Targeted Charging Review (TCR) – What does it mean for businesses?

In an on-going bid to reduce the carbon footprint across the UK, the Government has announced ambitious targets to electrify heating systems and introduce more electric vehicles to the roads.

Before stepping down as Prime Minister, Theresa May pledged £106m to fund further research and the development of zero emission vehicles. With an ever-rising volume of renewable generation on the Grid, the nature of supply and demand in the UK is evolving rapidly and we need to act now to ensure that our energy system can cope.

Having already anticipated the reforms that will be needed in order to meet the Government’s ambitious targets, Ofgem launched a Targeted Charging Review (TCR) in August 2017, that will change the regulatory charging landscape, ensuring that residual and future charges meet the interests of customers now and in the future.

What needs to happen?

The first step is to facilitate a smarter energy system. We need to ensure our energy supply is flexible and highly responsive to facilitate growing demand. This will require careful planning, and means we are likely to see new rules and regulations in order to accommodate the new challenges and opportunities generated by the smarter energy system.

To provide long-term funding for our networks, the current Pay As You Go initiative will be changing to better incentivise and reward behaviours that reduce the cost of operating distribution and transmission networks.

Currently, distribution charges are based on residual and fixed costs which guarantee a level of income from each point. However, by introducing forward thinking charges designed to influence user behaviour, energy usage would be much more efficient, therefore placing less strain on the Grid.  This also means, the current Red/ Amber/Green distribution method could be abolished.

What does TCR mean for business?

TCR will provide the essential framework needed to help the Government achieve its zero-emission goal by 2050. The main point to consider is the additional power required from the grid; businesses must understand what power is being used for and their contributions.

By understanding the power used at present, and making a conscious effort to be more efficient, we may find our current infrastructure is equipped to deal with the change and doesn’t require too much adjustment.

One of the key factors for businesses to consider are Triad periods, which were introduced to help maintain and reduce peak energy demand between the winter months, November to February.  Owing to the success of this scheme, the requirements are altering slightly, and also the cost recovery has become skewed towards businesses that are unable to engage with the process.

 Once net zero comes into fruition in 2050, we may see more legislation using price drivers to influence user behaviour and mitigate strain on the grid whilst recovering necessary costs from the overall network.

Preparation is Key

Whilst the outcome of the network charge reviews remains to be seen, businesses should evaluate their own energy consumption and have an accurate idea of what they need now, and in the future. For example, when considering introducing EV charging points, consider how this is is likely to affect demand now and in the future, and how this can be mitigated or used to the businesses advantage.

This is where Kinect Energy comes in, we will work with you to determine your energy needs now, and in the future, to help you create a more efficient and fully tailored energy strategy to suit your business. Contact us today info@kinectenergy.com.