Distribution Network Operators (DNO), companies licensed to distribute electricity in the UK, are currently facing a difficult time with vast quantities of electricity applications being submitted nationally to connect new sites to the grid. Furthermore, as part of Ofgem’s final Access SCR (Significant Code Review) coinciding with the introduction of the new distribution price controls, RIIO-ED2, the expectation is applications for electricity will increase.

One of the main goals of Ofgem’s new electricity price controls, is to incentivise the DNOs to invest in the UK’s electricity infrastructure in a way that benefits consumers and the environment, while also keeping price controls down.

RIIO-ED2 comes into force for a new five-year period which began 1st April 2023.

How the price controls work?

For developers, RIIO-ED2 will provide a more predictable and stable regulatory environment for investment in the electricity distribution network. From a cost perspective, the latest framework will mean some reinforcement costs may be absorbed by the electricity networks, rather than passed on through the connection offer for payment.  

There has been mixed opinions and some confusion with regards to reinforcement costs but to dispel common thoughts around reinforcement, this is where the electricity network needs to upgrade or change part of the existing apparatus to suit the new requirements. Reinforcement does not include the costs of new apparatus, new cables or new circuit breakers etc.

There was an anticipation within the industry that developers were holding back on applications to the networks until after 1st April 2023 (which has become apparent in recent days), in order to reduce the contribution they may face for reinforcement costs. This will inevitably mean a later influx of applications to the networks, causing a backlog in the system. There is no definitive timing on likely delays, only that the networks will come under increasing pressure.

Expectation amongst planners, consultants and developers is that this new price period could spell the end for high distribution network reinforcement cost contributions by the applicant. However, what this does mean is that the number of applications submitted to DNOs has exponentially risen since its introduction.

To what extent the network reinforcement costs will be socialised amongst all UK energy users is difficult to define. Expectation is that this will be made apparent during the price control period in April 2023. Initial conversations suggest that reconfiguration, repositioning and new cabling will still remain a cost to be covered by the applicant. The DNOs across the UK have formally issued their costs and a high cost cap has been agreed with Ofgem at £1,720/kVA. Each of six DNO’s across the UK have submitted a business plan for the next five years and will now lead on this moving forward.

Engage with distribution

The importance of understanding the utility networks in advance of submitting a planning application for a site is critical, as power is a necessity to any development. By understanding the constraints and opportunities of the networks in advance, it provides landowners and developers with a better understanding of how their plans can take shape. It is recommended to engage with the utility networks as far in advance as possible, in order to gain an understanding of the existing infrastructure and current plans to upgrade the network for capacity.

Further information

Contact Chris Phillips or Michael Lock

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