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Local institutions for Net Zero – LCP Delta help Ofgem to take a crucial step forward

Summary

TL;DR LCP Delta, alongside CEPA and Millhouse Power Ltd, supported Ofgem by developing the case for change and reform proposals to inform Ofgem’s thinking. A key part of LCP Delta's work was to analyse and identify the issues with current arrangements, prioritising the most significant issues that need to be urgently addressed.

Achieving Net Zero will require transformational institutions to plan and efficiently deliver the huge investments required. LCP Delta works closely with players from across the energy system, and it is clear from our work that the rapid energy transition requires investment at all levels – from nationally strategic hydrogen infrastructure and large-scale renewables to the local network reinforcement required to electrify heating and transport and connect local wind and solar generation. Coordination, joined up planning, and accountability across the whole energy system are both critical yet lacking – and we need a new institutional framework that is capable of delivering this.

Yesterday, Ofgem took a critical step towards this new institutional framework, in publishing its much anticipated consultation on the future of local energy institutions and governance, which follows on from April 2022 Call for Input. A key proposal from Ofgem is to institute a set of Regional Systems Planners (RSPs), that will develop regional whole system energy plans – linking to local area energy plans produced by Local Authorities, network plans across electricity and gas, and national planning scenarios.

In the initial call for input, Ofgem also set out issues with the current market development for flexibility delivered by local, decentralised assets, in particular the markets for DSO (Distribution System Operator) flexibility. In this updated consultation, Ofgem have proposed to assign a flexibility market facilitation function to a single entity to that will drive consistency across network regions and join up with national flexibility markets.  Ofgem have also launched a further Call for Input on the Future of Distributed Flexibility that posits the creation of a centralised flexibility procurement platform or flexibility exchange. We think these types of proposal could drive greater efficiency in the procurement and dispatch of flexibility resources, and open flexibility market to a broader range of flexibility assets.

LCP Delta, alongside CEPA and Millhouse Power Ltd, supported Ofgem by developing the case for change and reform proposals to inform Ofgem’s thinking. A key part of our work was to analyse and identify the issues with current arrangements, prioritising the most significant issues that need to be urgently addressed. We explored options for RSPs and flexibility market facilitation using case studies, literature evidence and stakeholder engagement, proposing options to take forward and key development questions that need to be addressed.

We believe this institutional reform is crucial to achieving Net Zero – but is just one part of the solution to ensure the required investment in local energy systems and network infrastructure comes forward. All stakeholders, including the regulator, policy makers, network companies, local government and the private sector will need to collaborate to make investment in local energy systems a reality.

Related to this work, LCP Delta is driving forward innovation in the networks with its work supporting Northern Power Grid to establish a Community Distribution System Operator (Community DSO) project.

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