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C2 Miscelllaneous
C1 Consumer protection
C5 Supplementary
C4 Functions of ONR
C3 Office for Nuclear Regulation
C2 Nuclear regulations
C1 The ONR's purpose
Electricity Market Reform is a government programme aimed at attracting the investment needed to replace the UK’s ageing energy infrastructure and to decarbonise the UK’s electricity mix. This reform is the biggest change in the UK energy market since the privatisation in 1990.
The Electricity Market Reform aims to achieve its ambitions through two schemes:
C9 Miscellaneous
C8 Emmisions performance
C7 The renewables obligation: transitional arrangements
C6 Access to markets
C5 Conflict of interest and contingency arrangements
C4 Investment contracts
C3 Capacity market
3. Electricity Capacity Regulations (2014)
Roles and responsibilities
Roles and responsibilities under the Capacity Market
Regulator
Capacity Market Settlement Services Provider
Elexon
Electricity Settlements Company (Settlement Body)
Delivery body
Government
Final Capacity Market Design presentation
Design
Payment
Delivery
Trading
Auction
Descending clock auctions
Capacity to procure
Capacity Market Rules
Policy Paper
The Electricity Capacity (Amendment) Regulations 2016
The Electricity Capacity (Amendment) (no.2) Regulations 2015
The Electricity Capacity (Amending )Regulations 2015
What is the capacity market
C2 Contract for difference
Low Carbon Contracts Company
Replaced Renewable obligation certificates
C1 General Considerations
Accelerating the decarbonisation of industrial clusters and dispersed sites
Continue to explore demand-side policies that support the development of markets for resource-efficient and low carbon products.
Increase availability of recycled materials and move to a more circular economy through changes to regulation and increased accessibility of funding
Provide targeted UK Emissions Trading Scheme (ETS) free allowances on a temporary basis and support from policies such as Carbon Border Adjustment Mechanisms (CBAMs)
Use Local Enterprise Partnerships (LEPs) and local authorities (LAs) to design local infrastructure plans in coordination with central government and devolved administrations.
Provide certainty of supply and a clear timeline for when low carbon hydrogen, waste biomass, and carbon capture, utilisation, and storage (CCUS) will be available, using Contracts for Difference (CfDs) and government matchmaking.
Create incentives for electrification by increasing the availability of affordable renewable electricity and shifting the burden of policy and network costs.
Gas Systems
We set price controls for the gas and electricity network companies of Great Britain. Price controls balance the relationship between investment in the network, company returns and the amount that they charge for operating their respective networks.
RIIO-2 is the second set of price controls implemented under our RIIO model. It's an investment programme to transform the energy networks and the electricity system operator to deliver emissions-free green energy in GB, along with world-class service and reliability.
We set the price controls according to the following sectors and timeframes:
RIIO-GD2
RIIO-GD2 is the price control for the gas distribution network, where network companies take gas from the transmission network and deliver it at safe, lower pressures to homes and businesses. The price control runs for five years, from 2021-2026.
Electrical Systems
UK Structure
Energy supply
Transmission and distribution network
Transmission Network Use of System (TNUoS)
Tariff System
Residual Tariff
The residual tariff is a ‘balancing item’ and is set to ensure that the average TNUoS charge for all generators does not exceed the legal limit of €2.50/MWh. All generators pay the same residual tariff
Wider Tariff
Wider tariffs are intended to signal to generators the impact to the transmission system of connecting at different locations. As such, wider tariffs vary by geographic location of the point of connection with 27 charging zones across GB.
Generation charging zones are reviewed at the start of each price control period
Wider tariffs also vary by the generator type and historic output levels.
The load factor for each generator is re-calculated each year based on the three median outputs from the past five years of operation. There are two wider tariffs for intermittent generators in zone 3: the shared year round tariff and the not shared year round tariff.
These two tariffs are determined using the transport model under two different scenarios for generation operation.
The shared year round tariff is prorated by the load factor. The input parameters of the transport model are updated each year. The unit cost data associated with circuit types is reviewed at the start of each price control period
Transport model
Local substation Tariff
Local substation tariffs reflect the cost of the first MITS substation that each transmission connected generator connects to. These tariffs are updated annually for inflation. Beinneun Wind Farm connects to the GB transmission system at its local 132/33kV substation
Local circuit Tariff
Where a transmission connected generator is not directly connected to the MITS, the local circuit tariff reflects the cost of overhead lines and cables between the connection and the MITS. Local circuit tariffs are updated annually for inflation and for changes to network use (e.g. new connections). Beinneun Wind Farm is connected to the MITS at the Fort Augustus grid substation via 15km of 132kV overhead line. The use of this infrastructure is charged for through the local circuit tariff.
