- Ofgem launches consultation to reform how the electricity network operates
- It says the network needs to be fair for all consumers and work more efficiently
- Homes may have to pay for all electricity consumed, even if it’s from solar panels
- Electric car owners could be hit with a fee if they charge their cars in peak hours
Around one million households with solar panels installed could see their energy bills rise under new plans by the regulator to reform the electricity network.
Ofgem says the current system needs to change to make sure all consumers pay their ‘fair share’ of charges for using the network – including those who generate their own electricity through solar panels.
Those with electric cars may also see their bills rise if they charge their vehicles during peak times rather than through the night when the cost is cheaper.
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One million houses with solar panels could see their bills rise under new Ofgem reforms
Ofgem has begun a consultation on reforming the electricity network to make sure ‘the costs for the networks are spread fairly among consumers and that network capacity is used efficiently’.
It said as there have been rapid changes in the electricity sector, the network needs to have a ‘smarter, more flexible’ system which ‘captures the benefits of these changes for customers and keeps costs low.’
It wants the new system to be in place by 2020 – 2021 and has published two working papers proposing reforms to the current system.
The first looks at how to make sure consumers use the electricity network in the most efficient way possible, for example during the night when the cost of electricity is cheaper rather than during peak times.
The second looks at the cost of the electricity network and how to make sure it works fairly for all customers.
Ofgem estimates that annual electricity network charges are around £120 per year on average, a quarter of a typical electricity bill, which all consumers have to pay.
These charges go towards the upkeep of the electricity network and the more electricity is used from the main grid, the higher these charges are.
Therefore households which create their own power, such as those with solar panels, buy less from the main grid and have lower network charges to pay.
The regulator says this is unfair because even houses with solar panels will need to rely on the national grid for electricity at times, such as during the winter.
Those who charge electric cars at peak times will put an extra strain on the grid
Ofgem says when it comes to electric cars, if drivers charge their cars at peak times this will put a strain on the network and they will therefore need to pay an additional fee compared to those charging their cars at off-peak times.
It said without smart chargers installed, which charge electric vehicle batteries at off-peak times, there will need to be upwards of £6bn spent in order to upgrade the network.
Households could have to pay network charges based on all the electricity they use
Andrew Wright, senior partner of energy systems at Ofgem, said: ‘Currently residual charges, are mostly based on a customer’s net consumption.
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‘This means that a customer who takes all their electricity from the grid will pay a larger share than a customer who generates some of their electricity on their own site, for example with solar panels, even though they both have the same ability to access the system.
‘When one set of consumers pays less, it increases charges for others, including those that are in vulnerable circumstances.
‘The networks exist to provide electricity at times when we rely upon them. We want to make sure that all users pay a fair share of the costs even if they are only using the networks when their on-site generation is not producing electricity.’
This means that a customer could be charged based on how much electricity they consume in total, including the electricity generated on-site, rather than just the electricity from the main grid and this could push up costs for those currently generating their own electricity.
Ofgem says it wants to reform the electricity network so it is fair to all consumers
Solar panels are a way to generate your own electricity by harnessing power from the sun and converting it into energy you can use to power your house. A typical house with solar panels will consume 40 per cent of the electricity generated, with the remaining 60 per cent being sent back to the National Grid.
Lots of homes across the country have solar panels but since 2015 when the Government subsidies for those with the panels were reduced, they are now more costly.
This means that having solar panels installed isnt a viable option for most households, and therefore it could be seen as unfair for those without them to pay higher network charges.
Households with solar panels not only make their money back through lower electricity bills, they are also able to lower their overall costs through the feed-in-tariff.
This is a certain amount paid by the Government to certain households for the electricity they generate through their solar panels. It is paid quarterly by energy providers but was cut by around 65 per cent in 2016.
While solar panels are nothing new, part of the motivation for the reform of the electricity system are other advancements in this industry, such as home battery systems and electric cars.
Courtesy: Daily Mail Online