Energy retail market reform should come first, MPs told

The Chair of the government’s Energy Digitalisation Taskforce has stressed the need to treat demand and supply equally

The UK should prioritise energy retail market reform instead of concentrating solely on electricity market reform.

Speaking at the Business, Energy and Industrial Strategy Committee, Laura Sandys CBE, Chair at Energy Digitalisation Taskforce, said: “Maybe I reframe the debate about the electricity market reform.

“I actually think it’s the wrong place to start. So, I would say that we need to start with retail reform. We need to understand the context of this new system. We’re going from a commodity system to a capital asset system.

“So, the commodity which is the wholesale market can opponent is actually becoming less and less important. If one goes back to 1990, a terabyte of data was a million dollars. Today it’s $0.05. Weather doesn’t take price signals, but demand does.”

Sandys has also stressed the importance of treating demand and supply equally and making all digital and technological assets accessible to the demand side.

She identified three crucial areas: retail reform, system reform and the wholesale market.

During the hearing about the decarbonisation of the power sector, Rachel Fletcher, Director of Regulation and Economics at Octopus Energy, underscored the necessity of price signals that allow for the optimisation of assets in the energy system.

Ms Fletcher has suggested that the UK must maintain investor confidence and keep investment flowing into generation while also focusing on areas that require change.

She said: “I would be cautious in doing anything that upsets the investor appetite. However, we’ve got a glaring hole in our arrangements, which is that we do not have markets and the price signals that allow us to optimise the thousands and what will quickly become millions of assets that we have.

“Across the system that could be making a massive contribution to balancing supply and demand, avoiding the need for really expensive backup generation and transmission and storage build.

“And I think that as a country, actually and as a set of policymakers within government and in industry, we are clever enough to be able to do both to keep that pipeline of investment flowing and to come up with arrangements that recognise we’ve got a phenomenally valuable asset class that private consumers are investing in batteries on wheels, electric vehicles.

“And it would be absolutely unforgivable for us to allow that investment to happen and then pay twice if you like because we haven’t found a way of optimising and using those assets.”

Make sure you check out the latest Net Hero Podcast episode:

Latest Podcast