Ofgem publishes decarbonisation action plan

Mon 03 February 2020 View all news

Ofgem has published a Decarbonisation Action Plan which sets out nine actions required to be taken over the next eighteen months to ensure energy networks are ready to deliver net zero, support Government in tackling the difficult question of how to decarbonise heat and transport and encourage innovation to provide new low carbon products and services for consumers. The plan has been generally welcomed by industry and consumer groups.

Ofgem's plan aims to:

  • Build a system that supports the growth of renewables and ten million electric vehicles on our roads by 2030
  • Support development of an offshore grid to enable a four-fold increase in offshore wind generation by 2030
  • Set up an innovation fund focused on unlocking investment in innovative solutions to tackle climate change

Ofgem says that the plan recognises that there are trade-offs to overcome, such as fairly spreading the cost of a low carbon energy system between today’s and tomorrow’s consumers.

It says Ofgem will look at how it can support the roll out of electric vehicles and will publish an Electric Vehicle Strategy. This will address how the grid needs to evolve to meet increased demand. It will also look at new business models, such as electric vehicle owners selling electricity back to the grid during peak times. This is good news for consumers, it says, who will be able to reduce carbon emissions while saving money on their bills. 

The Electric Vehicle Strategy will complement the findings of the Electric Vehicle Energy Taskforce, the group of 350+ stakeholders convened by the LowCVP which recently published its findings and twenty-one recommendations for action.

Ofgem’s new Chief executive Jonathan Brearley said: “Britain has come a long way. It has decarbonised faster than any other major economy, but we must go further, particularly on heat and transport. We are taking an approach that recognises that our role protecting consumers includes achieving net zero.

“As low carbon renewable energy grows and more transport goes electric, the energy system needs to be more flexible to respond to peaks and troughs in both supply and demand. Our new price controls for network companies will clear the path for this, providing the incentives for investment for the future.

“It is now vital that the energy industry rises to the challenge and demonstrates how it will work with the Government and Ofgem to decarbonise Britain’s energy system at lowest cost.”

Responding to the announcement, Dame Gillian Guy, Chief Executive of Citizens Advice - the official consumer watchdog for energy - said: “Ofgem has set out the right challenges, it now needs to deliver on them.

“The shift to net zero will mean major changes to the way we all use energy. 29 million homes will need to have their heating system changed and electric vehicles will eventually replace petrol and diesel models.

“The regulator, government and industry has to put people at the heart of this process. People need to understand why these changes are needed, they will need help and support to make those changes and strong consumer protections if things go wrong.

“Ofgem has recognised the need to protect vulnerable customers as we move to net zero. It will be important that people in vulnerable circumstances are able to benefit from access to new technologies and services. If we don’t get the difficult decisions about the low carbon transition right, it will ultimately be those who can least afford it who end up hardest hit.”

Industry stakeholders generally welcomed the publication of the plan.

Alistair Phillips-Davies, chief executive, SSEN said (reported by Current): “Thirty years from 2050 and with COP26 this year, it is encouraging to see government, industry, and, now, the energy regulator, standing united in driving efforts to decarbonise at pace and build on the UK’s leading position.

"The true test will be, however, in the delivery. We need a market that accelerates renewable energy deployment, gets spades in the ground on carbon capture and storage, and creates a financeable framework for energy networks to invest strategically and fully unlock the potential of low carbon transport and heat.

“This action plan is a positive start and Ofgem should now be empowered to do more by having net zero built into its core remit, so that its intentions aren’t limited by its statute.”

David Smith, chief executive, Energy Networks Association: “Net zero and how to achieve it is one of the biggest challenges facing our communities today. Ofgem’s report recognises how far we have come and the role networks have played, but there’s even further to go. A whole systems approach, including the use of hydrogen and biogas, will require innovation, research, different regulatory models, working with new partners and the ability to continue to attract investment to secure a green future. We support Ofgem’s action plan and look forward to playing our role in achieving net zero.”

Patrick Erwin, policy and markets director, Northern Powergrid: “We welcome the clear message that Jonathan Brearley is delivering to the industry on his first day as CEO through the Decarbonisation Plan; it is exactly what’s needed.

“We look forward to working in partnership with Ofgem and stakeholders across our operating area to deliver on this vital agenda. Jonathan’s message chimes with our vision for our future network, set out in our DSO plan published last year. This sets out how the power grid can underpin decarbonisation and enable the move to net zero.

Juliet Davenport, CEO, Good Energy said: “Ofgem is beginning to make the right noises in this report, but it needs to be much bolder to deliver a zero carbon Britain.

"To truly protect the customer of the future, we need to protect the planet we live on. The most cost effective way of doing this is by putting British businesses and households at the heart of the solution to the climate emergency, allowing every part of the system to be part of a zero carbon Britain, not excluding the small guys and in the process handing the reins to the incumbents who caused the problems in the first place."

For more reactions, see this link.

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