electricity Networks Commissioner to determine the...
Recommendation
We recommend that the UK Government task the new Electricity Networks Commissioner to determine the grid infrastructure necessary to enable industry, communities and businesses in Wales to decarbonise heat and transport in line with net zero targets.
Government Response Summary
The government is reducing timelines for delivering strategic onshore transmission network infrastructure and appointed an Electricity Networks Commissioner, who is leading a project to identify areas where improvements could be made.
Wales Office
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8
Accepted
Para 63
We note the work by the Welsh Government to develop a long-term plan for energy...
Recommendation
We note the work by the Welsh Government to develop a long-term plan for energy networks in Wales and call on the UK Government to explain how it is engaging with this. The UK Government needs to explain how it …
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Government Response Summary
Strategic planning of the network takes account of network needs in Wales, and the Holistic Network Design (HND) recommends connections and infrastructure for projects in the Irish Sea and Celtic Sea. Welsh Government representatives feed into the HND through monthly meetings.
Wales Office
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14
Accepted
Para 77
It is not equitable that grid reinforcement costs should be shared by consumers in an...
Recommendation
It is not equitable that grid reinforcement costs should be shared by consumers in an area because this would create a higher burden for rural households and businesses and those in areas which historically lack existing grid infrastructure. We ask …
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Government Response Summary
The costs of connecting a project to the existing network are charged to the connecting customer, and from April 2023, reinforcement costs will be met by electricity billpayers in the relevant distribution area.
Wales Office
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16
Accepted in Part
We are encouraged to see the new Electricity Networks Commissioner appointed with a remit to...
Recommendation
We are encouraged to see the new Electricity Networks Commissioner appointed with a remit to reduce timelines and look forward to understanding in more detail how this will be achieved. However, it is not clear that the UK Government appreciates …
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Government Response Summary
The government recognises the need for a step change and outlines actions from the Electricity Networks Strategic Framework (ENSF) and BESS to cut timescales. They mention amending National Policy Statements and a National Infrastructure Planning Reform Programme but do not commit to a projected timeline for reducing processing times by 50% within a year.
Wales Office
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20
Rejected
Para 99
We recommend that the UK Government amend Ofgem’s primary duty to include both ensuring the...
Recommendation
We recommend that the UK Government amend Ofgem’s primary duty to include both ensuring the best value for consumers and achieving net zero targets, by bringing forward government amendments to the Energy Bill. This would provide strong signals to developers …
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Government Response Summary
The government does not consider an amendment to Ofgem’s primary duty necessary, as they believe the existing duty to protect consumers' interests already includes the reduction of greenhouse gases.
Wales Office
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22
Accepted
Para 110
The Government should outline the circumstances in which higher grid construction costs, for example due...
Recommendation
The Government should outline the circumstances in which higher grid construction costs, for example due to undergrounding, are justified to enable rural communities to keep pace with the decarbonisation transition.
Government Response Summary
Ofgem is revising how customers are charged for connecting to distribution networks to reduce connection costs, and project approval is a matter for Ofgem.
Wales Office
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24
Rejected
Para 117
We recommend that the Government engage directly with community energy projects in Wales to understand...
Recommendation
We recommend that the Government engage directly with community energy projects in Wales to understand the difficulties they face connecting to the grid. The UK Government should lead a working group made up of the Welsh Government, grid infrastructure owners, …
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Government Response Summary
The government states that the Welsh Government has responsibility for renewable energy projects under 350 MW and community energy schemes, and that the Community Energy Contact Group (CECG) has been re-established with a representative from Community Energy Wales. They decline to establish a separate working group at this time.
Wales Office
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25
Rejected
Para 118
We recommend that the UK Government strengthens the legislative framework to support the growth of...
Recommendation
We recommend that the UK Government strengthens the legislative framework to support the growth of community energy schemes. The Energy Bill provides a potential opportunity to do this.
Government Response Summary
The government states there are no legislative barriers to community energy groups, and so has no plans to bring forward legislative proposals at this time.
Wales Office
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27
Acknowledged
The Government should incentivise energy companies and transmission infrastructure owners to provide benefits to communities...
Recommendation
The Government should incentivise energy companies and transmission infrastructure owners to provide benefits to communities hosting network assets. Communities should be directly consulted on the benefits they would like to receive. A starting presumption 40 Grid capacity in Wales should …
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Government Response Summary
The government states that it has already committed in the BESS to review community benefit options for electricity network infrastructure, and is currently engaging with stakeholders to explore a more standardised approach to local community benefit packages.
Wales Office
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29
Accepted
Para 142
The UK Government should use National Grid ESO’s Future Energy Scenarios to work with energy...