Main Interconnected Transmission System (MITS).
Review of TNUoS
Distributed System Operator
Consultation on Distributed System Operators
Reform to the long term development statement (LTDS) i
Reform to the long term development statement (LTDS) is the first key enabler in our work programme. Improvement to the LTDS is core to enhancing the availability of network forecasting and planning data, and will underpin a number of DSO functions.
Key enablers for DSO programme of work and the Long Term Development Statement
OFGEM Consultation
closed 2020
awaiting decision
Electricity System Operator
Transmission Network Owners
Reform to the Long Term Development Statement (LTDS)
Energy generation
Balancing Services market
The ancillary (balancing) services market will continue to operate alongside both of the above mechanisms. Here, National Grid pays participants for the option to buy energy at an agreed price, helping National Grid in its obligation to keep the network in balance. Participants can be called on to provide generation or load-management capacity outside of stress events
STOR Short Term Operating Reserve
At certain times of the day we may need access to sources of extra power to help manage actual demand on the system being greater than forecast or unforeseen generation unavailability.
Where it is economic to do so, we will procure sources of extra power ahead of time through the STOR service. Providers of the service help to meet the reserve requirement either by providing additional generation or demand reduction.
The requirement for STOR varies depending on time of year, week and day.
Capacity market rules
smarter networks
energy networks innovation process ENIP
process document
Ofgem
Policy
RIIO
RIIO Revenue = Incentives + Innovation + Outputs
RIIO-T2 is the price control for the high voltage electricity transmission networks and high pressure gas transmission networks which transmit energy across Britain from where it is generated. The price control runs for five years, from 2021-2026.
The RIIO-T1 price control ran from 2013-2021.
RIIO-ED2
RIIO-ED2 is the price control for the electricity distribution network, where network companies take power from the transmission network and deliver it at safe, lower voltages to homes and businesses. The price control runs for five years, from 2023-2028.
The RIIO-ED1 price control covers the period from 2015-2023.
In the RIIO-ED2 price control, we will set regulated revenues and required outputs for the electricity distribution network operators (DNOs). In order to do this, we need information from the companies on the activities that they intend to undertake in RIIO-ED2, and their associated costs and outputs. Companies will provide this information to us in the form of a Business Plan, which we will then assess. Companies may earn a reward or be penalised based on our assessment of their plans.
RIIO-2 is the second set of price controls implemented under our RIIO model. It's an investment programme to transform the energy networks and the electricity system operator to deliver emissions-free green energy in GB, along with world-class service and reliability.
Keeping conumer bills low
Smart flexible energy system
Enabling whole system solutions
DSO Tranistion
Modernising energy data
Value for money for customers
Active programmes
Switching programme
Smart meter transition and data communication company &DCC)
REMIT wholesale market integrity
Onshore transmission project delivery
Offshore electricity transmission (OFTO)
Network price controls
2021-2028 (RIIO-2)
2013-2023 (RIIO-1)
Network cycber security
Network charging and access reform
Midata in energy programme
Interconnectors
Innovation Link
Gas System Operator Regulation (GSO)
Energy data and digitalisation
Electricity wholesale market lquidity
ESO (electricity system operator (ESO) regulation
Flexibility
Smart Power
BEIS: Future potential for Demand Side Response in Great Britain
BEISL Towards a smart energy system
National Infrastructure commission report
Subtopic
Full chain flexibility
Electricity system fexibility
Position Paper
Electricity settlement reform
Default tariff cap
Cosumer vulnerability protection
Capacity and Market EMR Dispute resolution
Industry
Compliance and eforcement
Renewables Obligation
The Renewables Obligation (RO) requires licensed electricity suppliers to source a proportion of the electricity they supply to UK customers from renewable sources. We set suppliers’ obligations as a number of Renewables Obligation Certificates (ROCs). The obligation levels for 2020/21, announced by the Department for Business, Energy & Industry Strategy (BEIS) on the 27 September 2019, are:
Using these obligation levels and multiplying by the total electricity supplied (MWh) to UK customers during this obligation period (1 April 2020 – 31 March 2021), the total obligation for 2020/21 is 119,090,744 ROCs. Split out for each obligation this is:
Suppliers will have until 1 September 2021 to meet their obligations for 2020/21 (31 August for buy-out payments) by opting to either:
Any suppliers who do not meet their obligations in full by the end of 1 September will need to make a late payment by 31 October.
