Ofgem outlines plans for RIIO-ED2 promising investment without bill increases

June 30, 2022
Equipment in Power Station.

This article was originally published in Electrical Review.

Ofgem has announced its plans for the RIIO-ED2 price control period, with the energy regulator promising major investment without impacting consumer’s pockets.

The five-year RIIO-ED2 price control period will begin in 2023 and run until 2028, with big plans to boost grid capacity, improve customer service and resilience to prevent power outages, and prepare for the future of a greener, cheaper grid. However, all these plans will require major investment, with Ofgem outlining £20.9 billion in investment.

Naturally, the draft proposals will present a challenge for distribution network operators.

Simon Ede commented, “RIIO-ED2 marks a tougher than hoped for settlement for distribution companies as Ofgem seeks to balance the need for large new investments with a heightened sensitivity on customer bills and complaints of excess profits in the past. Beyond the headlines, however, RIIO-ED2 continues to mark the focus of the regulator Ofgem on improving the distribution grids which are a vital component in the energy system given the move to a more decentralized, renewable and smart energy world.

“Whilst the draft sum is still below what the 14 DNOs asked for, it is a recognition of the investments required. Having read the draft submissions form several of the DNOs, it’s clear that digitalization of the grids is a key trend to better use the assets currently in use. This means software in tandem with smart devices will become more important down to secondary substations and beyond to the customer.

“The £2.7bn of upfront funding is a clear sign that grid resilience is a key priority in the short term and capacity additions required for the EV uptake and general electrification e.g. Heat Pump rollouts require both funding, planning and last but not least a significant increase in skilled labor when it comes to installation and maintenance.”

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