NERA Reports for RWE npower Related to Project TransmiT

13 February 2014
By Sean Gammons and Richard Druce in collaboration with a team from Imperial College London

NERA Director Sean Gammons and Senior Consultant Richard Druce, in collaboration with a team from Imperial College London, have prepared a series of reports for RWE npower in the context of Project TransmiT, Ofgem's fundamental review of electricity transmission charging arrangements in Great Britain.

The NERA and Imperial team reviewed the Ofgem Impact Assessment that led to Ofgem's "minded-to" decision to implement a new transmission charging methodology, known as "WACM 2." The report highlights that Ofgem failed to check whether the proposed methodology reflects the costs that different generators impose on the system better than the existing methodology. Analysis presented in this report suggests that WACM 2 reflects costs less closely than the status quo methodology.
In a follow-up to this first report, the NERA and Imperial team updated and expanded the analysis of whether the WACM 2 charging methodology is more cost reflective than the status quo methodology. Across a range of scenarios, the analysis showed that the WACM 2 methodology does not constitute an improvement on the existing methodology in terms of cost reflectivity.
The NERA and Imperial team also performed a modelling exercise to assess the economic case for introducing the WACM 2 charging model. The electricity market and transmission system modelling conducted for this assignment suggests that "WACM 2" would lead to wasteful transmission investment, and increased costs to the consumer over the period to 2030. Therefore, the modelling does not support the introduction of the WACM 2 model.

Project TransmiT: Review of Ofgem Impact Assessment of Industry Proposals CMP213
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Project TransmiT: Modelling the Impact of the WACM 2 Charging Model
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Project TransmiT: Assessing the Cost Reflectivity of Alternative TNUoS Methodologies
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