Future networks – RIIO-ED2 (Issue 3)

This is the third research paper in a series exploring the evolution of regional flexibility markets and how they can support the development of an efficient, low carbon energy system. The series is prepared by Cornwall Insight, Complete Strategy and Shakespeare Martineau. This paper has been led by Complete Strategy and investigates the interaction of regional flexibility markets with network company price controls.

The focus of this paper is on the early-stage development of the RIIO-ED2 price controls, starting in April 2023, and regional flexibility markets. It covers:

  • Potential new roles for distribution network operators (DNOs) as they transition to a more active role as distribution system operators (DSOs)
  • Ofgem’s announcements to date on its policy for regulating distribution system operators
  • Challenges for the regulatory in managing the uncertainty of the DNO to DSO transition when setting a five-year price control
  • Pros and cons of the regulatory approaches which Ofgem could pursue

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