Recommendation
The UK Government should use National Grid ESO’s Future Energy Scenarios to work with energy companies and grid infrastructure owners to determine areas where anticipatory investment in grid infrastructure would be justified to achieve net zero targets. Where anticipatory investment …
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Government Response Summary
The government highlights Ofgem's work to create a price control framework that enables strategic investment ahead of need, along with efforts to accelerate strategic transmission network infrastructure and protect consumers. They state they are already working with National Grid ESO, Ofgem, and network companies on the HND, which identifies key strategic transmission projects.
Wales Office
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30
Acknowledged
In order to utilise the opportunities for renewable energy generation in Wales a system of...
Recommendation
In order to utilise the opportunities for renewable energy generation in Wales a system of anticipatory investment in grid infrastructure needs to be created and implemented urgently. In the government response to this report, we request further information on the …
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Government Response Summary
The Government is supportive of Ofgem's work to ensure its network price control is more forward-looking and enables strategic investment ahead of need. They regularly engage with Ofgem to understand their work on electricity network price controls and welcome the agile approach to regulation to enable strategic investment at the distribution network level across Great Britain.
Wales Office
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32
Acknowledged
Para 153
Due to the urgency of the situation the UK Government needs to take control of...
Recommendation
Due to the urgency of the situation the UK Government needs to take control of electricity grid network design by setting deadlines and targets for Ofgem, grid Grid capacity in Wales 41 infrastructure owners and other significant bodies including National …
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Government Response Summary
The government states its commitment to delivering a secure, resilient, net-zero network, engaging with stakeholders and speeding up planning processes, but provides no specific commitments beyond ongoing engagement and existing plans.
Wales Office
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33
Acknowledged
As well as considering the grid in Wales as part of a Great Britain enterprise,...
Recommendation
As well as considering the grid in Wales as part of a Great Britain enterprise, the UK Government must recognise the distinctive challenges and opportunities associated with the grid in Wales. The UK Government should engage directly and regularly with …
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Government Response Summary
The Government recognizes the distinct challenges and opportunities in Wales and states that the Welsh Government is represented on OTNR governance forums, with ongoing engagement to deliver projects and develop strategic network planning exercises.
Wales Office
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Conclusions (19)
1
Conclusion
Acknowledged
Para 40
We have heard that there are constraints on both the distribution and transmission grids in Wales. Julie James MS told us Wales does not have the grid capacity it needs “right now”. However, Rt Hon Greg Hands MP told us that the grid is “fit for purpose today”. We are …
Government Response Summary
The government recognises the challenges faced in Wales and evidence provided and states that network regulation is a matter for Ofgem.
3
Conclusion
Acknowledged
Para 48
To ensure that communities and business in Wales can decarbonise in line with government targets, grid infrastructure must be able to meet the projected increase in demand for electricity. The evidence we received suggested that the grid in Wales will not be suitable to facilitate the decarbonisation of heat and …
Government Response Summary
The government acknowledges the importance of grid infrastructure to meet the projected increase in electricity demand. They reference the British Energy Security Strategy (BESS) and the appointment of an Electricity Networks Commissioner but do not commit to specific actions to address the identified issue.
4
Conclusion
Accepted
Para 49
While we understand that the UK Government must consider the energy and network needs of the UK as a whole, we consider that it would be inequitable if the UK were to benefit from Wales’ natural resources for renewable energy generation while Welsh households, businesses and industry were not adequately …
Government Response Summary
The Government states that strategic planning will always take account of network needs in Wales, pointing to the Holistic Network Design (HND) as the first step towards a Centralised Strategic Network Plan (CSNP), and mentioning Welsh Government representatives input.
6
Conclusion
Acknowledged
Para 61
We recognise the strengths of an electricity grid that serves the whole of Great Britain. However, we conclude that there are distinct challenges and opportunities relating to grid infrastructure in Wales that require specific focus and intervention from the UK Government.
Government Response Summary
The Government recognises distinct challenges and opportunities relating to grid infrastructure in Wales and is taking various actions to support stakeholder engagement and coordinated and strategic electricity grid network design with the Welsh Government represented on OTNR governance forums.
7
Conclusion
Acknowledged
Para 62
The Committee welcomes that Celtic Sea projects have been included in the list of infrastructure projects in the UK Government’s Growth Plan and notes the recent decision by The Crown Estate to seek to accelerate the leasing process where possible. This appears only to be possible in Wales if improvement …
Government Response Summary
The Government recognises different regions have different challenges and is taking various actions to support stakeholder engagement and coordinated and strategic electricity grid network design, citing Welsh Government representation on OTNR governance forums and direct engagement with the Welsh Government.
9
Conclusion
Accepted
Para 72
Upfront connection costs can be prohibitive and prevent the development of energy projects. This results in a “chicken and egg” situation whereby developers wait for other developers to commit to the funding of connection costs.
Government Response Summary
The government points to Ofgem's decision to socialise a proportion of network reinforcement costs, BEIS's amendment to connections legislation, existing frameworks for developers to share connection costs and Ofgem incentive schemes as addressing the committee's concerns.
