Ofgem launches their Decarbonisation Action Plan

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On his first day in office, Ofgem’s new chief executive Jonathan Brearley announced the regulator’s Decarbonisation Action Plan.

Mr Brearley commented on the Plan: “Britain has come a long way. It has decarbonised faster than any other major economy, but we must go further, particularly on heat and transport.

“We are taking an approach that recognises that our role protecting consumers includes achieving net zero.

“As low-carbon renewable energy grows and more transport goes electric, the energy system needs to be more flexible to respond to peaks and troughs in both supply and demand.

“Our new price controls for network companies will clear the path for this, providing the incentives for investment for the future.

“It is now vital that the energy industry rises to the challenge and demonstrates how it will work with the Government and Ofgem to decarbonise Britain’s energy system at lowest cost.”

The plan sets out nine actions, which will seek to ensure energy networks are ready to deliver net zero, support Government to tackle the difficult question of how to decarbonise heat and transport and encourage innovation to provide new low carbon products and services for consumers.

Only 5% of the energy used to heat UK homes today is from low carbon sources.

The plan ‘recognises that there are trade-offs to overcome, such as fairly spreading the cost of a low carbon energy system between today’s and tomorrow’s consumers.’

Ofgem will also look at how it can support the roll out of electric vehicles and will publish an Electric Vehicle Strategy.

According to the Plan, country’s use of electric vehicles may need to grow from 230,000 today to 39 million by 2050.

This will address how the grid needs to evolve to meet increased demand.

It will also look at new business models, such as electric vehicle owners selling electricity back to the grid during peak times.

To meet net zero, Britain will see changes to the way homes and businesses are heated.

This might include using hydrogen boilers or electricity to power heat pumps, and may see more customers connected to heat networks.

Ofgem will work closely with government as it develops its strategy to decarbonise heat.

To bolster the UK’s vibrant offshore wind sector, Ofgem will explore with government and stakeholders how offshore networks could best enable the rapid growth of offshore wind power.

A more coordinated approach will make it easier and cheaper for the electricity that offshore wind generates to reach consumers.

The nine actions in Ofgem’s Decarbonisation Plan are:

  1. Building adaptability into their price controls to ensure network companies invest efficiently and are able to adapt to changes in technology and infrastructure.
  2. Setting up a regulatory fund to unlock investment in innovative solutions to tackle climate change.
  3. Exploring, with government and industry, opportunities for greater coordination to enable rapid expansion of an offshore grid at lowest cost.
  4. Harnessing existing knowledge and expertise to help government and the industry develop cost-effective and low risk options to decarbonise heating.
  5. Reviewing the way UK energy systems are managed to ensure they are fit for a net-zero future.
  6. Creating a more flexible electricity system to ensure that consumers will benefit from the lowest cost transition to a reliable net-zero system.
  7. Developing a regulatory strategy on electric vehicles to support roll out and maximise the benefits to consumers.
  8. Supporting innovation and experimentation, particularly in the retail market, to create low carbon products and services that will directly benefit consumers.
  9. Responding to the need to take big decisions facing a deeply uncertain future by becoming more adaptive in the way we work and in our regulatory approaches.