Utility Week

8 | JULY 2021 | UTILITY WEEK The top stories… Energy Energy Emissions What has happened? The latest figures for switches between elec- tricity suppliers (see Customer Talking Points, p13) also hinted at an upcoming milestone. According to ElectraLink, the market share of the large legacy energy suppliers is set to drop below 50 per cent for the first time as early as next year. That is an astonishing retreat given the dominance of the former big six as recently as ten years ago and points to the revolution that has taken place in energy retail. However, as a new Utility Week report makes clear (p26-28), this is a sector in which it is still incredibly hard to make money. Many of the disruptors insist that it is What has happened June marked two years since the net zero by 2050 target was passed into law. Since then the government has ramped up targets fur- ther, including a bolstered emissions target for 2035. However, there is growing concern that despite the evident ambition, progress on key milestones has been limited. The Climate Change Committee (CCC) has issued a series of reports over the past month urging the government to act now or face the consequences, and costs, later on. The first focused on adaptation, warn- What has happened The House of Lords Industry and Regulatory committee kicked off its inquiry into Ofgem and net zero in June. This will delve into a variety of areas but the key question will be how the energy regulator balances environ- mental objectives against its responsibilities in relation to affordability for consumers, and whether there is a "conflict" here. The results of the inquiry will inform the gov- ernment's promised strategy and policy statement for Ofgem. Meanwhile, a heavyweight trio of MPs tasked by Boris Johnson with giving their views more widely on innovation, growth and regulatory reform issued a series of rec- ommendations (see Review, p6). The task- force highlighted particular concern around the energy retail market but also warned that unless policy and regulation are reformed, "unprecedented" reinforcements to the electricity network will not be deliv- ered in time to achieve the government's ambition to roll out 40GW of offshore wind by 2030. What they said: Dr Jeff Hardy, senior research fellow at Imperial College London's Grantham Insti- tute, giving evidence to the Lords' inquiry: "We have to think a lot about what a supply licence looks like and what sort of business Remaking the energy retail sector Lords inquiry looks into regulating for net zero Energy bills are a hot political potato but energy retailers are losing money and many question whether the current market is viable COP26 presents the UK with the change to lead the world UK has failed to adapt to climate change models are going to be allowed to have [long- term] relationships with consumers." Catherine Mitchell, professor of energy at The University of Exeter, in the same session: "Until Ofgem sorts out the [gas] distribution entities, we are not going to move to net zero and the cost will be far higher than it has to." What this means The issue of regulation within utilities has been a hot topic for some time but calls for reform are growing ever louder. Ofgem chief executive Jonathan Brearley has been very open about the need for the regula- tor to evolve to reflect current and future needs. However, the onus ultimately lies ing that despite having the capacity and the resources to respond to climate risks, the UK has so far failed to do so. It identified eight key risks, including to the viability and diver- sity of terrestrial and freshwater habitats. In another publication it urged the gov- ernment to set out a clear road map in its Net Zero Strategy, due to be released this year, including firmer short-term targets for the rollout of renewable energy technologies. And giving evidence to a select commit- tee, the CCC's David Joffe called for a net-zero test across all government policy (see above). panies to be viable and is in need of reform. This is why there is so much attention on the upcoming energy retail strategy, which is set to come out imminently along with a con- sultation on automatic switching. a conscious decision to prioritise investment over profit as they seek to lay first claims to what are expected to be lucrative new mar- kets. However, it is clear that the framework that supports the market is not helping com-

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