Gemserv has published the latest in its series of papers on reforming governance of the UK energy market – the full report can be accessed here.
With the energy transition to net zero rapidly accelerating, many of today’s market rules, standards and change processes governed through energy ‘codes’ are looking increasingly dated and must be reformed. This is essential to ensure market governance continues to be a key enabler, rather than a barrier, to a net zero future.
Widescale reform will take time and Gemserv is encouraging BEIS, Ofgem and the industry to take forward some ‘no regrets’ recommendations now recognising that more fundamental reforms will take longer to implement.
Trevor Hutchings, Gemserv’s Director of Strategy, said: “We think that there are several opportunities to act now, making demonstrable improvements to code governance which will unleash further innovation, competition and efficiencies in the market. This can be done without jeopardising wider reform over the longer term.”
Bob Hull, energy industry expert and lead author of the paper, added: “Energy codes have successfully underpinned the energy system since the late 1990s but have become complex and change is slow. In the meantime, markets and technologies have moved on and they need to be modernised to help drive the transition to net zero. Our recommendations should deliver early benefits and can provide a strong catalyst for future change.”
Gemserv is recommending action in three key areas:
- Strategic guidance and co-ordination – Ofgem should issue strategic guidance to Code Panels and Code Managers to ensure they are aligned and co-ordinated with government and industry priorities for net zero and consumer outcomes.
- Accountable and incentivised code management – this includes the introduction of reputational and financial incentives to improve performance, with greater transparency, and competitive tendering of code managers to ensure value for money.
- Simplification and accessibility – harnessing the power of digitalisation to reduce regulatory burdens, make rule changes more accessible to market participants and steps to simplify the rule book.