Energy and Utilities

The Energy Transition | New consultation on the future of local energy institutions and governance

Published on 6th Mar 2023

Welcome to our top picks of the latest energy regulatory and market developments in the UK's transition to net zero

This week we look at Ofgem's consultation on the future of local energy institutions, Britain's new green generation record, the British Standards Institute's new standard for sustainable finance, and Associated British Ports' plans to invest £2 billion into the energy transition.

Ofgem publishes consultation on the future of local energy institutions and governance

Ofgem published a consultation on the future of local energy institutions and governance on 1 March 2023. The consultation identifies three key roles for the regulator centred around energy system planning, market facilitation of flexible resources and real time operations. The plans include:

1.    The introduction of a new Regional System Planner which will ensure there is accountability for regional planning. The Planner will be responsible for incorporating national and local priorities into regional system plans, and should be a single independent entity with multiple branches. Ofgem suggest that the Future System Operator (FSO) may take this role, as establishing a new body would be more time-consuming.

2.    Assigning a single entity with a market facilitation function that would deliver more accessible, coordinated and transparent flexibility markets. This expert entity should be in charge of simplifying processes and reducing market barriers to entry, while aligning transmission and distribution arrangements. Ofgem again considers the FSO to be the most suitable body for this function.

3.    Keeping real-time operations within the distribution network operators to ensure accountability for network safety and reliability.

Ofgem also published a call for input about building the world's first distributed energy "super" marketplace on 1 March 2023. Proposals include digital concepts that will optimise supply and demand of renewable energy by facilitating the sale and purchase of surplus electricity from low-carbon energy storage and generators. The publications form part of Ofgem's wider agenda to promote more flexible and efficient use of energy across Britain.

Britain breaks green generation record 

Analysis from Imperial College London which was published on 28 February 2023 has revealed that Britain broke its green generation record in December by running its electricity grid on 100% clean power for 25 hours. Over the course of 2022, there were almost 100 hours where the grid delivered green energy in excess of demand, and a total of 2.9GW of surplus during December alone.

Although fossil fuel generators were still required to stay online during this period in order to provide stability to the grid, the statistics show progress towards National Grid's goal of being able to operate a grid with zero emissions by 2025 at times when there is enough renewables output.

Dr Iain Staffell of Imperial College London, and lead author of the quarterly Drax Electric Insights report, said: “Britain’s power grid has undergone a remarkable transformation over the last decade with surplus clean electricity having switched from being a pipe dream to becoming a reality. The UK has led the world in "greening its grid" further and faster than any other major economy and we need to ensure we don’t lose the momentum to make net zero a reality.”

British Standards Institute launches global standard for sustainable finance

On 28 February 2023, the British Standards Institute (BSI) unveiled the Financial Services Standard BS ISO 32210:2022, which aims to co-ordinate the efforts of the financial sector to facilitate greater collaboration on sustainability.

The Standard creates a framework for the sector to focus efforts towards aligning with global initiatives such as the United Nations Sustainable Development Goals and the Paris Agreement on climate change. It is designed to provide guidance as to how key sustainable finance principles can be integrated into core business strategy and enacted across the operations, products and services of all organisations within the sector including lenders, investors, and regulators.

BSI director general Scott Steedman said,  "[t]his new standard on sustainable finance can build confidence in the financial sector and offer long-term benefit for everyone." He also reiterated that the BSI is committed to helping financial institutions to become more sustainable and to "align their strategy and operations with different regulatory requirements and stakeholder and market expectations".

Associated British Ports pledges £2 billion of investment into net zero transition

Associated British Ports (ABP), owner and operator of 21 ports across the UK, announced a wide reaching sustainability strategy entitled "Ready for Tomorrow" on 28 February 2023.

The strategy includes £2 billion worth of investment into the energy transition. This comprises around £600m of investment to reduce ABP's direct and power-related emissions by 90% by 2040. It will also invest a further £1.4 billion into identified investment projects to facilitate decarbonisation across the shipping chain. These projects will involve collaboration with customers and major sector participants, and will include a variety of technologies including floating offshore wind, low-carbon hydrogen production and carbon capture and storage.

ABP has already demonstrated a focus on renewable energy generation, with 17 of its ports containing onsite generation projects. The Port of Hull is home to the UK's largest commercial rooftop solar installation.

ABP CEO Henrik Pedersen said that ABP was a "key enabler for the UK's energy transition" and that the plan aims to "redefine what 'keeping Britain trading' means in the cleaner and greener economy of the future".

Maritime Minister Baroness Vere praised the plan for "investing in our future" and noted that it would complement the government's package of investment into funding for greener shipping.

This article was written with the assistance of Saskia Zant-Boer and Luke Webb, Trainee Solicitors.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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