In its letter on 22 September, Ofgem launched Project TransmiT: A call for evidence. In this, Ofgem are carrying out an independent and open review of transmission charging and associated connection arrangements (likely to include the thorny topic of secured liabilities for grid access).
TransmiT represents a major and very welcome opportunity for industry to lobby for change to a charging methodology that has been creaking at the seems for some time and that will fail to cope with major offshore wind investment via Round 3. The stated aim of the review is to ensure that we have in place "arrangements that facilitate the timely move to a low carbon energy sector whilst continuing to provide safe, secure, high quality network services at value for money to existing and future consumers." This has to be welcome news for industry, particularly for those seeking new connections who have struggled to understand the full impact of connection charges and use of system charges on their projects.
At a European level, the Renewables Directive (2009) which is due to be implemented in the UK by 5 December 2010 requires that transmission charging rules are non discriminatory, transparent, cost reflective and objective and that they do not discriminate against renewables in general and particularly against renewables in peripheral regions such as the islands or areas of low population density. At the time of writing this article, the UK Government position appears to be that the current transmission rules meet these requirements and that no major changes are needed by 5 December. DECC are shortly expected to publish a set of draft regulations designed to transpose the Renewables directive into UK law.
It is clearly important that the TransmiT process runs its course allowing all stakeholders to influence the outcome. We suggest, however, that it is also important that these EU requirements are taken seriously and recognise that current arrangements may not meet the non discrimination standard in relation to renewables - meaning that reform is needed sooner rather than later. This point is also made in a recent Parliamentary report "The Future of Britain's Electricity Markets".
In terms of timescale and process, Ofgem suggest the Significant Code Review (SCR) process may be appropriate for implementation of TransmiT and rightly note that they will need to consult formally on whether this process can be used before opting for it. Unfortunately, the possible use of SCR means that this sounds rather like a consultation (the current review), before a process consultation (on whether to use SCR) before the real SCR goes ahead - all of which will take time.
The area of transmission charging is a very contentious one. Existing and future generators will all have different interests and differing portfolios of assets - these will inevitably lead to polarising attitudes, e.g. to locational charging, amongst users of the system. The SCR process is ultimately one in which a bundle of changes are put through individual code processes - the changes are proposed by Ofgem and consulted upon, and ultimately once the individual code change processes have run, Ofgem will take the final view on what is implemented. The SCR process is designed for complex issues such as TransmiT but is it really fit for purpose for an issue where industry disagreement is inevitable and entirely understandable given the commercial issues for each stakeholder?
We suggest that industry will welcome a wide ranging opportunity to comment on the right transmission charging regime to take the UK forwards, but will not welcome a laborious (if slightly streamlined via SCR) industry change process that may take a very long time to work through and complete the job. Particularly in an area of this complexity and where industry will be inevitably divided, we question whether or not it would be more appropriate for Government to clarify how its policy approach to climate change, etc, should be reflected via a transmission charging regime.
The job done by DECC in relation to the choice of a connect and manage regime and its implementation was short, sharp and to the point. We do not doubt that transmission charging is a bigger subject, but suggest that at least some elements of whatever solution is proposed may need to be clearly set by Government in order to ensure that its policies are implemented quickly and effectively against the backdrop of a stable and properly understood modernised transmission charging regime.