ICIS Heren energy news, roundup and data

Ofgem defends investment strategy

01 March 2010 00:00  [Source: ICB]

British energy regulator Ofgem may have jumped the gun on funding for new grid investment projects, a parliamentary committee has warned.

The 14-member energy and climate change committee said that funding may have been granted for specific projects "before the completion of a fundamental review of how better use can be made of the existing network."

The warning was contained in a report, The Future of Britain's Electricity Network, released last Tuesday.

The committee said that grid investment will be required to avoid delays in connecting new power stations, but it warned that the existing regulatory framework "may be driving the case for investment at the expense of other more cost-effective options, such as greater management of demand for energy."

However, a spokesman for Ofgem defended the regulator over the existing framework: "Ofgem agrees network-access reforms are needed," he said.

"We have sought to change the arrangements, but have met strong resistance from parts of the industry. This is why we referred the issue to government, so it can take legislative action."

The report also called for government to take a greater role in developing a smart grid.

Committee member and MP Paddy Tipping said this was necessary to "accommodate a far more diverse energy mix that includes a much higher proportion of renewables that cannot respond so easily to fluctuating demand."

UK generator Scottish Power has estimated that a £37bn ($57bn, €42bn) grid investment will be required between now and 2020.

"The scale of the challenge, combined with the time frame over which it is to be achieved, has led many within the industry to call on the government to provide more strategic direction on how it expects the networks to evolve over time," the report said.

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Author: Jamie Stewart

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