UK: DECC Consults On Improving Grid Access

On 24 August 2009, The Department of Energy and Climate Change ('DECC') launched a Consultation on improving grid access. Significant investment will be required between now and 2020 in order to meet the UK's climate change targets, but the current grid access arrangements create certain barriers to access for new renewable and other low carbon generation which could hinder these investments. This Consultation will be of interest to all industry participants, from existing generators and those with an interest in developing new generation capacity, to transmission and distribution companies who will implement the conclusions of the Consultation and consumers who will ultimately pay any costs associated with the amended access regime.

Transmission access has been under review since publication of the 2007 Energy White Paper, and in June 2008, DECC published its final report, which highlighted that both interim and enduring arrangements were required to improve grid access. While interim measures have since been taken forward, the industry process stalled when it came to deciding on enduring arrangements. In the intervening period there have been various developments in the debate on the issue, and the Government is now taking a direct role, proposing to use its powers under the Energy Act 2008 to seek to ensure that reforms will be implemented in a manner and timeframe consistent with its climate change objectives.

On 24 August 2009, The Department of Energy and Climate Change ('DECC') launched a Consultation on improving grid access. Significant investment will be required between now and 2020 in order to meet the UK's climate change targets, but the current grid access arrangements create certain barriers to access for new renewable and other low carbon generation which could hinder these investments. This Consultation will be of interest to all industry participants, from existing generators and those with an interest in developing new generation capacity, to transmission and distribution companies who will implement the conclusions of the Consultation and consumers who will ultimately pay any costs associated with the amended access regime.

Transmission access has been under review since publication of the 2007 Energy White Paper, and in June 2008, DECC published its final report, which highlighted that both interim and enduring arrangements were required to improve grid access. While interim measures have since been taken forward, the industry process stalled when it came to deciding on enduring arrangements. In the intervening period there have been various developments in the debate on the issue, and the Government is now taking a direct role, proposing to use its powers under the Energy Act 2008 to seek to ensure that reforms will be implemented in a manner and timeframe consistent with its climate change objectives.

Objectives

In the UK Low Carbon Transition Plan (to read our previous Law Now on the Low Carbon Transition Plan, please click here), the Government set out measures, inter alia, to enable 40% of our electricity to be sourced from low carbon generators by 2020. This will require an electricity grid with larger capacity and with the ability to manage greater fluctuations in electricity demand and supply. Investment will be required in both new power stations as well as transmission and distribution network reinforcements.

Various options were developed through the industry process, including 'connect and manage' whereby generators would receive a fixed connection date, and would be entitled to use the system from that date, and auctions whereby all capacity would be reallocated by auction to all generators. The Government concluded that 'connect and manage' would be more likely to meet its objectives.

Under 'connect and manage', generators would be able to connect to the network as soon as their local works were ready and would not have to wait for network reinforcements to be completed. Where the combination of new and existing generation exceeds the capacity of the transmission network, the system operator would actively balance the network and generators would be paid constraint costs.

The Consultation document lays out a number of different approaches to Connect and Manage and seeks views on how best to ensure broad cost reflectivity, while not undermining other policy goals such as security of supply, legally-binding renewables targets and the need to facilitate low carbon generation investment to help avoid dangerous climate change, and ensuring compliance with European Community and domestic law.

Key considerations for the Connect and Manage models under consideration are whether the costs of connect and manage (principally constraint costs) should be socialised across all users (the "Socialised" model), or some or all of those costs be focused on new entrant power stations (known as the "Hybrid" model). A further model that is being considered would give the choice to new and existing power stations on whether to commit to the network in return for greater certainty over charges, or to opt out and be exposed to additional constraint costs ("Shared Cost and Commitment" model).

The Government's initial view is that a form of Connect and Manage (Hybrid) might best meet its objectives. The Consultation closes on 17 November 2009 and the Government intends to implement the changes to codes and licences to ensure the new regime can take effect from June 2010.

To read the full Consultation document, please click here.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 27/08/2009.

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