The British Government has said it intends to change the mandate of the country’s energy markets regulator, Ofgem, to include an explicit net zero duty. This was announced in an amendment to the Energy Security Bill currently working its way through Parliament.
The change is overdue and very welcome. Renewable power plants, such as solar farms, and energy storage systems help to address the linked challenges of climate change, the cost of living crisis, and energy security. It is therefore vital that the networks that move electricity around the country are expanded and upgraded. This will enable more renewable power plants and energy storage systems to connect and provide clean energy to the grid. Including an explicit net zero duty within Ofgem’s mandate enables the regulator to prioritise the changes necessary for that investment to be made by the network operators.
The change is something that NextEnergy Capital and many other renewable energy companies have long called for. For example, the UK’s solar trade association, Solar Energy UK, and five other industry groups have previously written to the Secretary of State, calling for Ofgem to take a strategic approach to investment in the transmission and distribution network. Ofgem itself has said in the past that it needs to facilitate decarbonisation.
By voting this amendment into law, Parliament will add a welcome and vital piece of the regulatory puzzle required for net zero. NextEnergy Capital will look forward to seeing how Ofgem uses its potential new mandate to accelerate investment into network infrastructure.
However, there is more to be done. To maximise the benefit of its new mandate, Ofgem will need support from Government – particularly the Treasury and the Department for Energy Security and Net Zero – so that it can make bold decisions that prioritise decarbonisation.
The prize is a big one: an energy system based on renewable power generated across the country, from sources such as solar, is not only better for the planet, it is also more affordable, and less susceptible to unpredictable international events, such as the war in Ukraine.
The more we decarbonise, the more we will enable homes and businesses to benefit from lower-cost, clean energy, and reduce reliance on costly fossil fuels. It will be important for Ofgem and Government to work quickly and in lockstep to deliver solutions that allow the necessary investments to be accelerated, while ensuring that vulnerable consumers are not left behind.
The Government is also looking at changes to how electricity markets work, through the Review of Electricity Market Arrangements (REMA) process. Coupled with the required investment in grid infrastructure, REMA could deliver significant benefits if these and other reforms provide clear investment signals to drive the energy transition. This notably includes developing pricing mechanisms that incentivise the development of renewable energy and storage systems, rather than fossil fuels, and ensuring that investments made into existing renewable power plants are protected.
NextEnergy Capital continues to engage with Government around REMA and is proud to be represented on the Government’s recently established Solar Taskforce.
We look forward to continuing to engage with the Government on the future of Britain’s energy system.