University of Exeter Energy Policy Group submission to DECC consultation URN 14S/271: Strategy and Policy Statement: a consultation on the draft statement
Thank you for the opportunity to comment on the draft Strategy and Policy Statement (SPS). This comment is set out in the following way: an introduction to our view; responses to your three questions; and a conclusory section of our view what a SPS should include.
A key criticism of the Draft SPS is that it does not clarify how the Government wishes to prioritise its goals, or how the trade-offs between them should be made. Ultimately this is because the SPS has not confronted the fundamental tension between ‘independent’ regulation and the longer term, strategic framework needs of rapidly transforming to a decarbonised energy system.
We are not sure that it is possible, or even beneficial, any longer to have an ‘independent’ regulator in its current form. We support decision-making based on knowledge, legitimacy, transparency and involvement of stakeholders. It is a time of huge technological change within energy systems. We also need to decarbonise our energy systems rapidly, and this implies a flexible but strategic framework to get there. It therefore seems to us that a CEO, powerful economic regulator, as with the current Ofgem model, is not compatible with enabling the necessary shift in our energy systems.
In that sense, the SPS is an unimaginative document, somehow taking no notice of the changing energy world, nor embedding arguments in support of flexibility. More, it appears to solidify a problematic institutional structure rather than thinking what institutional arrangements would most suit the strategic and policy needs of Government?
An ‘independent’ economic regulator de facto allows a narrow technical /economic viewpoint to make momentous societal decisions which have major distributional impacts. Currently, the Regulator is then evaluated in a narrow legal sense of meeting its Duties, including ensuring the financial stability of the system. There is no wider evaluation of ensuring an energy system suitable for the longer term needs of society – beyond that of customers – nor does Ofgem have any incentive to act in that way, or penalty if it does not. The SPS has not included such arrangements.
Overall, however, our view is that Government has not taken this opportunity to remove the tensions inherent with the Guidance documents (which have been around since the 1990s) and Ofgem, as an independent regulator, which the Ofgem Review in 2011 highlighted. As such, this SPS has done little to take forward the issues raised in the Ofgem Review.
Answering the Consultation’s 3 questions……….
Read the full EPG Submission: EPG Submission to DECC SPS
Submitted by: Dr. Bridget Woodman, Prof. Catherine Mitchell, Dr. Matthew Lockwood and Dr Caroline Kuzemko, 17th October 2014.