Energy Regulation Sandbox

What is a Regulatory Sandbox?

The Energy Regulation Sandbox can help innovators trial or bring to market new products, services, business models and methodologies without some of the usual rules applying. The Sandbox has 4 tools in its arsenal. For trials, we can provide bespoke guidance, comfort (shared risk) and time-limited derogations (relief) from specific rules. For market entry, we can confirm (not an endorsement) that an activity is permissible, and, where a rule is blocking an innovation, potentially remove this by way of a derogation.

Many of the barriers innovators encountered reside in the detailed codes owned and operated by industry. Two of the electricity codes, the Balancing and Settlement Code (BSC) and the Distribution Connection Use of System Agreement (DCUSA), have responded to this and developed sandbox derogation capabilities for pre-commercial trials. These tools are part of the Energy Regulatory Sandbox and can be accessed via an application to Ofgem. Other Code Administrators are considering sandbox flexibilities; we will update our resources as new codes come on-line.

Making an application

Innovators can access the service when they need it.

We expect anyone seeking support through the new Sandbox will have a sufficiently mature proposition, are able to set-out what support they require, and are ready to progress within a reasonable timeframe.  Our experience is that many innovators need feedback instead of, or in advance of, sandbox support, so we encourage you to use our feedback service if you are finding it too difficult to provide the information requested in the sandbox application form.

The Energy Regulation Sandbox Guidance Notes setting out the detail of what’s on offer (and what’s not), who can access support, how to apply, entry criteria and other key information. To apply, please fill out the application form attached to the page.

Regulatory Sandbox repository

As the  guidance explains, the Sandbox can support schemes operating in different parts of the regulated gas and electricity markets. It can enable trials (or pilots or demonstrators) that have to be done in a live energy environment, involving consumers or interacting with market rules or the physical system: the Sandbox can provide innovators with bespoke guidance, comfort and time-limited derogations (relief) from specific rules. For innovators considering market entry, the Sandbox can confirm (not an endorsement) that an activity is permissible, and, where a rule is blocking an innovation, potentially remove this by way of a derogation. 

The range of activities that can be supported and the various tools at our disposal, mean that each Sandbox we grant will be bespoke, although we can expect common use-cases to emerge. 

It also means that the monitoring and evaluation arrangements we agree will be particular to each innovator and what they’re doing. All innovators have to undertake an evaluation of their Sandbox, looking at their customers’ response to their innovation, and relevant insights about consumer attitudes and behaviours, market and system operations, and the challenges facing regulation. They’ll also tell us about their experience of the Sandbox, its usefulness, and what impact it had. Where we support Sandbox schemes that have common characteristics, serve a similar consumer group, or explore related use-cases, there may be value in Ofgem undertaking a parallel comparative evaluation of grouped / thematic activities. 

These variables shape what information we’ll provide about the Sandboxes we grant and their evaluation arrangements: 

Trials 

  • We’ll provide a summary of the trial and the Sandbox support provided, but not publish the decision document. 
  • If a derogation is granted as part of the trial, we’ll also publish the direction (the formal mechanism used to enact a derogation). 
  • Evaluation reports are due at the end of the trial, or within 2 years of the trial’s commencement, whichever is sooner. 

Market entry 

  • We’ll provide a summary of the scheme and the Sandbox support provided. 
  • If a derogation is granted, we’ll also publish the direction (the formal mechanism used to enact a derogation). 
  • We’ll announce when a bilateral confirmation is granted to an innovator, but not publish it. In time, we’ll issue a generalised and decommercialised broadcast confirmation setting out the regulatory principles underpinning a permissible innovation. 
  • The timescales for evaluations will depend on circumstances but are likely to be available 12 or 18 months after the Sandbox is granted. 

Sandboxes granted 

Sandboxes declined 

 Further information

In addition to the Sandbox guidance, we published this short introductory companion to help innovators make a quicker call on whether the sandbox might be for them. 

If you have any questions about the Regulatory Sandbox, please contact us at sandbox@ofgem.gov.uk.