Great Britain’s latest innovation in grid regulation.
Peter Fox-Penner is chairman of The Brattle Group. Dan Harris is a principal in Italy, and Serena Hesmondhalgh is a principal in the U.K. The authors acknowledge the contributions of Paul Whitaker of National Grid, Chris Watts of Ofgem, and Heidi Bishop of The Brattle Group. The opinions expressed in this article are solely the authors’.
The electric industry has entered an era of low-to-negative sales growth alongside high, policy-driven investment needs. This era will call for significant network reinforcement, as generation resources become more diverse, including demand response. Grid operators will need smart grid innovations to manage price-responsive loads and even the interconnection of electric vehicles. Directly or indirectly, this squeeze will touch all segments of the industry, including distribution and transmission owner-operators. Grid owner-operators are particularly affected, as a very high proportion of their costs are fixed. They remain price- or revenue-regulated (or publicly owned), but yet often are given responsibility for delivering on policy outcomes such as greater energy efficiency or green power use.