Ofgem has called for the government to set up an independent body to run the electricity system and lead the UK’s transition to a “low-cost, low-emission grid”.
It recommends taking the role of running the electricity system away from National Grid in order to deliver net zero at the lowest cost to consumers – National Grid ESO has performed this role since 2019, but Ofgem argues a complete separation would be preferable to “avoid any perceived or real potential conflict of interest”.
The regulator estimates an independent body with a more active role in designing and planning new grid infrastructure could save consumers between £400 million and £4.8 billion between 2022 and 2050.
The Independent System Operator would also provide independent advice to the UK Government on how best to hit its target of net zero emissions by 2050 – reaching this target is expected to place a significant strain on the grid, as electric vehicle (EV) adoption soars and renewable capacity is rapidly increased.
In a media briefing this morning, Ofgem CEO Jonathan Brearley told future Net Zero a total separation of roles would ensure the consumer can be kept front-of-mind when decisions are being made on how best to manage the energy system, with more targeted planning being “crucial” to driving decarbonisation at an affordable cost while maintaining security of supply.
Mr Brearley, said: “The energy system needs to go undergo the biggest transformation in over a century to meet Britain’s ambitious climate goals.
“Ofgem is recommending the creation of an independent body to help deliver the fundamental changes in how we use energy.
“This would help bring forward green economic growth, accelerate our journey towards net zero and save consumers money on their energy bills.”
When asked whether network budgets, and therefore consumer spending, would have to grow with changes to allow more EVs and renewables onto the grid, Mr Brearley told ELN: “What we’re proposing today is a small change in the way that the energy system is arranged and that really won’t have an impact on customer bills.
“What will have an impact, is making sure that the system as a whole is designed and run as efficiently as possible and that’s what these reforms intend to do.
“So that means ultimately networks will get what they need to build a system but those budgets won’t need to be so big because you won’t be spending so much money on the energy that we all use.”
Kwasi Kwarteng, Business and Energy Secretary, said: “As the first major economy to commit in law to net zero carbon emissions by 2050, the UK is leading the green industrial revolution.
“Meeting our far-reaching targets will mean changes to how we turn the lights on, travel to work and even cook our meals. Which is why we must ensure that the energy system is designed to provide the very best for consumers and allows energy companies to keep innovating as we build back greener.
“I welcome Ofgem’s contribution to the debate over the future structure of our energy system and will consider its recommendations thoroughly.”