Policy must be ‘flexible’ to keep up with the energy revolution

Policy needs to be “more flexible” and “more agile” to keep up with the revolution in the UK’s energy system, the former boss of National Grid has argued.

The fast pace of change means many policies are “already out of date” by the time they are put into practice.

“When you’re in the middle of revolution it’s really hard for government to set out a policy that’s going to last for 10 years,” said former National Grid chief executive Steve Holliday. “It’s really tough.”

Speaking at an event held by the Energy and Climate Intelligence Unit in London, he added: “Our political system is risk averse in a sense because people don’t like coming out with a policy unless it’s been stress-tested and consulted on for 18 months, in which case, I’d argue, by the time it’s implemented its already out of date to a certain extent.”

Policymakers should instead get used to a regulatory and policy framework which that is “not perfect but is more flexible”. As the adoption of new technologies cannot be accurately forecast, it should be one which encourages their development and then “adjusts as you live and learn”. “That’s quite a different world from world we used to be living in,” he added.

Holliday said the capacity market is already heading in this direction, although “it’s not quite as flexible as it should be.” In March the government announced plans to overhaul to the capacity market: adding in an extra auction so the Contingency Balancing Reserve can be replaced a year early, buying more capacity and buying it earlier. Ofgem has been consulting on changes to the network charging regime to end the ‘embedded benefits’, which enabled small-scale diesel generators to win the bulk of contracts for new capacity in the first two auctions.

Last week the head of the Energy Intensive Users Group Jeremy Nicholson called for a comprehensive review of the network charging regime, saying Ofgem shoudn’t rely on “spontaneous code modifications every now and then”.