Ofgem is consulting on whether to make the provision of new network services, required to operate a clean power system, a licensable activity, which would give the regulator more visibility of the growing sector and more power over it.
At issue are so-called ‘network services’, such as reactive power for voltage and inertia for stability. These ensure that the electricity system remains within boundaries for frequency and voltage and in the past they were provided from network assets. Now there are a greater variety of providers and the GB system operator (now NESO) has secured the services using open tenders. NESO’s Clean Power 2030 advice “highlighted the need to increase the number of technologies that provide network services”.
Ofgem said that despite their growing importance, it has limited regulatory oversight of commercial providers. It identified several issues with the existing situation:
Unlicensed providers may need to pay additional charges on the electricity they consume, so they face different costs to licenced providers, for historical reasons.
There may be licensing issues present with assets that are dedicated to providing network services. Licensing arrangements pre-date the use of assets dedicated to providing network services, but Ofgem said network service technologies should fit within the licensing regime, “particularly as their classification has knock on impacts on the costs and charges that parties face”.
Ofgem notes that some commercial providers have voluntarily applied to be licensed, in order to “seek a level playing field in exposure to the paying of certain charges”. Ofgem has used interim regulatory solutions, such as granting commercial providers with generation or transmission licences, depending on the type of asset providing the network service. But now it is considering creating a new bespoke licensable activity for the dedicated provision of network services. It says “We consider that this can lead to a lower cost transition to a secure net zero system”, as well as enabling appropriate regulatory oversight and ensuring that providers are accountable for their actions. It added, “We also support ongoing review work which provides clarity on the charges and levies which different industry parties should be exposed to.”
The consultation closes on 9 May.