Over recent weeks it’s become clearer which way the wind is blowing on private wire. Although BERR and OFGEM have set themselves an end-of-year deadline for finalising changes to the licensing regime, it’s possible to get a feel for which way they’re headed. Here are some of the key bits:
Supply and distribution license exemption: per company or site by site?
When determining if you’re exempt from the requirement for a supply or distribution license, you’re supposed to sum your megawatts across all the sites you own. So if, for example, you had two private wire sites of 750 homes each, officially you’re no longer exempt. Currently, quite a few companies flout this rule and officials have never been keen to enforce it.
Having considered scrapping the “per company” maximum, BERR has hinted that it’s now minded to keep it. So will they start enforcing it more rigorously? I suspect they won’t. And even if they do you can imagine there would be lots of possibilities of getting round it by setting up ownership of private wires at arms length.
So what about breaking up a big site into lots of little networks?
If OFGEM isn’t going to enforce the company limit, what’s to stop unscrupulous ESCOs breaking a large scheme into lots of little license-exempt chunks? The clear message is that this is a step too far and it won’t be allowed. Some of the big sites that toyed with this approach now appear to have reconsidered.
Didn’t the Citiworks ruling outlaw private wire?
No it didn’t. It just means you have to allow third party access. So customers have to be able to switch away to another supplier if they want to, but the network owner carries on without a supply or distribution license. But if customers do switch, the owners of the private network will suddenly find themselves confronting the administrative horrors of the electricity markets: individuals will have to be subtracted from the main site meter, data collected and sent out, balances balanced, settlements settled.
Will 3rd party access on private wire networks actually become a reality? Definitely. But it looks like the government isn’t going to be prescriptive – yes you have to do it, but we won’t tell you exactly how it must be done. So we’ll see what approaches emerge in the market. Incidentally it seems to be the new DECC that’s deciding this one, not BERR or OFGEM. How the hell are we supposed to keep track of who’s in charge of what?
carbon limited 
The private wire issue is critical here. But what happens within a heat network? is there to be an opt out rule for the supply of thermal energy? I would be interested to review the implication so this in relation to potential future renewable heat obligations, like that proposed in Scotland. Must go an read the Scottish proposals.
Heat networks are still totally unregulated but it’s not going to stay that way for long. Either a system of self regulation by industry will emerge or DECC is going to impose something.
There’s a meeting coming up between DECC and CHPA in a week’s time to discuss regulation of heat networks, after which we’ll probably have a clearer idea.
However, until networks become much more widely spread (and interconnected) it won’t be possible for customers to choose their heat supplier. I.e. until then it won’t be possible to separate the supply business from distribution business. So while some regulations and consumer protection measures will be brought in in the short term, right to switch is still a long way off in my view.
which is a good thing. I am unconvinced by the arguement for total deregulation within the Utilities. There has to be some mechanism in the early years for the investors in such networks to be assured of their returns, even if the value of heat is always going to be less than that for electricity. If Govt. removes all potential income securities, at what point does the risk outweigh the benefit for the investors. Now, if the investment was truly coming from the public purse, thats a whole different story…