The post below was first published on our Energy blog

On Saturday, 4 September 2021, Ofgem (the energy regulator in Great Britain) published its plans to further support the UK’s transition to electric vehicles (EVs) in the deployment of EVs and their integration into the electricity system. Ofgem aims to get the network ready for EVs and ensure there is sufficient network capacity for EV uptake, all while aiming to avoid unnecessary investment into the network and keep consumer costs down.

Phasing out petrol and diesel cars and vans

Ofgem’s latest announcement reinforces its commitment to decarbonising transport which has already seen Ofgem commit £300 million to support the installation of 1,800 ultra-rapid charge points in the UK (announced in May 2021), with this initial support considered only a starting block to the over £40 billion to be invested in Britain’s energy networks in the next seven years.

These building blocks are all part of the bigger plan to phase out all new petrol and diesel cars and vans in the UK by 2030 and have all new cars and vans fully zero emission at the tailpipe by 2035. In so doing, and as announced by the UK Government in November 2020, the UK aims to become the fastest nation in the G7 to decarbonise cars and vans.

Growing demand for EVs

Less than a year after the Government’s announced ambition to decarbonise transport, the plan for EVs appears to be on track with over 500,000 ultra low emission vehicles (ULEVs) currently registered in the UK, along with forecasts that more than one in seven registrations in the UK in 2021 will be plug-in vehicles, and an estimated 14 million EVs will be on UK roads by 2030. ULEVs use low carbon technologies and emit less than 75g of CO2/km from the tailpipe, and include pure EVs, fuel cell EVs, plug-in hybrids and extended range EVs. These ULEV thresholds are also those used for the UK Government’s consumer incentive scheme, the Plug-in Car Grant (PiCG), and are also the thresholds used for zero emission vehicles (ZEVs).

Increasing need for electricity

By 2035, the Climate Change Committee has forecast that about 370,000 public charge points will be needed and Ofgem estimates that up to 19 million home charge points may be required (research has shown that a key factor in 36% of households not getting an EV is the lack of charging points near their homes). By 2050, electric cars and vans are expected to need 65TWh to 100TWh of electricity annually, an increase of 20% to 30% over today’s levels. The Competition and Market Authority (CMA) market study into EV charging completed in July 2021 has also identified areas in the nascent charging industry where greater competition is required (e.g. along motorways).

Getting EV network ready

Ofgem’s strategy is primarily focused on (1) ensuring that EV charge points are able to connect to the grid in a timely and cost efficient manner, (2) enabling further efficiency in the grid through smart charging and vehicle-to-power (V2X) technology, and (3) encouraging consumer participation in the EV transition as EVs become effectively part of the electricity system.

Addressing uncertainty

A major challenge to ensuring sufficient network capacity is that of when and where EV uptake is likely to happen, and having identified EV uptake, the challenge is the time needed and connection charges involved in implementing an EV charging infrastructure. The uncertainty surrounding the location and pace of EV uptake means Ofgem cannot currently approve full five-year programmes of work in advance.

In an effort to address this uncertainty in future EV location uptake, among other issues, distribution network operators (DNOs) will be required to forecast local EV uptake and consumer behaviour through price controls for electricity distribution networks (RIIO-ED2), thereby incentivising improvements to the connection process. DNOs will also be required to engage with local stakeholders and assess local EV investment needs and, under RIIO-ED2 licence obligations, DNOs will be required to publish digitalisation strategies.

Using smart charging

The use of smart charging will be incentivised through the use of special tariffs (e.g. Market-Wide Half-Hourly Settlement and Time of Use), progressing smart charging (e.g. pre-set charging at off-peak times), working with the Government and industry to remove barriers for V2X, and developing data and communication for dynamic smart charging.

Reducing barriers to connection

In an effort to reduce barriers to network connections, Ofgem will remove connection costs associated with reinforcement of shared networks and will publish their Final Access and Forward-Looking Charging Significant Code Review (SCR) decision in 2021, with changes to be implemented from 2023. The SCR looks at proposals for distribution connection charging, definition and choice of access rights, and transmission charging for small distributed generation.

A greener, fairer future

Ofgem will continue to engage with key stakeholders and encourage ongoing engagement and greater consumer participation through supporting product development and extending consumer protections to new products and services.

On EV flexibility and interoperability, Ofgem will publish in 2022 a joint BEIS/Ofgem EV Flexibility Policy Statement, which will include reviews of charge point interoperability, driving consumer engagement with smart technology, and improving data flow between charge points, operators and networks.

A Retail Strategy on how best to support consumer participation and ensure consumer protection will also be published, and work with BEIS and the Government will continue in an effort to identify gaps in the current framework of consumer protection and ensure fair pricing in the aim of enabling the transition to EVs and achieving a greener, fairer future.

Reza Dadbakhsh
Reza Dadbakhsh
Partner, London
+44 20 7466 2679
Sarah Pollock
Sarah Pollock
Partner, London
+44 20 7466 2786
Nick Pantlin
Nick Pantlin
Partner, London
+44 20 7466 2570
Steven Dalton
Steven Dalton
Partner, London
+44 20 7466 2537
Barbara McNulty
Barbara McNulty
Associate, London
+44 20 7466 3184