Submission: Ofgem Electricity Settlement Reform SCR launch statement

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Submission: Ofgem Electricity Settlement Reform SCR launch statement

Submission by the Energy Policy Group (EPG) of the University of Exeter to Ofgem Electricity Settlement Reform SCR launch statement.

Catherine Mitchell

Sept 2017


To Whom it may Concern,

I have just realised that I have missed the 1 September 2017 deadline to provide feedback on the electricity settlement reform (ESR) SCR options.

If it is at all possible I would like my below feedback to be included in your assessment.

I agree there is a need for electricity settlement reform.

I support Option 3 – that Ofgem leads an end to end SCR process. I am convinced that to undertake such reform with Option 1 or 2 would be far inferior. I agree with Ofgem (on page 6 of the Launch Document) that managing the necessary changes coherently and consistently will require an end to end process.

The aim of the ESR should be to enable a smart and flexible energy system. I would argue this requires linking settlement at the wholesale level with local balancing at the distribution level and at the balancing at the supra-national regional level.  It should also enable demand side response, including via aggregation, down to the domestic level, and to a far higher % of what would have been total electricity use than currently occurs (ie the US average by State is 6%, and several States are above 10%); it should reveal value sufficiently so that coherent integration at the local level between heat, electricity and mobility can occur; and it should enable a more or less 100% renewable electricity system to function securely and economically (ie Denmark regularly now integrates 150% electricity days).

Running a smart and flexible energy system, capable of meeting the CCC targets, requires a number of governance ducks to get in line. One is the incentive mechanism for networks (ie a wholly restructured RIIO to include more performance based regulation); another is the market and settlement mechanism; another is tariffs; another is institutional change – for example DNOs transforming into distribution service providers (ie market facilitators).  I welcome this market aspect but it is important that the ducks do work together; and in such a way that change happens fast enough so that the CCC targets can be met, and this will require more direction from Government.

It seems to me Option 3 is without doubt the best option.

Download the submission here: Ofgem Electricity Settlement Reform SCR launch statement – EPG submission Sept 2017

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