National Grid to Lose System Operator Role: Leak
UK power system operator National Grid will lose its power to supervise the system, if a leaked document seen by The Times wins government support.
The Department of Energy and Climate Change (DECC) appears to hold the view that the company is too powerful in terms of the capacity it owns and is continuing to build, such as subsea power cables, to import power from continental Europe. This could influence its decision-making as system operator.
Regulatory and market risk have discouraged investment in new generating capacity while old, uneconomic or dirty capacity such as coal and gas is being taken offline and, looking further ahead, there is still a question-mark over EDF's plans to build a nuclear plant at Hinkley Point. National Grid is planning to import more electricity to provide a bigger supply-demand margin.
“Ministers are considering three main options designed to strip National Grid of its role as the UK’s power system operator,” the report says, in the March 3 edition of the daily, as they are “alarmed by the country’s growing reliance on importing electricity and a lack of new domestic power station developments.” It said utilities such as Centrica and Scottish & Southern Energy were opposed to the present arrangements where National Grid has a conflict of interests although Centrica told NGE March 3 that in fact it had not expressed a view.
The report says the ministers are favouring the creation of a not-for-profit company, modelled loosely on UK railway network operator Network Rail, that would be overseen by energy regulator Ofgem, on the grounds that the model has been shown to work well in other countries.
DECC did not comment directly on the leak but said there was "a strong case for greater independence for the system operator to promote more competition in our electricity system and that it was working alongside National Grid and Ofgem to see how we can ensure our electricity system is as secure, flexible and independent as possible, whilst operating in the best interest of consumers.”
Last November, UK Energy Secretary Amber Rudd said that "as our electricity system changes, we need to make sure it is as productive, secure and cost-effective as possible."
Neither Ofgem nor National Grid commented on the leaked document.
Capacity Mechanism to Start Early
Earlier this week, Rudd announced that the capacity mechanism to encourage investment in power plants would be brought forward a year.
The reforms set out plans to buy more electricity capacity and buy it earlier – encouraging more investment in our energy system. This will mean new energy infrastructure can be built, in particular new gas fired power stations. Under these plans an early capacity auction would take place in January 2017 for delivery in winter 2017/18. The consultation also includes details on tougher penalties for companies that fail to deliver their capacity market contracts. This consultation will close on 1 April 2016.