Last week, Angela Hepworth, our Director of Policy and Regulation ran a Talk Power webinar on key regulatory updates in 2017, what they mean for customers and what to expect from 2018.
We’ve summarised the points from her webinar here, you can also listen again and view the slides via our Talk Power events page.
Angela started by highlighting that whilst reforms under Electricity Market Reform are still the bedrock of delivering low carbon, secure energy – Contracts for Difference (CfD), Capacity Market (CM), Carbon Price floor, and the Emissions Performance Standards - policy is evolving to adapt for a smarter future.
2017 from a regulation perspective
Angela gave us a detailed overview of the key regulatory activity this year:
The year has brought us the government’s Industrial Strategy, a vision for how the UK can increase productivity but just as important for the energy industry, reaffirming the Government’s commitment to decarbonisation in a way that is affordable for the consumer. We also saw Ofgem’s Smart Systems and Flexibility Plan, that starts to ask how the regulatory framework needs to adapt for a smarter world. Ofgem also launched its Targeted Charging Review, looking at the challenge of charging for the transmission and distribution networks in a way that recovers the cost of the investment in a way that is fair and proportionate. 2017 also saw the launch of an independent review, with the publication of Professor Dieter Helm’s review on energy costs.
We heard the latest on the long awaited Clean Growth Strategy including a number of measures specific to businesses customers, including a new Carbon Reporting mechanism for ‘large’ business, a voluntary emissions target and reporting mechanism for public sector organisations, and energy efficiency measures for businesses to aim to improve energy productivity by at least 20% by 2030.
Angela also noted a key element from the Autumn Budget was the introduction of a new Cost Control measure on Low Carbon policies (CfD, Renewables Obligation (RO), and Feed-in Tariffs (FiT), effectively replacing the Levy Control Framework. Although all existing budgets (including the £557m allocated for CfDs) remain, it does appear to exclude any new money for Feed-in Tariff scheme from 2019.
Positive intentions for 2018
As we touched on lin our previous blog, this will have an impact on your non-energy costs, which will still increase as CfD and CM schemes develop and grow. However, Government policy will aim to continue to help to curb the increase, while trying to ensure value for money and fairness for the longer term. The focus from a policy view point is on how to bear down on costs and how best to allocate them across all participants.
On Brexit, the key questions for the energy industry are around whether the UK remains in the EU ETS and the impact that will have on carbon prices; whether the UK maintains the ability to trade power and gas efficiently, the stability of the regulatory framework of course, including for the nuclear industry the Euratom Treaty.
The Industrial Strategy White Paper published in November has cemented much of the detail of the strategy but we expect to see more from the ‘business energy cost roadmap’ in 2018 (which is likely to be a series of announcements rather than one specific output), including a new scheme to support businesses invest in industrial energy efficiency. We’ll also see the response and final decisions on the carbon reporting mechanism that is being consulted on until 4 January 2018.
Despite the Budget announcement seemingly ending or pausing the FIT scheme, it is still likely the Government will look to address issues around encouraging small scale renewable generation – i.e self-generation – in the New Year, though it is less clear how and what they can do. There will be continued progress on Ofgem’s Charging Review and we’ll be giving a more detailed update on that in January at our next webinar on policy and regulation, sign up for updates here. The Government will also respond to the Helm review which is also still open for responses until 5 January.
And beyond 2018 we see the change coming from two key areas – smarter markets and decarbonisation of heat and transport. Whether that’s different products going through our gas network, hydrogen or biogases, or greater use of electric heating and heat pumps. Much of which has the potential to further increase demand on the electricity network. One thing is for sure the energy market, and policy and regulation with it, continue to evolve.
We’re here to help you understand the full impacts of these policy and regulation changes. If you missed the webinar you can tune in and view the slides here. We also encourage you to engage with your relationship managers on these issues (and our policy and regulation experts will in turn support them).
We’ll also continue to keep updating you through further webinars and the blogs on the Talkpower pages- sign up to receive our regular event updates.