The green transition will require significant investment in utility infrastructure. Many countries have restrictive income caps or fixed tariffs that do not allow for investment to support the electrification of transport, heating and agricultural processes. Incentive-based revenue caps are the answer, and will likely be adopted in many countries over the next decade.
Many regulators use R to perform benchmarking to compare the efficiency of utilities today. To ensure regulators adopt CNAIM (Common Network Asset Indices Methodology) as quickly as possible, we have focused our efforts on an R package, but we are also in the process of developing a Python implementation.
RIIO (Revenue = Incentives + Innovation + Output) price controls were introduced in Great Britain in 2013 by Ofgem, the regulator, as a way determining allowed revenue for electric and gas utilities. The implementation for Distribution Network Operators (DNOs), RIIO-ED2, uses CNAIM to asses the cost of maintaining each DNO’s grid, with respect to asset health. From a basic perspective, DNOs with transformers and power lines that are old and in poor health should be able to invest more than DNOs with assets in better condition.
CNAIM is a freely available standard, ratified by Ofgem, which can be read on their website.
In the process of implementing CNAIM for Danish utilities, and after several discussions with Ofgem and British DNOs, it is clear that:
Statisticians reading the CNAIM standard will note that parameter estimates for explanatory variables such as duty factor and corrosion are unlikely to be based on statistical methods, but are instead rules-of-thumb. The CNAIM Github package aims to resolve the issues listed above and reduce the barriers to adoption of RIIO-type price controls in countries outside of Great Britain.
To install the newest version of the CNAIM package, run:
To load CNAIM, run: