The EIUG has received feedback from energy intensive industries that the time it takes to get a connection to the grid deters business cases for more embedded renewable generation or industrial electrification moving forward.
It agrees with the assessment and recommendations in the Electricity Network Commissioner’s letter to the Secretary of States, as supported by the analysis in the companion report by the Energy Systems Catapult.
As the Climate Change Committee has pointed out, electricity demand is expected to increase significantly due to larger roles of technologies such as hydrogen from electrolysis, direct air capture of CO2 and electrification of industrial processes. The EIUG suggests that the key question for the inquiry is whether the proposed changes are sufficient to achieve the Government’s decarbonisation objectives.
The EIUG is sceptical about locational pricing via the wholesale market price for electricity consumers, especially nodal pricing. Nodal pricing is unlikely to incentive existing demand users to move as passed investments will have created sunk cost and any move in response to nodal pricing is likely to be prohibitively expensive thereby negating its intended effect. Additionally, nodal prices are unlikely to be the defining variable in future investment decisions to locate new demand, as existing demand determine future demand to a large extend, and other variables, such as access to raw materials, transport infrastructure and proximity to customers are even larger reasons than electricity prices, even for energy intensive industries.