‘UK’s current energy retail market cannot deliver net zero grid’

Government launches call for evidence to reform energy retail market, but experts caution that additional measures are required to safeguard vulnerable individuals struggling with unaffordable energy bills

The Department for Energy Security and Net Zero (DESNZ) has come forward, echoing a widespread agreement among experts that the existing energy retail market faces considerable challenges in delivering a net zero energy system.

Despite ongoing efforts, it appears unlikely that the current market structure will be able to meet the ambitious targets for a net zero grid, the DESNZ has said.

It added: “Whilst there is broad consensus that the current retail market is unlikely to deliver the innovation required for a net zero energy system, there is no such consensus on the extent to which government intervention is needed or on where any interventions should be targeted.”

To address these concerns and pave the way for a more resilient and consumer-centric market, the department has launched a call for evidence.

In response to the news, National Energy Action Head of Policy Matt Copeland said: “Despite publishing several documents considering the future of retail markets, the UK Government has failed to set out any new proposals to protect low income and vulnerable people in energy markets from April 2024. Millions of households continue to face unaffordable energy bills.

“Last winter was the hardest in living memory, but this winter looks likely to be just as bad. With prices staying high, more and more people are going without hot food or warm showers or are turning their heating off altogether.

“Households are also struggling with a growing mountain of debt. We urgently need the UK Government to meet its commitment to set out how it will protect the most vulnerable.”

Oliver Bridges, who is Head of Energy Data at NTT Data UK&I, said: “This announcement is a preamble, rather than the main event. In the run-up to the Energy Bill’s third reading in September, the UK Government is setting out its stall.

“We’ll see how the smart meter roll-out, combined with a return to a more competitive market, leads to a new wave of innovation in the energy industry.”

Bridges who was former Head of Data Science and Analytics at Smart DCC, the smart meter network provider connecting over half of Britain’s homes, added: “The Energy Bill will simplify the regulatory framework, creating active code managers – rather than passive administrators who mainly act as facilitators. This will unlock more agile change in the industry: focusing on sourcing change approval, rather than blocking change entirely.

“We’ve already seen this in the Retail Energy Code (REC) and the Market-Wide Half Hourly Settlement (MHHS) programme – an industry-led, not regulator-led transition.

“Ultimately, however, these moves are driven by the net zero imperative. The Energy Bill puts the onus on the regulator, Ofgem, to consider how it can support the Secretary of State in reaching these targets.

“To innovate, suppliers must be ahead of legislation as well as the latest advances in clean energy. This calls for a clear strategy that goes beyond the traditional energy market – and towards the technology and data fronts too.”

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