Shock to the system: Ofgem proposes new body to run electricity network
Ofgem has this morning submitted proposals for the creation of an independent body to run the UK’s electricity network, in what would be a radical shake-up of the way the country’s power is managed.
Such a body, the watchdog says, could save consumers up to £4.8bn by 2050, while leading the country’s charge towards net zero.
The new “Independent System Operator” [ISO] would be fully separate from National Grid, which owns the electricity distribution system.
Its responsibilities would include helping to charge millions of electric vehicles and enabling a huge increase in renewable power while maintaining secure energy supplies.
Ofgem’s chief executive Jonathan Brearley said that the network needed to undergo its “biggest transformation” if the UK was to hit its climate targets.
“[The body] would help bring forward green economic growth, accelerate our journey towards net zero and save consumers money on their energy bills”, he added.
Business secretary Kwasi Kwarteng welcomed the proposal, saying that meeting the targets would require “changes to how we turn the lights on”.
National Grid, which has run the energy network since privatisation, said it would work with Ofgem and government on the potential divestment of the electricity system operator.
Even though a separate body was set up within National Grid to avoid potential conflict of interest connected to operating the system, there have been concerns that this might not go far enough.
A spokesperson for National Grid said: “An industry structure that enables long-term thinking and allows the system operator to take on new roles as part of the energy transition is an important step in the market and regulatory reform necessary to deliver net zero.
“Significant further work is needed to determine the detail of that structure.”
Simon Virley, head of energy and natural resources at KPMG, said that the proposal needed to be considered in the context of the changes demanded by the UK’s net zero target.
“There are new roles to be performed, like planning future networks for hydrogen, the offshore grid needed to deliver a four-fold increase in offshore wind, and whether local area energy plans add up to what we need at the national level to hit our carbon budgets”, he said.
“This requires fundamental reforms to our current institutional landscape, including the creation of a National Energy Agency, incorporating the SO, to carry out some of these new roles.”