Utility Week

UTILITY WEEK | 6TH - 12TH SEPTEMBER 2019 | 13 Policy & Regulation cheapest deal – and then companies go bust because they are unsustainable – and then it has to bring in financial controls to stop people coming into the market. Instead it should be asking, what does it take to make this market do as well as others? Retail regulators don't stand outside supermarkets and frogmarch consumers off to different supermarkets." Technology and decarbonisation The most difficult challenge for a new boss is coming up with strategy to transform the entire energy system while the clock is ticking and there's a tight lid on costs. For one energy veteran, who himself was asked to apply for the vacancy, this means a new regulator will need to get to grips with what the future new energy market looks like and how we design a flexibility-led market. "Is it to be led by ESO [energy system operator] or DSO [distribution system operators]? Who has the primacy of balancing supply and demand?" All agree that decarbonising the energy system requires flexibility, but currently that is only in place as one-off projects, not as system facilities. And while the Energy Networks Association has been leading in this area in terms of its Open Systems Network Project, Ofgem is clearly keen to drive the agenda. In what is being seen as something of a marker, it published a paper in August setting how it plans for DNOs to take a more proactive role in the management of their networks through their transformation into DSOs. Harnessing data will be playing a big part in the future system too – and how to take forward the grid system in a way that is data led, making sure data is available but protected. These challenges were recently set out by Laura Sandys in her data taskforce review, which Ofgem has been responding to. To enable the zero carbon transition, there's also a sense that Ofgem's sphere of activity will need to change to include achieving net zero as part of its remit and to mop up the gaps that are emerging across the system, thus leaving areas that are unregulated or lack oversight. One such area is the developing of electric vehicles (EVs) and charging points. As one proponent of the wider role for Ofgem put it: "Electric vehicle charging is highly disruptive to the power grid – it needs to be managed very well for customers to get a good outcome. The people providing charging points are not regulated, they're not part of the utilities that Ofgem was set up to focus on. "Smart charging affects the cars, the charging points, the apps, and crosses the meter, because it affects the distribution net- work, and if there are millions of cars charg- ing, it affects the national system. Whose job is it to co-ordinate that? It's not just National Grid, not just the charging point manufacturer." He continues: "Here's an example of the chaos. We've got multiple electric vehicles manufacturers and charging point manu- facturers, all fighting for market dominance, until government steps in and says 'we want you to compete, but we want there to be an open system for customers'. "In other sectors, phones for example, we get great choice with our mobiles. But hang on, they all work anywhere in the world, without us having to do anything. And that's done by top class systems engineering, and management of data and protocol, and open systems. "The answer would appear to be that Ofgem needs a facilitating role. It can't just put the shutters up. It can't just manage transmission and distribution like in the 1990s. Now, the whole system spreads right the way down, across the meter and out." Some in the sector say that having a new leader at the helm affords the chance to change the remit and the way regulators are arranged. One school of thought would be to create an umbrella consumer regulator for telecoms/energy/water and a separate regulator for infrastructure. This may be an aspiration too far – and what new incumbent would want to do themselves out of job? The National Infrastructure Commission (NIC) investigation into the regulation of the UK's energy, telecoms and water industries is aiming to ensure the necessary levels of investment and innovation while these criti- cal services are kept affordable for everyone. The NIC's findings, expected to be published in October, could impact how Ofgem's new chief takes the organisation forward. Nolan's tenure is drawing to a close at a crossroads for regulation, where pragmatism and economics have already given way to a more prescriptive approach that plays more visibly to protect the consumer. It is clear that this is only the start of the evolution. Someone with vision and willingness to challenge the status quo arrangement, to bat for the bill payer and the environment and not be put off by the mountain that has to be climbed to do that, will be key requisites for whoever lands the role as Nolan's successor. Martin Cave: chair of Ofgem and a regulatory economist specialising in competition law and in the network industries, including airports, energy and telecommunications. He has held professorial positions including at Warwick Business School. Lynne Embleton: chief executive of IAG Cargo and NED Ofgem, previously she was managing director, Gatwick, British Airways, a position she held for more than two years. Joanna Whittington: DG Energy & Security, BEIS, held a number of senior posts at Ofgem before joining the office of Rail and Road, becoming its chief executive in January 2016.

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