Editor’s letter: Ofgem’s Nolan is ready for a fight

Ofgem's chief executive has big plans for the energy transition - and he's not afraid to fight for them says Ellen Bennett

Ofgem has been on the back foot for a long time. Five years ago, Labour hopeful Ed Miliband pledged to abolish the regulator – and while it didn’t get him into power, the promise didn’t raise any serious opposition either. Ofgem survived that election, but it has spent the years since engaging in endless rows over energy bills and – though less so now – the capacity crunch. It’s been reactive, it’s been beleaguered, it’s been a public whipping boy.

Not any more. The man in charge, Dermot Nolan, is now getting on for four years in post. He has a clear vision of what must be achieved in the years ahead, and a message for the market: the energy transition isn’t just around the corner. It’s happening now – and it will go further and faster than anyone could have imagined. The message is neatly, if coincidentally, timed to coincide with the release of the results of the second CfD auction which, with record low prices for offshore wind and other renewables, prove the point.

The weight of the transition sits heavily upon Nolan’s shoulders. He’s keenly aware of how much is at stake: get it right, and the UK decarbonises, affordably, securely and sustainably. Get it wrong, and energy prices spike, Britain loses competitiveness, customers pay more for a vital commodity and technologies such as electric vehicles fail to realise their potential.

The change will be enormous, perhaps more than anyone has anticipated. Nolan isn’t running scared. He holds out the prospect of a two-year deadline for competition to deliver in the retail market, suggesting that if it’s still not working to general satisfaction by that time, with all the reviews and the remedies, then Ofgem is ready to consider “other measures”. That’s a huge admission, to publicly acknowledge even the potential that competition might fail.

And that’s not the only surprise contained in Nolan’s vision of the future. He’s careful to emphasise that he’s speaking of possibilities only, but he raises the prospect of DNOs splitting out their businesses, system-operator style.

So, Nolan is not wedded to any particular economic theory or business model. The man running the UK’s energy system is a pragmatist, focused on outcomes, with a clear vision of what he wants to achieve. If he needs to smash the current paradigms to get there, he’ll do so – and if that means ending up in court, so be it.

The days of Ed Miliband pledging to abolish Ofgem seem long ago. There’s a new confidence and determination coming out of Millbank, and Nolan is at the centre of it. See full interview here.