Energy Shift: Exploring Net Zero and RIIO-2, Tesla's Virtual Power Station, and Ofgem's Market Overview Report
The energy sector in the UK is undergoing a significant transformation, with various projects and initiatives aiming to accelerate the country's journey towards net zero emissions. Here are some key updates in this green revolution.
National Grid is reviewing the timescales for the introduction of its replacement frequency response services, as the industry pushes for a more flexible and renewable-friendly grid.
Tesla has unveiled the Tesla Energy Plan, allowing UK homes to become part of a network of houses that generate and store electricity, known as the UK Tesla Virtual Power Plant. The plan went live to select customers on 26 October.
A consortium of companies, including Drax, National Grid, and SSE, has submitted a £75 million funding bid to the second phase of the government's Industrial Strategy Challenge Fund. The Zero Carbon Humber Partnership aims to create the world's first net zero industrial cluster by 2040 through low carbon hydrogen, carbon capture, and negative emissions (carbon removal technology).
The energy industry has urged Ofgem to prioritize facilitating the UK's net zero targets in the RIIO-2 regulatory price control framework. Ofgem's RIIO-2 framework is indeed actively evolving to embed net zero considerations.
Ofgem's RIIO-2 framework integrates net zero objectives by funding innovation and flexibility projects that support the UK's transition to renewable energy and decarbonisation targets. This integration impacts the renewable energy sector positively by enabling investment in technologies and network adaptations essential for accommodating increasing renewable generation capacity.
Re-opener mechanisms under RIIO-2 allow network companies to apply for additional funding linked to evolving needs in electricity transmission, distribution, and gas distribution that help facilitate net zero. Funding through Ofgem’s Strategic Innovation Fund (SIF) and Network Innovation Allowance (NIA) during the RIIO-2 period supports large-scale and early-stage innovative projects that enable net zero.
The Clean Flexibility Roadmap, aligned with and informed by Ofgem’s innovation funding, targets a 2–3 fold increase in flexibility capacity by 2030 to cope with higher renewable penetration, underscoring the infrastructure transformation that RIIO-2 investments are facilitating.
Ofgem’s Centralised Strategic Network Plan (CSNP) development under RIIO-2 emphasizes coordinated planning aligned with net zero targets over 12- to 25-year horizons. This planning framework supports long-term integration of renewables, facilitating optimal network investments reflected in the price control arrangements.
Ad adjustments in specific programmes, such as the Fuel Poor Network Extension Scheme, reflect broader decarbonisation shifts, indirectly reinforcing the move towards electrification and renewables.
The Electric Vehicle Energy Taskforce has reconvened with the aim of turning its proposals for facilitating the transition to electric vehicles (EVs) into action. Meanwhile, the Skyline Partnership, formed by Scottish and Southern Electricity Networks and UK Power Networks, has launched a project to collate and share electric vehicle (EV) data.
Together, these elements show that Ofgem’s RIIO-2 framework is actively evolving to embed net zero considerations by funding innovation, supporting flexible network operation, and enabling infrastructure upgrades, which collectively bolster the renewable energy sector’s growth and integration in the UK energy system.
[1] Ofgem (2020). RIIO-2: Draft determinations for re-openers. Retrieved from [https://www.ofgem.gov.uk/publications-and-updates/riio-2-draft-determinations-for-re-openers]
[2] Ofgem (2020). Fuel Poor Network Extension Scheme. Retrieved from [https://www.ofgem.gov.uk/publications-and-updates/fuel-poor-network-extension-scheme]
[3] Ofgem (2020). Clean Flexibility Roadmap. Retrieved from [https://www.ofgem.gov.uk/publications-and-updates/clean-flexibility-roadmap]
[4] Ofgem (2020). Centralised Strategic Network Plan. Retrieved from [https://www.ofgem.gov.uk/publications-and-updates/centralised-strategic-network-plan]
[5] Ofgem (2020). RIIO-2 price control framework. Retrieved from [https://www.ofgem.gov.uk/publications-and-updates/riio-2-price-control-framework]
- Ofgem's RIIO-2 framework is supporting the financial aspect of the renewable energy sector by funding innovation and infrastructure upgrades, enabling investments in technologies and network adaptations that facilitate the UK's transition to renewable energy and net zero emissions.
- The Tesla Energy Plan, which was unveiled and became operative for select customers on 26 October, encapsulates the finance dimension of the renewable energy industry by allowing domestic households to generate, store, and sell electricity as part of a network of renewable energy sources, contributing to the UK's renewable energy supply and net zero targets.
