Charging for distribution network access - shallow-ish or shallower? The Charging Futures Forum and access taskforce, of which Regen was a member, reached its conclusion this week with the publication of the final report. The 80 or so pages present a series of options for how we might be paying for using a future electricity network and potentially some radical changes to the status quo, with associated winners and losers. Changes to these areas have the potential to make or break business cases for local flexibility or balancing markets, new renewable generation and even the future of electric vehicles. Will electric vehicles owners be expected to pay more network costs to be able to charge at home? Will users in constrained areas be competing for access to the network through an auction? If nothing else the report demonstrates how complex this area is, and that pretty much any change will have multiple and serious - pros and cons. There is a useful summary podcast from Charging Futures team at National Grid who give an overview of this process and bring out some points of interest. It’s a bit like getting on a train Although I’m in no way an expert in this myself, to aid in explaining the options for the Access part of the document, I’m going to use a train analogy because it helps me with visualisation and the principles seem to work in this context. (Apologies in advance to those who understand the details of the different connection charging methodologies and can spot the areas with no doubt significant over-simplification). Transmission network level is a mainline station – where someone wishing to board a full train can turn up, pay the ticket price and wait for a new train to be built. If they are significantly delayed, then they also get compensation. The cost of the new train and the compensation is borne by all the passengers on the new and existing trains. The system is called ‘Connect and Manage’ or ‘shallow’ charging e.g. you only pay for the bit of network that is solely for your use. Result: New person is happy but people already on the train are not very happy as their ticket price has gone up and mutter to each other “can’t they have taken a different route”/ “those annoying renewables generators are costing us money, I wish they’d go away” Distribution level are the branch lines – where someone wishing to board a full train turns up and is asked to pay the cost of a new train. No one asks the existing passengers if there might be space or a cheaper way to accommodate them. The distribution charging system is ‘shallow-ish’ because you only pay a part of the new train in reality. Result: People already on the train are much happier as it doesn’t cost them anything more. Unfortunately, the new person is faced with a very high cost and probably gives up and goes home, which is inherently unfair. The system also doesn’t benefit from what they would have done (it may have been an important meeting). Connect and Manage at Distribution? At Regen, we like the idea of the ultimately fairer transmission system closer to ‘Connect and Manage’ being applied to distribution level – but you can’t be building lots of new trains on the whim of one person. There is obviously the need to explore other options before a new train is built for the new passenger, and the other passengers that are likely to follow. Any system also needs some method to: Ask the new passenger if they can feasibly take a different route/board a different train? See if people already on the train would accept compensation to give up their seats. Ask the new or existing passengers if they are happy to travel ‘standby’ for a cheaper ticket price – so risk losing their seat occasionally. If after all the options are exhausted and a new train is still needed, then there needs to be some sharing of risk. So, the new person/people need to make some sort of commitment to buying a season ticket to use the train regularly and the operator can get some of its investment back. How can this be managed? The ‘Manage’ part is where the analogy starts to breakdown, so I will leave the train for now (no pun intended). With shallow charging you create a need for the network operator to actively manage the consequences of the mix of generation on their network, keeping it balanced and within the physical constraints. At transmission level they have sophisticated balancing systems that compensate generators for taking actions to remain within the constraints - either for turning off or encourage them to turn up. Together they are quite an efficient system – the balancing payments to generators can be measured and when that cost gets higher than the cost of investing in the network to remove the constraint – then there is a relatively straight forward decision that it is cheaper to invest. At distribution we currently have no idea what the opportunity cost is of all those people who have given up and gone home. Through local flexibility markets DNOs are now starting to explore if there are cheaper ways to manage constraints caused by existing users, high connection charges persist for those new users wishing to connect to constrained areas. A system of ‘standby’ or Active Network Management is also operating in constrained areas offering cheaper ‘standby’ tickets only to new passengers. But again, the cost to those users of losing their seats occasionally is not factored into decision making at a network level. Any new system needs to ensure these collective costs are understood at distribution and that a strategic decision can be made when the opportunity costs overtake the investment cost – triggering investment.