As part of the electricity distribution price control arrangements that run from 1 April 2010 to 31 March 2015, Ofgem established the Low Carbon Networks (LCN) Fund. The Fund allows up to £500m support to projects sponsored by the distribution network operators (DNOs) to try out new technology, operating and commercial arrangements. The objective of the projects is to help all DNOs understand what they need to do to provide security of supply at value for money as Great Britain (GB) moves to a low carbon economy.
There are two tiers of funding which are available under the LCN Fund. The First Tier is designed to enable DNOs to recover a proportion of expenditure incurred on small scale projects. Under the Second Tier of the LCN Fund, Ofgem facilitates an annual competition for an allocation of up to £64million to help fund a small number of flagship projects. In the first year, 4 projects were awarded Second Tier funding totalling £63.6million through the annual competition and 11 projects were registered under the First Tier. These projects involve the DNOs partnering with suppliers, generators, technology providers and other parties to explore how networks can facilitate the take up of low carbon and energy saving initiatives such as electric vehicles, heat pumps, micro and local generation and demand side management, as well as investigating the opportunities that smart meter roll out provide to network companies. As such the Fund should also provide valuable learning for the wider energy industry and other parties.
We will be monitoring the learning which starts to emerge from these projects in order to understand its impact on the current regulatory framework.
The governance arrangements for the LCN Fund are set out in the LCN Fund Governance document.
What’s New
We have published our decision that six new Second Tier projects have been selected for funding. The projects have a combined funding value of £57m and address a broad range of issues which are relevant to the challenges that the DNOs will need to address in the move to a low carbon economy. These include trials to operate the network differently in order to increase the capacity of current network assets to facilitate the connection of Electric Vehicles, heat pumps and photo voltaic micro-generation; how best to provide timely and efficient connection for distributed generation; and the role that demand side response and electricity storage can play in future network operation. The projects have significant potential to provide learning that will be beneficial across all networks and the projects include robust plans for disseminating this learning. The projects selected are:
· Capacity to Customers (submitted by Electricity North West Limited)
· Flexible Plug & Play (submitted by UK Power Networks)
· Flexible Networks for a Low Carbon future (submitted by Scottish Power Energy Networks)
· FALCON (submitted by Western Power Distribution)
· BRISTOL (submitted by Western Power Distribution)
· New Thames Valley Vision (submitted by Southern Electric Power Distribution)
We will be placing extra requirements on the FALCON, BRISTOL and New Thames Valley Vision projects to ensure that they deliver maximum value to customers. These and the other DNOs will have until the middle of December to accept the terms of funding. Full details can be found in our decision document and the Expert Panel’s recommendation document below.