Network governance requires ‘radical reform’

Network governance should be overhauled with the creation of a series of national and regional energy bodies, a new report has argued.

The paper was produced by the not-for-profit organisation Regen, which said “radical reform” is needed to ensure energy networks fulfil their required role in delivering the UK’s net-zero commitment, while also maintaining legitimacy in the public’s eyes.

“Given the climate emergency there is a strong case for the creation of a new national ‘energy agency’ or ‘office of net zero’ with the political backing to drive net zero carbon delivery across government departments,” it states.

“Working closely with, and including, devolved governments, cities and regions, this body would develop and implement a long-term energy and decarbonisation strategy to deliver policies set out by the government.”

The report also calls for a series of regional energy bodies aligned with license or metropolitan areas to guide and oversee planning by distribution network operators (DNOs), which would be given freedom within their price controls to reflect local priorities in their decisions.

Some of Ofgem’s governance functions would be devolved to the regional bodies and the goal of decarbonising the local energy system would be embedded within DNOs’ price controls.

Energy governance proposals

Drawing attention to Labour’s proposals to renationalise energy networks, the report warns: “In the absence of a clear strategic direction there is a risk that the industry could stagnate around the defence of the status quo, or be distracted by largely political and academic arguments about ownership, creating an investment hiatus that would slow the transition to a zero carbon economy.”

Regen director and report co-author Johnny Gowdy said: “We know the electricity networks have a critical role to play in our decarbonisation journey, this has been highlighted by the renewed political interest in who owns the networks, how they are governed and the method by which they are regulated and incentivised to make the right investments for our future.

“Ultimately however, the question of ownership may be less important than the ability of the public and private sectors to work together in a new partnership to deliver decarbonisation at least cost.

“Critically, there is a clear understanding that networks need the public to trust that they are not abusing a monopolistic position but are acting in the interest of consumers and delivering wider social good.”

Regen was supported in making the report by SP Energy Networks, whose director of network planning and regulation, Scott Mathieson, said: “The pace of change and radical transformation required across the industry means we cannot stand still.

“Net zero needs to be at the heart of energy policy, and we need more local decision-making capabilities to meet the unique needs of every community.”