By Tom Glover, RWE UK Country Chair
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RWE is the largest power generator in the UK, producing around 15% of the country’s electricity. We have ambitions to invest up to £15bn by 2030 in developing clean energy projects in the UK to support the energy transition, creating high quality jobs across the length and breadth of the country. To unlock this we need a stable and supportive policy and regulatory framework.
To fully decarbonise the power sector by 2035, we need a faster and more ambitious approach to resolving the significant barriers holding back the development of low carbon power: issues such as lack of grid, network charging and reform of the CfD.
Over the coming months, I will be publishing a series of thought pieces, sharing my ideas on how to tackle these challenges.
In this paper, I share my ideas which I believe need proper consideration from Government, Ofgem and the Electricity System Operator (ESO) in order to accelerate the connection of low carbon generation.
Key messages
Lack of grid infrastructure is the single biggest blocker to deployment of new low carbon power. As well as building new grid infrastructure, we need to make the connections process work better, and use the existing grid we have more efficiently.
On this, some progress is being made, but it is not yet having the impact needed.
The main area that has yet to be fully explored is the use of sharper economic signals to accelerate and optimise grid connections.
A move to more market-based solutions will mean that the most economically viable projects are the ones best placed to proceed – ultimately leading to lower costs for consumers.
More specifically I believe the following ideas need to be explored further:
- Greater transparency of connection availability: Poor visibility of network availability is a material issue, meaning developers must place multiple applications to find a viable site.
- Higher / earlier connection liabilities: Currently, the cost of applying for and holding a connection agreement is extremely low, and the limited cost of holding the place in the queue encourages parties to hold the agreement, even if the project is unviable or delayed, Higher upfront costs, or higher and earlier liabilities for grid connection agreements would mean that only viable projects with a high chance of commitment would apply for and hold connection agreements.
- Allowing parties to ‘trade’ connection capacity: For example, if one onshore windfarm is progressing more quickly, or is more economically feasible (i.e. larger, newer technology), but is behind in the queue, they should be able to come to a commercial agreement to trade places. Equally, a new offshore windfarm could pay an old gas station to close earlier and take over its grid capacity.
- More flexible and commercial arrangements for grid entry: Instead of building a new connection, two users (e.g. an existing gas station with a firm connection, and a new offshore wind farm) could agree to share the same grid capacity - when it’s windy, the windfarm uses the capacity, and vice versa the gas station. The windfarm would be prepared to compensate the gas generator for lost income, in exchange for getting onto the grid earlier.
Facilitating such commercial arrangements would allow for a more efficient optimisation of grid connections between assets and accelerate connections.
Low cost, low carbon generation would potentially come on earlier, and ultimately localised increases in grid capacity (and therefore new infrastructure) may be reduced, or even not be required at all.