RO Closed for new applications
Preplaced by CfD
ROCS 2020-2021
Codes and standards
Power & Energy
Gas and electricity
Retail Energy Code (REC)
Smart Energy Code (SEC)
Consolidated SEC
Gas
Supply Point Administration Agreement (SPAA)
Transition to the retail energy code
Retail Energy Code REC
NOW CLOSED
Independent Gas Transporter UNC (iGT UNC)
Uniform Network Code (UNC)
Electricity
System Operator - Transmission Operator Code (STC)
Distribution Code
Grid Code
Master Registration Agreement
Distribution Use of System Agreement (DCUSA)
Connection Use of System Code (CUSC)
Balancing and Settlement Code (BSC
Licensing
Network Innovation Allowance (NIA)
Ofgem Network Innovation Competition (NIC)
Ofgem Strategic Innovation Fund (SIF)
SIF Governance
SIF funding mecahnism
The SIF Funding Mechanism is established by the SIF Licence Condition. In each Regulatory Year, the Authority will calculate and, by direction, specify the net amount of SIF Funding (less any SIF Funding Return) that is to be paid to licensees and UKRI by the Electricity System Operator or NTS Owner, and the manner in which and the times at which the Electricity System Operator or NTS Owner is required to transfer that SIF Funding those funds. Recovering adm
Use of the ENA Smarter Networks Portal
Phases
Beta Phase
The Beta Phase focuses on the deployment of the solution to the Problem. The duration of the Beta Phase will depend on the scale and complexity of the solution deployed. Beta Phases will be of between six months’ and five years’ duration. Beta Phases are the largest of the Project Phases.
Alpha Phase
The Alpha Phase will focus on preparing and testing the different solutions to the Problem that are identified during the Discovery Phase, ahead of any future large-scale demonstration of the Project. It will also test the riskiest assumptions
Discovery Phase
: The Discovery Phase will define the Problem and the value in solving the Problem. It will also facilitate a common understanding of what energy consumers and network users need from the innovation and identify any constraints that may impact on solution of the Problem and options for the management of those constraints.
Costs
Route to market
Project plan and milestones
Impact
Innovation justification
The big idea
Project Summary
Problem definition
Criteria
Eligibility Criterion 8: Projects must be well thought through and have a robust methodology so that they are capable of progressing in a timely manner.
Eligibility Criterion 7: Projects must provide value for money and be costed competitively.
Eligibility Criterion 6: Projects must include participation from a range of stakeholders
Eligibility Criterion 5: Projects must be innovative, novel and/or risky.
Eligibility Criterion 4: Projects must not undermine the development of competitive markets.
Eligibility Criterion 3: Projects must involve network innovation
Eligibility Criterion 2: Projects must have clearly identified potential to deliver a net benefit to gas or electricity consumers (whomever is paying for the innovation).
Eligibility Criterion 1: Projects must address the Innovation Challenge set by Ofgem.
Must cover two of these areas
8. Novel approaches to infrastructure investment, such as:
c. Determining the economic investment required for network resilience and reliability through and beyond the transition
b. Coordinating approaches to siting assets to deliver more efficient capital investment on the system
a. How to maximise efficiency in large scale network and system investments by taking systems view across generation and demand side changes linked to decarbonisation
7. Future policy and regulatory conditions as well as market designs to support whole system approaches
6. Utilisation of data and development of new approaches which harness greater value
5. Assess the costs of potential energy demand reduction activities against alternative interventions
4. Evaluating the costs and opportunities of repurposing or decommissioning existing infrastructure and/or assets
3. Complementary and competing priorities between local, national, and international energy systems
2. Coordinating energy transmission, distribution and system operation across gas and electricity
1. Current and future needs for energy provision for heat, power, and transport
The SIF will support network innovation that contributes to the achievement of Net Zero, while delivering net benefits to energy consumers. It will coordinate network innovation funding with other public sector funding initiatives, thereby ensuring greater flexibility and strategic alignment in innovation funding, and eliminating both unnecessary duplication and funding gaps.