10
Conclusion
Accepted
Para 73
We are encouraged that Ofgem is reviewing connection arrangements and we look forward to hearing more about the progress being made in the run up to 1 April 2023. We consider that due to the tight timeframes set by government net zero targets, urgent work should be done to overcome …
Government Response Summary
The government describes existing mechanisms to address upfront costs and incentivise developers to share grid connection and reinforcement costs, including Ofgem's decision to socialise a further proportion of network reinforcement costs and existing legislation allowing developers to share costs and receive reimbursement from second comers.
11
Conclusion
Para 74
Larger companies have a financial advantage linked to scale, whereas smaller energy projects are often reliant on the development of larger projects and the availability of spare capacity once these have been completed.
12
Conclusion
Accepted
Para 75
A mechanism should be developed to allow small energy generation projects to defer and spread grid connection payments over time.
Government Response Summary
The government indicates that the connections framework overseen by Ofgem and DNOs already allows for instalment payments in appropriate circumstances.
13
Conclusion
Accepted
Para 76
We are encouraged to see that the UK Government recognises that grid connection costs can be prohibitively high for developers. However, we are concerned by the decision to move more of the reinforcement costs to the network charges paid by “all electricity consumers in the area”.
Government Response Summary
The government points to Ofgem's decision to socialise a proportion of network reinforcement costs and BEIS's amendment to connections legislation to enable these reforms as addressing the committee's concerns.
15
Conclusion
Acknowledged
Para 89
There is a multiplicity of different bodies involved in securing planning consent for grid infrastructure and this process needs to be streamlined. We welcome the commitment to cutting processing times by fifty per cent and appreciate the challenge that this constitutes. However, in light of the evidence we received, it …
Government Response Summary
The Government recognizes the need to streamline the planning consent process and is amending the energy National Policy Statements (NPSs) and working with Ofgem to expedite the regulatory approvals process.
17
Conclusion
Para 91
The planning consent process has created a queue of renewable generation projects in Wales to which grid capacity has been reserved before planning permission has been granted.
18
Conclusion
Para 92
The UK Government should work with National Grid ESO, NGET, the DNOs and Ofgem to revise consenting processes to align the allocation of grid capacity with the application for planning permission. National Grid’s work should be expedited on reviewing commercial contracts with developers reserving grid capacity, where those projects have …
19
Conclusion
Rejected
Para 98
Ofgem, as the market regulator, must ensure that the regulatory environment enables the decarbonisation of energy markets. Whilst ensuring the best value for consumers is important and should remain one of Ofgem’s primary considerations, this should be balanced against achieving net zero targets.
Government Response Summary
The government does not consider an amendment to Ofgem’s primary duty necessary, as they believe the existing duty to protect consumers' interests already includes the reduction of greenhouse gases.
21
Conclusion
Accepted
Para 109
The policy in favour of laying cables underground in AONBs is welcome. However, due to the significantly higher construction costs it is likely that overhead lines will simply be re-routed around AONBs. This will mean that communities and businesses in those areas will remain isolated from grid infrastructure and face …
Government Response Summary
Ofgem is revising how customers are charged for connecting to distribution networks to reduce connection costs, and project approval is a matter for Ofgem.
23
Conclusion
Deferred
Para 116
We have heard that community energy projects face specific difficulties in connecting to the grid, and that the UK Government is not aware of those difficulties.
Government Response Summary
The Welsh Government has responsibility for renewable energy projects under 350 MW in Wales, and community energy schemes have access to support from the Welsh Government.
26
Conclusion
Accepted
Para 126
There is a lack of clear policy directing energy development companies on how to provide adequate benefits to communities hosting grid infrastructure.
Government Response Summary
The government states that it has already committed in the BESS to review community benefit options for electricity network infrastructure, and is currently engaging with stakeholders to explore a more standardised approach to local community benefit packages.
28
Conclusion
Accepted
Para 141
Without an established system of anticipatory investment in grid infrastructure the significant opportunities for renewable energy generation in Wales will go under- utilised, which will have an impact on the achievement of net zero targets. Were grid infrastructure to be built on an anticipatory basis in areas where there is …
Government Response Summary
The government highlights Ofgem's work to create a price control framework that enables strategic investment ahead of need, along with efforts to accelerate strategic transmission network infrastructure and protect consumers. They state they are already working with National Grid ESO, Ofgem, and network companies on the HND, which identifies key strategic transmission projects.
31
Conclusion
Accepted
Para 152
The grid network has been built piecemeal on the basis of the energy needs of the nation over time. The energy system in the UK is changing and electricity grid network design needs to adapt to meet this change. We are encouraged to see the Government shifting to a more …
Government Response Summary
The Government is committed to unlocking the required investment to deliver a secure, resilient, net zero-ready network and is taking a leading role in a more strategically planned approach for electricity networks. This includes the publication of the HND and upfront consideration of community and environmental impacts to provide more certainty in the planning and consenting process.