Update on Energy and Utilities Sector | 24th July, 2020
The UK energy sector is gearing up for a transformative period, with various initiatives aimed at fostering innovation and promoting sustainability. One such initiative is Ofgem's Energy Regulation Sandbox, designed to help innovators in the energy sector develop and test new products, services, and business models within a controlled regulatory environment.
Helping Innovators Thrive
The process typically involves application and selection, collaborative testing, monitoring and feedback, and a pathway to scale. Innovators apply to join the sandbox, demonstrating the innovative nature of their solution and its potential impact. They then work closely with Ofgem and other stakeholders to trial their innovation under real market conditions, but with some regulatory flexibilities or temporary waivers. Ofgem monitors progress, provides feedback, and considers lessons learned for potential regulatory adjustments. Successful innovations may then be supported to enter the wider market with appropriate regulatory frameworks refined based on sandbox insights.
Embracing the Future of Energy
Several notable initiatives are underway. SSEN is calling on the government to work with the electricity industry to establish the world's most extensive EV charging network in the UK by 2025. Charge my Street and Cumbria Action have jointly launched a new charging scheme, looking for 100 businesses in Cumbria and Lancashire to join. WPD has announced a new £1 million "Take Care" project to design, test, and trial new technologies for rapid EV chargers at service stations.
In the realm of hydrogen, a consortium of 11 gas infrastructure companies has produced plans to create a hydrogen pipeline network of almost 23,000km by 2040. The proposed pipeline network will run through several European countries and connect future hydrogen supply and demand centres. Dr Angie Needle, Director of Strategy at Cadent, predicts that green hydrogen could reach a price equal to that of natural gas by 2035 to 2040.
However, the journey is not without challenges. Needle warns that a more robust hydrogen strategy is required in the UK to avoid losing its competitive edge. She also calls for the UK to invest in blue hydrogen, despite its higher emission levels, to stimulate the development of the hydrogen sector.
Regulatory Support for a Greener Future
To further accelerate innovation, Ofgem has announced a consultation on proposed changes to supply licence terms and conditions to speed up innovation in energy efficiency products and services for consumers. The changes include allowing licensed suppliers to apply for derogations from particular provisions of their supply licence for a limited time period and granting supply licences for specific geographic areas or premises types.
Transport for London (TfL) has also announced new plans to increase the amount of electricity procured from renewable sources, potentially signing direct power purchase agreements with renewables projects. These measures are hoped to assist TfL in reaching its target of creating a "zero-carbon" railway by 2030.
In conclusion, the UK energy sector is at a pivotal point, with numerous initiatives underway to drive innovation and promote sustainability. The regulatory sandbox approach fosters collaboration between regulators, developers, and technology providers to overcome regulatory barriers and facilitate safer and more efficient adoption of new energy solutions.
The Sandbox initiative, designed by Ofgem, provides a platform for innovators in the energy sector to develop new products and services, encompassing finance and energy, under real market conditions while enjoying some temporary regulatory waivers for a smoother transition to the wider market. The proposed hydrogen pipeline network, spanning several European countries, is a notable initiative in the energy sector, particularly in the development of green hydrogen, with a prediction of price parity with natural gas by 2035-2040.
