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Power market transformation is outpacing regulation, regulator says

The UK power market’s transition to a more decentralised, decarbonised and digitalised grid is happening faster than regulation can keep up, Ofgem’s Andrew Wright has said.

Wright, a senior partner within the regulator’s energy systems division, warned of the occurrence during yesterday’s Power Responsive conference organised by National Grid where he spoke of the need for rules and regulations to adapt with the market.

He stressed that the difference between doing this well and doing it badly would be worth “billions of pounds a year to consumers”.

“Whilst we recognise the need for a strategic and holistic approach [to market reform], it needs to be pragmatic… we need to look at the issues today and do things in manageable, bite-size chunks,” he said.

Talk of market reform quickly moved on to two outstanding pieces of legislation required by the power sector to indicate the desired direction of travel; the Smart Power Call for Evidence and the Clean Growth Plan.

Wright was joined on stage by David Capper from the Department for Business, Energy and Industrial Strategy (BEIS) who echoed Wright’s sentiment that the rate at which the energy market was changing had caught people by surprise.

“What we’ve seen over the last year is that this system which we often describe as ‘future’ is actually starting to emerge… it’s not some future system, it’s happening now,” he said.

Capper could offer no firm date on the publication of the CfE response, which BEIS has collaborated on with Ofgem, but said that it would be published soon. Wright added that it would be published “as soon as the political situation makes it possible”, alluding to both the Brexit referendum and recent snap general election, which have held its publication back.

The initial CfE document was pushed back by several months in 2016 due to the announcement and result of the Brexit referendum. Said to have been ready for release last May, it was not unveiled until November 2016.

It remained open until January this year and both BEIS and Ofgem originally intended to have a response published by May. However Theresa May’s surprise snap election has once again pushed the publication back, with no firm date on offer.

Meanwhile the government’s Clean Growth Plan remains delayed and is now more nearly seven months behind schedule having initially been due for release before the end of last year. Yesterday the new climate change minister Claire Perry said that it was her intention to publish the CGP after the summer recess.

Wright added that Ofgem’s goal was to ensure that the regulatory framework “drives innovation and supports the transformation to a low carbon energy system” with sustainable, resilient and affordable services at its centre.

E.On’s Sarah Vaughan, also speaking at today’s event, said the whole domestic energy industry was waiting for the plan “with baited breath”.

“There is no one single solution or silver bullet [for decarbonisation], but we do have to get on and do it,” Vaughan said.