lean delivery, sprinters not supertankers
focus on commercialisation
integrated innovation and regulatory change
simplified application process with reduced barriers to entr
Responsive flexible challenges
zero emission transport
heat
data and digitalisation
whole system integration
Collaborative Foundation
Innovation Challenge
understand consumers’ preferences to inform future market designs which will help to optimise across networks and infrastructures.
improve coordination of emerging innovations across networks, generators, market participants, investors, local & national policy makers, consumers, and other key stakeholders
reduce complexity, bureaucracy and barriers to entry
reduce duplication and excessive variation of products, processes or services.
improve coordination between networks and other system participants
Ofgem Innovation Vision 2021 – 2025
Priority Innovation
Data & Digitalisation
Energy Data innovation aligned with the Modernising Energy Data Programme
Cyber Security
Future if Retail
Consumer Consumers’ role and acceptability of products and solutions
Low Carbon Infrastructure
Electric Vehicles (EVs)
Smart Energy and Energy Storage
Local: Localised approaches to decarbonisation
Gas & Hydrogen Feasibility and safety
Built environment
Principles
Information on innovation should be widely disseminated
Innovation should be customer focused
Innovation should create value for the whole system
Strategy
Our strategy
6. Efficiency
5. Confidence
4. Partnership
3. Standards
2. Competition
1. Regulation
Ofgem strategic narrative: 2019-23
Transport
Modelling
Building world-leading digital infrastructure for our energy system
Growing the installation of electric heat pumps,
Consulting on whether it is appropriate to end gas grid connections to new homes being built from 2025
Aiming to bring at least one large scale nuclear project to the point of Final Investment Decision
Establishing a new UK Emissions Trading System,
Supporting the deployment of CCUS in four industrial clusters
Targeting 40GW of offshore wind by 2030
CCUS Incentivization and business model
Industrial carbon capture business model: May 2021 update
Industrial carbon capture - indicative heads of terms: December 2020 update (Annex E)
Dispatchable power agreement (DPA) business moel
Dispatchable power agreement (DPA) - heads of terms: December 2020 update (Annex D)
Dispatchable power agreement (DPA) - detailed explanation and examples: December 2020 update (Annex C)
Transport and storage business model
Transport and storage services (T&SCO) - government support package draft commercial principles: December 2020 update (Annex B)
Transport and storage services (T&SCO) licence - draft commercial principles: December 2020 update (Annex A)
Carbon capture, usage and storage: an update on business models (December 2020)
Zemo partnership
Introduction of E10 Petrol
E10 petrol contains up to 10% renewable ethanol, which will help to reduce carbon dioxide (CO2) emissions associated with petrol vehicles and tackle climate change. Petrol in the UK currently contains up to 5% renewable ethanol (known as E5).
E10 petrol is already widely used around the world, including across Europe, the US and Australia. It has also been the reference fuel against which new cars are tested for emissions and performance since 2016.
Renewable Transport Fuel Obligation
nder the RTFO suppliers of transport and non road mobile machinery (NRMM) fuel in the UK must be able to show that a percentage of the fuel they supply comes from renewable and sustainable sources. Fuel suppliers who supply at least 450,000 litres of fuel a year are affected. This includes suppliers of biofuels as well as suppliers of fossil fuel.
The RTFO only covers biofuels used in the transport and NRMM sectors. For information on using bioliquids or biomass to generate heat or electricity see the Ofgem website.
Reform
Amending the Renewable Transport Fuels Obligation (RTFO) to increase carbon savings on land, air and at sea
Draft Legislation: The Renewable Transport Fuel Obligations (Amendment) Order 202
Targeting net zero - next steps for the Renewable Transport Fuels Obligation
Guidance
Demonstrating compliance: evidence requirements
Use of Solar to generate hydrogen
Evidence of feedstock type in claims for double counted feedstocks
11.16 Considering the financial incentive that double counting of certain feedstocks presents, it will be particularly important to examine evidence of feedstock type for these claims. Evidence will be required that the fuel is indeed made from the feedstock that has been claimed and this evidence must come from the origin. Evidence will vary with feedstock type and source. For example, in the case of used cooking oil, evidence of the original collection of the oil from restaurants or other catering establishments would be required.
