Decision on enabling the competitive deployment of storage in a flexible energy system: Changes to the electricity distribution licence

Publication date
20th December 2018
Information types
Policy areas

We are introducing a new condition in the electricity distribution licence to ensure that distribution network operators cannot operate storage.

Storage can help to integrate intermittent renewable generation, reduce the costs of operating the system, and help avoid or defer costly reinforcements to the network. However, it needs a level playing field to compete in the relevant markets.

Where competitive activities are carried out by monopoly network operators, there is potential for competition to be distorted, for new market entrants to be deterred, and for network operators’ incentives to invest efficiently in their networks to be affected.

In the case of networks owning and operating storage, distortions or foreclosure have the potential to affect not just the uptake of storage by third party providers, but also the uptake of other forms of flexibility – such as DSR or other flexible generators – that provide the same or similar services in the same markets. This in turn has the potential to impact on other markets, including that for aggregation.

However, electricity storage can be a valuable source of flexibility for network operators, offering an alternative solution to avoid or defer the need for traditional reinforcement or to support cheaper and faster network connections. We need to make sure that networks have the right regulatory framework to make efficient and effective use of flexibility provided by the market, while acting in an entirely neutral way.

In the Smart System and Flexibility Plan we committed to making sure that network operators cannot directly operate storage. We consulted on our proposals for giving effect to this commitment in September 2017. After reviewing the responses to the consultation, we proceeded with a statutory consultation in September 2018 on the changes to the electricity distribution licence condition to fully implement our proposals. This is our decision on the proposed licence modifications to the electricitiy distribution licence.