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UK energy regulator Ofgem calls for electricity transmission reform

23 Dec 2008

UK energy regulator Ofgem is proposing radical reforms to the regulatory framework for Britain’s electricity transmission network to speed up the connection of renewable and other low-carbon electricity generation.

In the consultation Ofgem proposes reforms that aim to provide new financial incentives for electricity transmission companies to invest. The proposed incentives should encourage the companies to expand transmission capacity in anticipation of new generation being built.

The reforms, which are subject to consultation, could be introduced in winter 2009. Ofgem is also proposing measures that would remove immediate barriers to investments and proposals for new financial incentives. These could be introduced in Spring 2009.

According to Ofgem, this approach is designed to meet the challenges of connecting even more renewable generation to meet the EU’s 2020 renewables targets while potentially connecting new nuclear and conventional power stations over the next ten to 15 years. It marks a major departure from the current arrangements where transmission companies tend to wait for new generators to make connection applications and sign contracts before starting to invest. This has lead to bottlenecks and constraints on the system as major new transmission lines can take four to ten years to gain planning consent and be completed.

Ofgem chief executive Alistair Buchanan said, ‘Getting the right electricity infrastructure in place so more renewable generators can connect is critical if the UK is to meet challenging new renewables targets. We are signalling that network companies can earn a higher return for taking on some of the risk of ensuring that new transmission capacity is ready when new generation connects. But to protect customers we are saying they will earn lower returns if they invest poorly and new capacity is not used or there are significant cost overruns.’

Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain.

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