11.17 For RFNBOs, evidence of the amounts of each type of renewable electricity and/or renewable heat and/or renewable cold purchased will be required, providing assurance that bioenergy or fossil energy inputs have not been used to generate wholly RFNBO fuel volumes. Evidence that the feedstocks (materials providing atoms to the fuel) used (e.g. water, CO2) do not contain any energy will also be needed. In addition, evidence will be required that the fuel is indeed made from the process energy that has been claimed, and this evidence regarding the process energy must come from the origin (see section 10.14). For example, in the case of solar electricity, a power purchase agreement, or proof of ownership of the solar generation plant by the RFNBO plant, and meter readings would be required, plus a statement regarding the connection to the grid
Technologies
EVs
Fuels
High blend reneawble fuels
Biomethane
Hydrotreated vegetable oils
Biodiesels
B100
EN141214
B30
EN16709
B20
Hydrogen Belnded
Hydrogen Fuel Cell
Hydrogen Incentivization and business model
Low Carbon Hydrogen Business Model: consultation on a business model for low carbon hydrogen
UK hydrogen strategy (Aug 2021)
UK Hydrogen analytical index
Wales&West Utilities
Cadent
Northern GAs Netwroks
SGN
SGN Natural Gas
furmus energy
Phoenix Natural Gas
Northern Ireland
GNI (UK) Limited (North-South(
Belfast Gas Transmission Limited
Premier Transmission Limited
Manx utilities
national grid
Independent Distribution Network Operators (IDNOs) own, operate and maintain the newer parts of the electricity grid that supply housing and commercial developments and are directly or indirectly connected to the main distribution network. IDNOs do not have a specific geographical area and are regulated by Ofgem.
Vattenfall
Utility Assets
UK Power Distribution
Murphy
Leep Utilities
Last Mile Asset Management
Indigo Power
Harlaxton Energy Networks
GTC
Independent Power Networks Limited
The Electricity Network Company
Fulcrum
Forbury Assets Ltd (FAL) (SSE Eneterprise)
ESP Utilities Group
Energy Assets Networks
Eclispse Power Networks
Western Power Distribution
UK Power Networks
Electricity North West
Northern Powergrid
Manx Utilities
Northern Ireland Energy Networks
Scottish and Souther Electricity Networks
National Grid ESO
Northern Ireland Electricity Networks
National Grid
SP Energy Networks
Scottish and Southern Electricity Networks
Transmission
RIIO-T2
Full business plan
Five Goals
£199 million in efficiency savings from innovation
One third reduction in our greenhouse gas emissions
Every connection delivered on time
Aim for 100% transmission network reliability
Transport the renewable electricity
Innovation
Future energy - Local network plans for RIIO-ED2
Transition to DSO
Identifying the most cost effective solutions for energy customers
Enabling the energy transistion
Maintaining a safe and reliable grid
My electric avenue
Distribution
Transition
Balancing Services Market
Short Term Operating Reserve (STOR)
Capacity Market Supply
Low Carbon Contracts Company & Electricity Settlements Company
Capacity Market
CfD's
Contracts for Difference works by creating a private contract between the renewable or low-carbon electricity generator and the Low Carbon Contracts Company (LCCC).
Generators can bid for these contracts in auctions if they meet the eligibility criteria to participate. These auctions are held every few years with a fixed budget and the aim to guarantee future electricity generation from the development of new low-carbon generation capacity.
The contract agrees to pay the difference between the strike price and the reference price for electricity generated. The strike price is the price that the generator bids at and this should reflect the cost of the investment in the generation technology. The reference price is the indicator of what the average market price for electricity will be in the UK.
The difference between these two prices is paid to the generator to subside the development and generation of the electricity. The generator will only receive payments when the project starts to generate electricity. The generator would still sell the electricity to energy market as usual but would receive this top-up to reach the agreed strike price.
This top-up amount is then charged as a levy on electricity suppliers under the Contracts for Difference (Electricity Supplier Obligation) Regulations 2014. The payment of the top-up amount and the levy on electricity suppliers is managed by the Low Carbon Contracts Company.
Framework document
Challenges
3. investment challenge
2. replacing old power stations
1. decarbonisation
