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Households Could Be Charged Annual ‘Insurance Premium’ For Access To Electricity Grid

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Emily Gosden, The Daily Telegraph

Every household could have to pay an annual “insurance premium” for access to the UK electricity grid, under plans to overhaul the way networks are paid for.

Energy regulator Ofgem is worried that people who can afford to install solar panels and generate their own power for much of the day may end up not paying their fair share of the costs of the UK’s electricity pylons and cables.

Dermot Nolan, chief executive, told the Telegraph the question of how to charge for networks in an equitable way a “huge challenge” facing the UK energy system in coming years.

Currently, the cost of maintaining and upgrading the networks is factored into the prices energy suppliers charge for electricity, accounting for about £140 a year on a typical household bill.

Households that install their own panels will need to buy less electricity, so will avoid paying as much toward the costs of the network.

Solar panels
Households with solar panels may only need access to the grid occasionally CREDIT: GETTY IMAGES

However, most such households will still need to use the networks to draw power from the grid by night or in winter, and may also benefit from selling surplus electricity they produce to others via the network.

Mr Nolan said: “We have seen already an increase in solar, particularly in the south of the UK: people putting solar panels in their back yards, getting electricity to their homes for the entire day then only using power [from the grid] at night. That may become more prevalent.

“If batteries come in as well, will you see homes totally disconnected from the grid? Will they still need the grid as an insurance policy?

If the very affluent all had solar panels and batteries and were paying relatively low bills, and the relatively less well-off were paying higher bills because they were subsidising the grid, I don’t think society would accept thatDermot Nolan

“One of the biggest challenges for the country in energy… is how will you charge for the grid in that kind of situation?”

Mr Nolan said the regulator was thinking about the issue “pretty intensively” and had not yet decided the solution.

However, he said one option would be for households to “basically pay an insurance premium for access to the grid”.

Mr Nolan said the issue would be “difficult” to resolve as “people might feel ‘I’ll pay it when I need it’” but this would not reflect “the fact there is an infrastructure there and you have to pay for it”.

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