Modernising Energy Markets
Trevor Hutchings (FIEMA, DipIoD, CertIoD)
Net zero, clean energy, sustainability, commercial strategy, management consulting, corporate governance, comms, NED, Chair, CEO
Energy markets are facing a dramatic transformation. This is being driven by changes in technology, consumer expectations and the climate change emergency. Consumers and businesses are being empowered by new technologies to produce, store, and trade energy. New entrants and innovative business models are emerging, with open data likely to play a critical enabling role.
Gemserv’s aim is to help create the energy market required for this exciting future. While the current rules have been effective in supporting market developments since deregulation in the 1990s, they are now widely criticised as reactive, complex, and lacking coordination – in short, they are outdated and need to catch up. The Government’s current Energy Codes Review could be the catalyst to drive this change, and Gemserv is today setting out proposals to help inform the outcome of the Review.
Transforming the rules and practices that define today’s energy market framework will be challenging, but action is vital to enable increased competition, new services, reduced emissions and ultimately drive better consumer outcomes. A fundamental step change is needed, but one that is practical to implement.
Gemserv’s vision is for an integrated change programme that has three key elements:
1. A clear strategic direction from Government and Ofgem, setting out aims for future energy markets, defining required outcomes and implementation actions. A clear strategy will provide clarity for market administrators (such as delegated responsibilities and objectives for code managers) helping to ensure collective efforts towards common market goals.
2. A new self-governance framework that is aligned with this strategic direction and which provides clear accountability and faster decision making. It would address current issues - such as transparency and accessibility to decision-making, and issues of self-interest – by increasing the powers of independent panel members and ensuring decisions always align with clear outcomes.
3. A new operating model that includes a new risk-based approach to reduce the regulatory burden, a single market portal ‘one-stop-shop’ to enable streamlined market entry for all participants, and incentives for code managers for their delivery performance.
The above elements must be underpinned with clear transition plans, with the forthcoming Retail Energy Code (REC) front and centre of these. The REC can catalyse this transition becoming an exemplary code incorporating new thinking and process improvements, which could then be mirrored across other codes and governance arrangements.
Today’s paper is the latest in a series of thought leadership papers from Gemserv on proposals to modernise the energy market. Gemserv believe this integrated approach will allow consumers to benefit from better energy market rules and practices that are more efficient and transparent than today. Other market participants – be they established supply businesses, new entrants, or start-ups – will also benefit from clearer more accessible governance arrangements and a reduced regulatory burden.
Please download a copy of our paper here:
Former Director at Hastate Consultancy Limited
5yThanks Trevor. A good read with good clarity around the objectives. Ties in well with past papers. I still believe that the term 'code' is limiting - creates its own boundaries. That said, we have to incrementally move forward and the REC provides a kick start. Key, as you say, is a strategic plan from BEIS to give that direction. See you Thursday at the MRA event. Tony