Proposal 9 – Making the electricity market work for EV drivers

24 November 2019

Government and Ofgem to deliver market mechanisms which reward EV drivers’ actions.

The Government and Ofgem must ensure that the value of system services and the financial benefits of optimised network reinforcements and whole electricity system efficiencies, created by the actions of consumers, are reflected and accessible through market price mechanisms. EV chargepoints have the potential to support the operation and decarbonisation of the wider energy system in a number of ways. For the potential benefits to be fully realised it is vital that consumers are incentivised and rewarded for the system benefits arising from their actions. The benefit will be mutual allowing for improved propositions for the consumer and wider system payback. As part of its Targeted Charging Review, addressing residual network charges, and its Access and Forward-Looking Charges projects, Ofgem is reviewing price signals sent to users of distribution networks through the charging arrangements. Building on such activities, tariffs that better reflect true network costs and which more closely align retail price to wholesale variations (e.g. day-ahead dynamic tariffs) would further encourage demand flexibility. These propositions are designed to engage and bring about behavioural change, motivated in part by the carbon and environmental benefits but also through price and/or revenue incentives. This objective would be further supported through a regulatory framework which encourages innovation in whole-system and energy transition solutions. 

Consideration should be given to the following points: 

• Market mechanisms that encourage EV owners to provide energy services and/or avoid incurring additional energy system costs must be established;
• The overall market framework should allow a wide range of market participants and business models to compete on a level playing field;
• These market mechanisms must be coordinated to exploit potential synergies and avoid conflicting responses;
• This functionality should be delivered by BEIS/Ofgem comprehensively assessing the current markets and amending as appropriate; and
• Networks companies, generators, suppliers and aggregators should develop data driven market propositions.
• Building on existing work, networks companies, the automotive sector, suppliers and aggregators should further develop real world innovation trials at scale, working with consumers to understand the price signals needed to sufficiently reward people for providing flexibility and delivering wider system benefits.