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Ofgem Recommends Independent Body to Help Lead Britain's Green Transformation

Jan. 28, 2021
Creation of an independent body to help lead the path to net zero at the lowest cost to consumers.

Britain's independent energy regulator Ofgem has recommended the creation of an independent body to help lead the path to net zero at the lowest cost to consumers. The body would be fully separated from National Grid and run the electricity system, helping to charge millions of electric vehicles (EVs) and enabling a huge increase in renewable power while maintaining secure energy supplies.

Last month, the government committed to consult on reviewing the management of the energy system. It acknowledged that any additional responsibilities may require greater independence from National Grid, which has managed the energy system since privatization.

Ofgem, which will work closely with the government in its review, has estimated that an independent body with new responsibilities for running the electricity system could save consumers £0.4 to £4.8 billion (US$0.5 to US$6.5 billion) between 2022 and 2050. This body, or Independent System Operator, would be fully separated from National Grid, which also owns the electricity transmission network, to avoid any perceived or real potential conflict of interest.

Given the scale of the net-zero challenge, Ofgem is recommending the government goes further and considers full separation. Full separation would help ensure future decisions on how to manage the energy system are taken in the interests of consumers, helping to keep costs as low as possible.

New responsibilities for the Independent System Operator could include:

  • Providing independent recommendations to the government and Ofgem on new gas and electricity network investment proposals, as well as the costs and trade-offs on pathways to reach net zero.
  • Taking a more proactive role in the balancing of supply and demand across both local and national electricity networks. This could include creating new opportunities to reward consumers and generators for being flexible in the way they use electricity.
  • Taking on wider planning responsibilities for new infrastructure. For example, the design and construction of an offshore grid connecting offshore wind farms to the United Kingdom.

Jonathan Brearley, chief executive of Ofgem, said: “The energy system needs to go undergo the biggest transformation in over a century to meet Britain's ambitious climate goals. 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 toward 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 United Kingdom 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."

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