Utility Week

22 | MARCH 2021 | UTILITY WEEK Policy & Regulation Analysis In the Energy White Paper, BEIS said it would set out its "vision for energy as a guide to Ofgem" by consulting on a strategy and policy statement for the regulator. However, even with this new guidance, Mitchell says she does not believe a changed Ofgem and a new ISO will be able to ful• l the coordinating role she envisions because "they won't have oversight of local authorities and planning and all the other important institutions and actions which need to work together". She is not alone in this belief. Simon Vir- ley, a partner at KPMG and its head of energy and natural resources, thinks the ISO should form part of a National Energy Agency tasked with delivering net zero. "This might look like technocratic tink- ering. Far from it. Net zero changes every- thing. It will change the cars we drive, how we heat our homes, the way the whole econ- omy works. So, we need to use this moment, ahead of COP26, to think about how we are going to deliver on our commitment to reach net zero." "We need to think holistically about the delivery mechanisms and new functions that need to be carried out and which organisa- tion is best placed to deliver them. "There are signi• cant new roles that getting to net zero creates, like planning a future hydrogen grid or the oŒ shore net- work for 40-plus gigawatts of oŒ shore wind or providing expertise to local authorities on heat decarbonisation and assessing whether the local area energy plans currently being developed add up to what we need at a national level. "Reforms to the governance of the sys- tem operator need to be considered in that wider context," he adds. Virley says there are "plenty of precedents" for such an agency, both domestically and overseas. Muddled Roles Laura Sandys, chief executive of Challenging Ideas, says there is currently an "implemen- tation gap" that needs to be • lled: "There is a real problem in the de• nitions between BEIS, Ofgem and the ESO: who is responsible for what? "We've got what I would call muddled roles. I think the Ofgem paper was trying to clarify those roles and I think it needs to be a bit more fundamental." She says: "There needs to be some kind of delivery body that drives net zero through the system, that owns the strategic plan- ning and owns the whole-system costs as a strategic body. Ofgem is putting that into the ESO in terms of electricity but I think this actually needs a smaller delivery body that • ts between the policy and those that implement." "I'm not sure the ESO should be respon- sible for the policy trade-oŒ s that are needed around current consumers and future con- sumers and how the system needs to blend, let's say, heat and electricity," she adds. Ofgem's review of system operation noted the possibility of the ISO taking on new roles related to energy code governance and elec- tricity engineering and data standards. The regulator has previously suggested the ESO could become the strategic oversight body proposed in 2019 as part of its joint review of energy code governance with BEIS. An independent review of electricity engi- neering standards published before Christ- mas also called for a party to coordinate an overhaul of the standards and – highlighting the overlap with code governance – said this function could possibly be ful• lled by the same strategic body. Ofgem said it would consider these options and also noted a link between code governance and data standards, given that energy codes "currently provide some of the industry frameworks for collecting and shar- ing data". While she agrees with the regulator's "overarching" proposals in this regard, Sandys says that as the chair of the govern- ment and Ofgem's Energy Data Taskforce she is not on board with the last part. She says the governance of data and digitalisa- tion should not sit with an ISO: "I absolutely believe that is an Ofgem responsibility, not an active player's responsibility. "There is very little understand yet of the governance needs around algorithms and consumer outcomes and all of those things." Keith Maclean, managing director of Prov- idence Policy and chair of the advisory board for the UK Energy Research Centre, agrees with Mitchell that ownership and operation should have been broken up "a long, long time ago". He is pleased that Ofgem • nally wants to complete the split až er "dipping their toes in the water with the legal separa- tion within National Grid". But he too is concerned that the regula- tor is repeating the same mistake in other respects: "I think they make the case quite strongly for having an organisation with an overview of the energy system, but then the actual proposals don't ask for that and potentially create a half-way house that could be counterproductive, because if it is only the Electricity System Operator, then that's all it's going to look like, and one of the problems at the moment is that there needs to be much more joined-up thinking about everything. "A change to the body only for electricity, formalises something which is incapable of looking at the energy system because it won't have the remit to do so. One of the problems with National Grid all along is it tends to take a view of the world that is dominated by wires. If your main tool is a hammer, every problem looks like a nail." "I feel going part of the way isn't actually going to help and could possibly actually hinder • nding whole-systems solutions to net zero," he cautions. "There's obviously the policy work upfront," he adds. "The government needs to say what needs to happen. In my view, you then need somebody to design that, you then need someone to deliver that, and you then need someone to operate it. "There's a muddle between what's being designed and operated in the Ofgem pro- continued from previous page

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