UK regulator calls for full separation of power system operation from National Grid

London — UK energy regulator Ofgem has called for the creation of an independent system operator fully separated from National Grid to avoid conflicts of interest.

National Grid both owns and operates the electricity transmission network of England and Wales. In 2019 a legally separate function was created within National Grid to manage the electricity system to help avoid conflicts of interest.

Given the scale of the net zero challenge, however, Ofgem is now recommending government goes further and considers full separation.

"Full separation would help ensure future decisions on how to manage the energy system are taken in the interests of consumers, helping to keep costs as low as possible," it said.

"I welcome Ofgem's contribution to the debate over the future structure of our energy system and will consider its recommendations thoroughly," said Kwasi Kwarteng, Business and Energy Secretary.

In December's Energy White Paper the UK government committed to consult on reviewing the management of the energy system.

It said additional responsibilities relating to climate commitments may require greater independence from National Grid, which has managed the energy system since privatization in the early 1990s.

"Ofgem, which will work closely with government in its review, has estimated that an independent body with new responsibilities for running the electricity system could save consumers GBP0.4-GBP4.8 billion [$0.55-$6.58 billion] between 2022 and 2050," it said.

New responsibilities of an independent operator would include taking "a more active role" in designing and planning grid infrastructure, and providing advice to the government on how best to hit its target of net zero carbon emissions by 2050.

Such a body would take a more proactive role in the balancing of supply and demand across both local and national electricity networks, creating new opportunities to reward consumers and generators for being flexible in the way they use electricity.

It would also take on wider planning responsibilities for new infrastructure, for example the design and construction of an offshore grid connecting offshore wind farms to the UK, Ofgem said.

Gas network planning

Ofgem also said there was a good case for separating some gas network planning functions from National Grid and giving these to a new Independent System Operator.

"However additional complexity and a less certain future for the gas system means separating all gas system operation functions from National Grid requires further consideration," it said.

Nevertheless, providing independent recommendations to government could include both gas and electricity network investment proposals from a new body, it said.