BEAMA Response to Ofgem RIIO-ED3 Framework Consultation
15 January 2025
Ofgem has published its its RIIO ED3 framework consultation, with a deadline to respond of 15 January. You can find the consultation document by clicking here. The ED3 price control settlement for Distribution Network Operators (DNOs) will run from 1 April 2028 for five years.
Ofgem is changing its narrative and direction for ED3, stating that the regulator is now less worried about overbuilding networks, and more worried about under-building, in the face of significant demand increases expected in the 2030s. While the currently running price control ED2 was still assuming a degree of uncertainty about future demand pathways, promoted a ‘flexibility-first’ approach to defer network reinforcement where efficient, and was overall cautious on spend, Ofgem is now changing its approach. Ofgem is proposing a more proactive approach to network reinforcement and for the framework to be more prescriptive (‘input’ rather than ‘output’ based), to ensure the timely delivery of additional network capacity at least cost to consumers in the long term and to increase certainty for the supply chain. Ofgem see the need to change the RIIO model for ED3 in light of a changing context.
The context that leads Ofgem to approach ED3 differently is:
- Electricity demand is expected to increase significantly during the 2030s across all net zero pathways, as electrification gathers pace. Peak electricity demand to double
- The creation of a regional energy system planning function for the NESO (RESP, regional energy strategic plan) that will bring in local politicians and decision-makers will give Ofgem more confidence in the pathways for decarbonisation
- Clean Power 2030 Government Mission – this suggests more reinforcement is needed ahead of 2030.
- Supply chain and workforce are constrained – Ofgem believe that this is the reason why DNOs have got off to a slow start in spending their allowances over the past 1.5 years since ED2 started.
Furthermore, Ofgem has been given two additional duties, in relation to Net Zero, and to ‘sustainable economic growth’.
BEAMA are engaging with Ofgem on ED3. We are also making the point however that action needs to be taken during ED2, and that Ofgem should not delay all changes to ED3.
There are several working groups held by Ofgem, a workshop specifically with BEAMA, and BEAMA internal meetings. Members interested to support our response to the consultation and the workshops, please email laura.dye@beama.org.uk
