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Defining a Unified Vision of the UK Energy Market in 2030+
Part 2

14 Oct 2022

Following on from our first article, we now dive into what principles must be considered when designing the future energy market and what needs to change from where we are today to achieve a net zero energy system.

Design Principles

To ensure that the delivery of identified net zero dependencies and change initiatives meet the outcomes of an inclusive, fair and secure future energy system, initiatives should be delivered under the following design principles.

Attractive Industry for Investment – the Energy Sector must attract £50bn of public and private investment per year for the next 30 years, so it needs to be a safe and attractive destination. Money must be able to effectively flow through the system, balancing risk and reward.

Engaging and protecting consumers – there must be meaningful, trust-based engagement and protection for all consumers. The energy system will be simple, inclusive, fair, transparent, affordable, accessible, and supportive of vulnerable customers. Functions such as heating, hot water, and lighting are a basic human right and are guaranteed by a new social contract that ensures no one is left behind.

Market led and supported by government – the energy market will drive the solutions, creating an environment that encourages and supports innovation. Innovators and market actors will support the government by identifying critical decisions that require determination, building confidence in our net zero roadmap and assist the deployment of private investment. Major system dependant assets will be developed by government, to provide the cross-generational continuation of system stability. Fraud and gaming are protected against through a responsive, lean regulatory framework.

Whole System Designed for Resilience – the system must be flexible, agile, able to respond to changes and unknowns, and with sufficient capacity to allow balancing. It will break the economic link between energy demand & provision and GDP. There is no ‘one size fits all solution’ that protects from competing technologies staggering delivery and allows for energy mixes and solutions to organically emerge to fit the regions in which they are deployed.

Polluters Pay – polluters are held to account through the deployment of emission taxes at the point of pollution, enabled through the tracking and allocation of pollution costs to actors across the entire supply chain. There is a realistic exit strategy from Fossil Fuels, which winds down the old systems without compromising system security.

Initiatives of Change

Realisation of the future energy system will require key change initiatives to ensure the effective delivery of the desired outcomes. Whilst there may be conjecture around all the initiatives necessary to achieve a net zero energy system, there are several relatively simple and achievable initiatives that can be actioned now, with no regrets.

Energy Decarbonisation and Efficiency

Delivering change initiatives which deploy decarbonisation technologies at scale is a critical part of building the future energy system. The rollout of technologies which electrify transport, transform energy generation, and decarbonise heavy industry are often characterised by challenges that are highly interdependent and, in some instances, cross-generational. It is therefore essential that large scale change initiatives are centrally coordinated to mitigate the risk of duplication of effort and inoperability.

Energy Data

A resilient, flexible energy system must be supported by a free flow of standardised open data to enable automation and coordination of interoperable assets. Therefore, we must deliver change initiatives which ensures a consistent, open approach to data sharing. Only through transparency can we build confidence from consumers that personal data is used for their benefit and enable the technological dependencies required for a smart, flexible energy system.

Energy Regulation

The current disaggregated, often contradictory regulatory model represents a significant risk to the speed at which the energy transition can be delivered. Steps have been taken through the significant code review and code consolidation, but they are still not enough. We need to push for a single regulation programme that encourages innovation, protects consumers, holistically builds trust, and can respond quickly to emerging market issues.

Energy Markets

It is widely recognised that our current energy market arrangements are not sufficient to support the next stage of the energy transition. Change initiatives are required to rapidly transform energy market arrangements to enable integration of the retail and wholesale markets to support increased distributed generation and to provide clear pricing and investment signals, whilst ensuring security, competition, and a fair price of energy to the end consumers.

Decarbonised Homes

Improving the energy efficiency of homes is a key net zero dependency, with heating of buildings accounting for approximately half of the final energy consumed in the UK. This cannot be resolved by knocking down and rebuilding all unsuitable buildings but must be tackled through a coordinated retrofitting initiative. Such an initiative would also represent a perfect opportunity to install the latest technology in buildings, providing asset level data of sufficient granularity to enable system flexibility.

Smart Grids

Most recognised future system features will require an upgrade of our energy networks to provide the increased capacity to support electrification and the connection of millions of distributed smart assets. Change initiatives to proactively expand and upgrade our networks should be progressed as a no-regret investment.

In the final part of this blog series, we analyse what is holding back the energy transition and look at what’s next on the road to the energy markets of the future.

Click here to read part 3.