Briefing: Enabling the transformation of the energy system

Enabling the transformation of the energy system: Recommendations from IGov

Rebecca Willis, Catherine Mitchell, Richard Hoggett, Jess Britton, Helen Poulter

IGov, University of Exeter

12th September 2019*

Over the next few decades, the UK will need to steer a major transformation of the energy system, in order to maximise the benefits of innovation, bring about rapid decarbonisation in line with the Paris Agreement on Climate Change, and ensure that the system meets all people’s needs.

The current picture of governance is confused, with multiple advisory and regulatory bodies, working to different objectives, overseeing different aspects of the energy system.

Given the required scale and pace of change, there is a need for a direction-setting process, which provides co-ordination in a crowded institutional field.

This briefing is based on research conducted by the IGov project at the University of Exeter including stakeholder interviews and roundtable events, GB case studies, meetings with representatives from government, regulators and industry advisory panels, and case studies of regulatory regimes in other countries.

Our definition of governance is ‘the policies, institutions, rules and incentives related to the energy system, and the underlying decision-making process which establishes those rules and incentives’.

The briefing starts by setting out the main governance and advisory bodies overseeing the GB energy system, in section 2 (different arrangements are in place in Northern Ireland). It identifies a number of problems with current arrangements: there is a lack of direction-setting and transformation management; established industry players dominate the system; there are confused signals for market participants; there is no clear responsibility for carbon reduction, demand reduction or system integration; and there are ambiguities around social outcomes.

In section 3 it then argues that the system needs to be streamlined and simplified, in order to provide stakeholders with certainty about the process of energy system transformation over time. It outlines the changes needed, including the creation of an Energy Transformation Commission (ETC) to set a strategic direction for energy governance; an Integrated Independent System Operator (IISO) to oversee the implementation of this strategy; a repurposed Ofgem leading on economic regulation; Distribution Service Providers which perform a market facilitation and coordination role; and an independent Data Body and Market Monitor.

Finally, in sections 4 and 5, the briefing offers further detail on how an Energy System Transformation Commission could be established and what its role could be.

You can download the full paper here: IGov-Enabling the transformation of the energy system-Sept2019

* This briefing was updated on 12th September to provide the final designed version of the paper, it replaces the first draft of the research that was posted on 11th April and an updated draft on 1st August.