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Ofgem calls for new energy operator to oversee renewables shift

Energy regulator Ofgem has recommended creating a new body to lead the transformation of the UK’s electricity system to carbon-free power, and which would be independent from the National Grid.

With the government recently committing to consult on reviewing the management of the energy system, Ofgem said an independent body would “avoid any perceived or real potential conflict of interest”.

Ofgem, which will work closely with government in its review, has estimated that an independent body with new responsibilities could save consumers £0.4 - £4.8bn between 2022 and 2050.

Its new responsibilities would include taking a more active role in designing and planning new grid infrastructure and providing independent advice to the UK Government on how best to hit its target of net-zero emissions by 2050. In 2019 a legally separate function was created within National Grid to manage the electricity system to help reach this target.

But given the scale of the net zero challenge, Ofgem recommends full separation from the National Grid to ensure future decisions are “taken in the interests of consumers”, helping to keep costs as low as possible.

“The energy system needs to go undergo the biggest transformation in over a century to meet Britain’s ambitious climate goals,” said Jonathan Brearley, chief executive of Ofgem. “Ofgem is recommending the creation of an independent body to help deliver the fundamental changes in how we use energy. This would help bring forward green economic growth, accelerate our journey towards net zero and save consumers money on their energy bills.”

Kwasi Kwarteng, Business and Energy Secretary, said: “As the first major economy to commit in law to net zero carbon emissions by 2050, the UK is leading the green industrial revolution. Meeting our far-reaching targets will mean changes to how we turn the lights on, travel to work and even cook our meals. Which is why we must ensure that the energy system is designed to provide the very best for consumers and allows energy companies to keep innovating as we build back greener.” 

“I welcome Ofgem’s contribution to the debate over the future structure of our energy system and will consider its recommendations thoroughly.” 

National Grid said it “operates one of the safest, most efficient and reliable power networks in the world, and has a critical role to play in the decarbonisation of the economy to reach net-zero”.

It added: “That’s why we are working closely with the Government, regulator and industry to explore what changes will be needed to achieve net-zero, and the role and potential divestment of the electricity system operator is an important part of that discussion.”

In July last year, Ofgem unveiled a five-year £25bn investment programme designed to help transition the UK’s energy grid to renewables and cut costs for households.

 

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