GB energy regulator Ofgem has recommended creation of an independent body to lead the delivery of the country’s net zero ambition.
The proposal is that the new independent system operator would be fully separated from National Grid, which has managed the energy system since privatisation but also owns the electricity transmission network.
National Grid Electricity System Operator (ESO) was established as a legally separate function within National Grid in 2019, in order to avoid perceived or real conflicts of interest. Current responsibilities include ensuring the stable and secure operation of the national electricity transmission system and supporting the planning and coordination of electricity networks.
Ofgem’s recommendation is that the status is taken a step further with full separation.
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Given the scale of the net zero challenge, full separation would help ensure future decisions on how to manage the energy system are taken in the interests of consumers, helping to keep costs as low as possible, the regulator says in a statement.
“The energy system needs to go undergo the biggest transformation in over a century to meet Britain’s ambitious climate goals. Ofgem is recommending the creation of an independent body to help deliver the fundamental changes in how we use energy,” Jonathan Brearley, chief executive of Ofgem, commented.
“This would help bring forward green economic growth, accelerate our journey towards net zero and save consumers money on their energy bills.”
Ofgem estimates that an independent body with new responsibilities for running the electricity system could save consumers £0.4 – £4.8 billion (US$0.55-6.6 billion) between 2022 and 2050.
Its new responsibilities would include taking a more active role in designing and planning new grid infrastructure in the balancing of supply and demand and providing independent advice to the UK government on how best to hit its target of net zero emissions by 2050.
National Grid has responded with a short statement saying that the company is working closely with the government, regulator and industry to explore what changes will be needed to achieve net zero, and the role and potential divestment of the Electricity System Operator is an important part of that discussion.
“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.”
In order to deliver the clean energy transition in a timely, fair and affordable way, the country needs ambitious government policy, an aligned view on the activities required from a future energy system, a clear set of principles by which they are governed, and the frameworks to support them, says National Grid.