Utility Week

Utility of the future: Regulation 8 | 18TH - 24TH OCTOBER 2019 | UTILITY WEEK Analysis Three forward steps for energy For the next instalment of our Regulation pillar, we asked our Utility of the Future Advisory Board how they would recast the regulatory framework to help achieve net zero and ensure a good deal for consumers in the energy retail sector of the future. B uying white goods in the future won't just come with the option of maintenance and service con- tracts, but also with a contract for the energy it consumes – and possibly even the water. This was one of the predictions thrown up by the group of experts who form the advisory panel for the Utility of The Future (UOTF) campaign. When asked to discuss how regula- tion might need to change in future, they said the start- ing point was to look at what services might be delivered and how business models might change, which might mean a blurring of regulatory territories. A wide-ranging discussion brought up a number of areas of concern such as emerging gaps and a lack of joined-up thinking. When the meeting took place a few weeks ago, the National Infrastructure Commission's (NIC's) report setting out how it hoped to see the role of regulators change in the future had yet to be published. That report, Strategic Investment and Public Confi- dence, took a pragmatic approach to how regulators could be strengthened under the current system, and its recommendations addressed some of the concerns of our panel. Unsurprisingly, our discussions turned out to be in the same orbit as the NIC's on a number of fronts – particularly around the need for greater long-term plan- ning for resilience and a greater formal footing to be established when it came to putting zero carbon at the heart of regulatory decisions. One difficulty highlighted by the UOTF advisory board was the fact that Ofgem's principle objective is silent on carbon, so when it comes to choosing between focusing on consumer bills or acting on climate change, it was bound to choose the former. The NIC agreed and in its report said Ofcom, Ofgem and Ofwat should have new duties to promote achieving the target of net zero emis- sions by 2050, as well as improving resilience. Outgoing Ofgem chief executive Dermot Nolan has acknowledged too that although Ofgem had taken a board decision to be more proactive in this regard, "it would not be unhelpful to have further clarification of our statutory duties". However, such is the pace of change and innova- tion needed to decarbonise the energy system that this will require in places more than strengthening what is already there, say our experts. It could call for a com- pletely different approach. Here we explore in more detail three of the ideas they proposed. 1. Set up a body to provide energy systems oversight The transition to a net zero energy and transport system is creating a plethora of new requirements, companies and services. Distribution network operators (DNOs) will need to transform themselves into distribution system operators (DSOs), while electricity generation becomes more decentralised and consumers switch to electric vehicles and use many more connected home devices. And all of these things will be interacting with each other in more price-sensitive markets. Energy pro- cesses and new practices will cross current commercial, organisational and governance boundaries, and this will mean new data, IT and communications requirements, resulting in design, standardisation, privacy and cyber- security challenges. The Future Power Systems Architecture project between the Institution of Engineering and Technology (IET) and the Energy Systems Catapult identified 35 new or significantly modified functions that will be required to meet the 2030 power system objectives – and pointed to the need for a whole-system view, from the large power station down to the smart kitchen appliance. Our board, of whom John Scott was involved in the Future Power Systems Architecture project, suggested a new organisation was needed that could oversee stand- ards and ensure interoperability in areas such as electric vehicle charging – in much the way the telecoms sector had an overseer to facilitate open data and interoperabil- ity and provide coherent approaches to the use of data. "The Future Power Systems Architecture project has The NIC has said Ofcom, Ofgem and Ofwat should have new duties to promote achieving the target of net zero emissions by 2050. The mass rollout of EVs is the first big step to decarbonising transport

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