Multiyear Strategy sets out Ofgem’s vision for delivering clean, affordable and secure energy system
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The future is about supercharging the delivery of clean, secure and fairly priced energy for consumers, said Ofgem today as it published its new strategy.
‘Protect, Build, Change, Deliver’ sets out the regulator’s objectives and priorities for the next five years and beyond as the UK moves beyond the unprecedented energy crisis of 2022 that saw bills rocket and Government intervene to provide billions of pounds of support for struggling households.
As the market stabilises and energy prices begin to fall – on 1 April the new price cap of £1,690 takes effect, down from £2,382 for the same period last year – Ofgem has set out its plans to ensure consumers are protected and opportunities maximised as the pace of change accelerates on the journey to a net zero energy system.
The strategy sets out five priorities that will shape all of the energy regulator’s work going forward as it works to accelerate the transition from gas to renewable forms of energy, and help customers, particularly the most vulnerable, deal with the impact of the energy crisis that has seen debt levels reach record highs. Those priorities are:
- Shaping a retail market that works for consumers
- Enabling infrastructure for net zero at pace
- Establishing an efficient, fair and flexible energy system
- Advancing decarbonisation through low carbon energy and social schemes
- Strengthening Ofgem as an organisation.
Last week, the National Grid Electricity System Operator (ESO) predicted that electricity demand in Great Britain could grow by over 50% by 2035 as more sectors such as transport and heating use more electricity, meaning the need for more clean, secure and fairly priced energy is more urgent than ever.
The new strategy has been developed following the appointment of a new Ofgem Chair, Mark McAllister, and a new, refreshed Board that includes expertise in customer service, engineering, economic regulation, digital services and business.
Mark McAllister, Chair of Ofgem, said:
“The price shocks of the last few years have been greater than anything I have seen in a 45-year career in energy. During that time, Ofgem’s focus was – rightly – on protecting customers and doing everything in its power to minimise the impact on the most vulnerable households.
“As things start to stabilise, now is the time to shift our focus forward to building a cleaner, more secure and affordable energy system that will help to deliver a net zero future for generations to come, while ensuring we are not susceptible to similar price shocks again.
“The challenges we face, including building infrastructure at a rate unseen for decades, are there for all to see but so too are the opportunities and the benefits they could bring for customers across the UK.
“Our new strategy describes our intention to use our distinctive vantage point and our position as the energy regulator to bring together all parts of the sector, providing constructive challenge and working in partnership to realise the benefits of the new energy system for the whole of society.”
Ofgem has already begun a range of work to address some of these challenges including introducing the new Accelerated Strategic Transmission Investment (ASTI) framework to speed up the expansion of the electricity grid to ensure the increasing power generated by offshore wind projects reaches consumers. The first two projects were given provisional approval this month. In November 2023, Ofgem announced plans to introduce a network of regional energy planning roles to improve local energy planning and speed up the roll out of new infrastructure.
Ofgem has also put in place new consumer standards requiring energy suppliers to be more proactive in identifying and helping customers at risk of struggling with bills and published a major call for input on debt and affordability to consider how to find a lasting solution to the issue. Alongside this a call for views on the future price cap has been released to consider how it can be updated to match the dynamic future that consumers will see in energy. The calls for input mark the start of a more collaborative and insight driven conversation Ofgem believes is needed to deliver the necessary change at the required pace.
Jonathan Brearley, Chief Executive Officer of Ofgem, said:
“Protecting customers now and in the future by ensuring they pay a fair and reasonable price for their energy, whilst building an energy system fit for the future is our priority.
“We are now at a pivotal moment as we look ahead to a huge transformation of how we use our energy, how it’s getting to our homes and how it’s created in the first place This means potentially a huge range of possibilities for consumers – smarter tariffs, more energy efficient homes and ultimately more affordable bills.
“Getting there will not be easy, but it is necessary and we must ensure we bring the public along with us as we make this transition.
“That is why Ofgem will be using its role as regulator to make sure the entire energy sector is working not just to highlight and deliver the benefits of that change for consumers, but also showing how they will be protected from the risks.”
The strategy covers all of Ofgem's work, including its regulatory work, its role administering energy efficiency, low carbon energy and social schemes on behalf of the government; and how as an organisation it will deliver on its objectives.
It is intended to be a ‘living’ strategy, which means Ofgem will work closely with customers, stakeholders and the sector to understand their direct experiences, using them to shape Ofgem’s actions, and keep the document up to date with the fast moving and changing energy environment.
Alongside the strategy, the regulator has published a more granular Forward Work Programme (FWP) covering the year ahead, which in future years will include an update on the strategy and the progress it has made towards its objectives. Ofgem also intends to develop metrics in future which will be used to assess its progress against this strategy.