A new role for electricity networks?

Ofgem recently consulted on the future role of Distribution Network Operators (DNOs) in supporting the rollout of low carbon technologies and energy efficiency measures. This consultation explores fundamental changes to the role of DNOs during the next price control that runs from 2028 to 2033. Ofgem is consulting ahead of its Sector-Specific Methodology Decision (SSMD) in May 2026.

While we want to ensure that all households are able to participate in any energy transition, it’s not currently the statutory role of DNOs to address this problem. We are concerned that materially expanding the role of DNOs at this point in the price control setting process could increase perceived investor uncertainty. This uncertainty could in turn lead to Ofgem being too generous with the cost of capital or incentives in the price control overall. This could have negative consequences for energy consumers in the form of higher electricity network charges in future.

We’re not against the role of DNOs changing in future. However, the evidence base to support DNOs taking on a role in relation to low carbon technologies and energy efficiency is currently lacking. We consider that local authorities are a better option for targeting support at those in fuel poverty and we are aware that many DNOs already work closely with local authorities. To support fundamental changes in the role of DNOs, we would need to see more evidence of significant correlation between electricity network needs and areas of fuel poverty. We’d also need reassurance from Ofgem that any DNO involvement in energy efficiency and low carbon technologies, whether in terms of coordination, operations or financing, would not distract the DNOs from their core activities.

We’d also welcome analysis from Ofgem on which technologies are in scope for any potential change in the DNO role. We expect Ofgem’s analysis will show that batteries are the only technology which can make a material difference to peak demand at distribution level. Heat pumps will increase peak demand in winter (when it’s cold) and solar will have little impact on this demand as the weather tends to be duller during the winter months.

Any roll-out of small-scale batteries by DNOs into people’s homes would need strong consumer protection, including product standards and guarantees that the batteries should last for a minimum of 10 to 15 years. We note that even this is a very different lifespan to the typical DNO asset, which can be 50 or 60 years. There is also limited information on whether energy efficiency measures (such as loft, room-in-roof, cavity wall or solid wall insulation), that could reduce heat loss and therefore peak demand in homes with electrified heating, are in scope.

Enhanced coordination

If Ofgem wishes to pursue changes to the role of DNOs through ED3, we can see a stronger case for DNOs playing a larger role in the way that energy efficiency and low carbon technologies are co-ordinated. We can see opportunities for efficiencies which could, ultimately, lower the costs and inconvenience for energy consumers.

We can see this enhanced coordination as an evolution from their current role. We recognise that DNOs already engage with local and regional governments when writing their business plans for each price control. And we appreciate that DNOs will increasingly engage with the National Energy System Operator (NESO) and its Regional Energy Strategic Plans (RESPs).

Expanded role

We’re unconvinced, based on the evidence provided by Ofgem so far, that DNOs should take on an expanded role for low carbon technologies and energy efficiency during the next price control. We recommend that Ofgem does not pursue this further unless compelling evidence emerges before SSMD.

We’re open to Ofgem exploring the role of DNOs and building the evidence base ahead of the 2033–2038 price control. This could include using innovation funding, which is ultimately funded by consumers, to trial an expanded approach during 2028–2033.

Our full response to Ofgem’s consultation can be found here.