A new report released by UK consultant firm Gemserv provides recommendations on how the UK government can accelerate the transition of its energy market to net-zero.
According to the report Enabling energy markets for net-zero: Reforming code governance, action is needed in three key areas to accelerate the energy transition:
1. Strategic guidance and co-ordination – Ofgem should issue strategic guidance to Code Panels and Code Managers to ensure they are aligned and co-ordinated with government and industry priorities for net zero and consumer outcomes.
2. Accountable and incentivised code management – this includes the introduction of reputational and financial incentives to improve performance, with greater transparency, and competitive tendering of code managers to ensure value for money.
3. Simplification and accessibility – harnessing the power of digitalisation to reduce regulatory burdens, make rule changes more accessible to market participants and steps to simplify the rule book.
Although the energy transition is rapidly accelerating with the digitalisation, decentralisation and decarbonisation of the grid, energy market rules and standards are also increasingly becoming outdated resulting in slower than required energy transition progress, according to the report.
Reforming change processes governed through energy ‘codes’ is therefore vital to ensure market governance continues to be a key enabler, rather than a barrier to a net-zero future.
The report states that since widescale reform takes time, it is vital for Ofgem, the BEIS and the industry to take action now rather than later.
Trevor Hutchings, Gemserv’s director of Strategy, said: “We think that there are several opportunities to act now, making demonstrable improvements to code governance which will unleash further innovation, competition and efficiencies in the market. This can be done without jeopardising wider reform over the longer term.”
Bob Hull, energy industry expert and lead author of the paper, added: “Energy codes have successfully underpinned the energy system since the late 1990s but have become complex and change is slow. In the meantime, markets and technologies have moved on and they need to be modernised to help drive the transition to net zero. Our recommendations should deliver early benefits and can provide a strong catalyst for future change.”