UKERC response to BEIS/Ofgem consultation on energy industry codes

19 Sep 2019

The gas and electricity sectors feature many different actors that interact in different ways, through commercial arrangements and physical transfers of energy. The activities of the larger actors – generators, suppliers, gas shippers, and network owners and operators – are regulated through various licences.

There is then a raft of standards and codes that govern the interfaces between the actors and many of the characteristics of equipment that is connected to the networks. Most of these documents were established when the gas and electricity sectors were first liberalised in the late 1980s and early 1990s. Although a number have seen various revisions since then, many industry observers have argued that they are out of step with technological and market developments and difficult to change.

For example, in January 2017, UKERC noted that code reform relating to electricity distribution has been extremely slow, and that ‘reforms that we believe are now required cannot be left to be taken forward’ by the DNOs’ and, on their behalf, the Energy Networks Association (ENA). UKERC also argued that leaving leadership to the network licensees is too passive and risks excessive delays in proposals for change being formed and tested.

Read a summary of our response to the BEIS/Ofgem consultation on energy industry codes below.

The need for reform of industry code governance

Industry codes need to be updated in a timely and appropriate fashion, with all parties affected given the chance to comment and enough time to do so. Streamlining or accelerating the process seems essential but must not lead to perverse outcomes.

It seems necessary for some degree of authority to be given to one or more parties in which the rest can have confidence, to drive and explain change. A new, independent code manager function should be responsible for “identifying, proposing and developing changes (analysis, legal drafting etc.), including understanding the impacts”.

The objectives of reform

I agree with the first three of the four objectives of reform:

  1. Providing strategic direction.
  2. Empowered and accountable code management.
  3. Independent decision-making.
  4. Code simplification and consolidation.

The fourth objective should be approached more cautiously. Whilst the accessibility of codes should be improved, with unnecessary content removed and the content made clearer and more consistent, great care must be taken when it comes to code simplification.

Much of what is currently written could be argued to be too prescriptive. Requirements could be expressed more clearly and succinctly  focussing on the ‘what’ of a requirement and agnostic on the ‘how’.  However, the objective to simplify codes may not be appropriate in specific circumstances, particularly in relation to technologies that are not yet well understood or where detailed behaviours have the potential to cause significant system problems but are treated as commercially confidential.

One particular area where simplification and lack of appropriate engineering detail could lead to very problematic outcomes is the case of power electronic inverters connected to the system and their control. At the time of writing, it seems that this might have been an issue in the loss of infeed from Hornsea offshore wind farm in the GB system incident on August 9th 2019.

The model for governance of code

A separation of responsibility between those who are charged with the development of codes and those with the authority to approve changes would seem sensible.

Government should be responsible for articulating the vision and policy direction for the energy system. This policy framework would help to shape the decision-making and prioritisation of code change. In the development of codes, a strategic code governance body should take account of policies not just of the UK Government but also the devolved administrations.

Any strategic body will need to be held accountable and “impartial, engaging with – but not beholden to – industry” and appropriately reflecting views from government, Ofgem, code managers and the wider sector.

Practical issues

The new code governance body or bodies must have sufficient understanding of both engineering and economic issues and the ability to translate them into likely impacts on energy users. This will require engineering and economic expertise and, at least, access to the ability to assess societal and environmental impacts. Engineering and market modelling capability will be essential.

Particular technical areas such as the treatment of power electronics based interfaces with the electricity system will require increasingly close attention as such devices become increasingly prevalent.

Specific steps should be taken to ensure that smaller parties are able to engage in the code governance process.  The “creation of a single interactive regulatory on-line portal for all energy rules” will be important. At present, it is very difficult to find all the relevant rules and fully appreciate the scope of each document. Appropriate guidance should also be produced to promote correct and consistent interpretation of codes.

Consideration should be given to the policing of compliance with codes. Again, sufficient resources should be devoted to this and the tests will need to be carefully designed. For example, according to what is known publicly at the time of writing, it would appear that testing of controls on Hornsea wind farm’s connection and turbine failed to reveal an inability to ride through a relatively modest voltage dip at the point of connection to the main transmission system on August 9th 2019.

Europe

It should be noted that there are well-developed processes at a European level, led through, for example, the European Network of Transmission System Operators for Electricity (ENTSO-E) and complemented by work in the Council of European Energy Regulators (CEER) that, under current arrangements, will lead to changes in GB electricity system standards and codes. It should be noted the exit from the European Union will impact many of these arrangements.

If, as time goes on, technical standards in force in the UK diverge from those in the rest of Europe, it will likely impact on the cost of some technologies that might need bespoke developments for the UK market.