New local bodies could oversee UK energy system as Ofgem continues sector shake-up
Ofgem has announced a review into the energy system – assessing how it is planned and operated locally – which could pave the way for new independent bodies to oversee local energy systems across the UK.
The market regulator is looking to ensure the country is ready for a significant ramp up in green power, with the government pledging to heavily boost nuclear, wind, hydrogen and solar power over the coming decades to reduce the UK’s reliance on overseas buyers.
It believes local power grids will play a key role in reducing the country’s reliance on expensive imports of gas, bringing down energy bills while helping the country meet its goal of net zero carbon emissions by 2050.
These grids could potentially be used to charge millions of electric cars and power clean alternatives to gas boilers to heat homes and businesses.
The review follows soaring energy bills – which have risen to nearly £2,000 per year – with mass volatility in the market causing 29 firms to collapse since September last year.
Reforms key for net zero push suggests regulator
Currently, each electricity distribution network company is responsible for operating its local power grid and planning for future energy demand.
Companies will be expected to reinforce the grid to connect new local electric vehicle charging points and heat pumps.
However, Ofgem believes that the current arrangements have gaps and lack co-ordination, creating potential conflicts of interest which could add unnecessary costs to customers.
For example, new local markets could play a bigger role in future to balance power supply and demand flexibly and reduce the need for building expensive new grid capacity.
However, if electricity distribution network companies are responsible for these new markets, they face a potential conflict of interest as building new grid capacity would boost their revenues.
In today’s Call for Input, Ofgem has set out four possible alternative arrangements.
These range from separating the local system operation function internally within electricity distribution network companies to setting up new fully independent regional bodies.
Charlotte Ramsay and Richard Smith, co-directors of energy systems, management and security of Ofgem, said: “To reduce our reliance on expensive imports of gas and bring down customers’ energy bills, we need to accelerate our transition to net zero. This will require a transformation of our energy system, in particular at a local level.
“This review will ensure that local energy systems across Great Britain are set up for a huge increase in green, more affordable and homegrown power.”