Ofgem Publishes Nine-Point Plan to Decarbonise Energy System

The UK’s energy regulator will overhaul the way it governs the industry, in order to meet the government’s net-zero commitments.

Ofgem has published a new nine-point climate action plan, detailing how it will support a fourfold increase in offshore wind generation, the rollout of 10 million electric vehicles by 2030 and the adoption of low-carbon home heating, while protecting households from rising energy bills.

It will also support suppliers in creating new low-carbon products and services, including smart tariffs which help balance the grid, while cracking down on ‘greenwashed’ tariffs. 

Price controls may become more flexible to support companies’ investment in clean energy, including the development of an offshore grid. Currently offshore wind farms are linked to the mainland grid through undersea cables but aren’t connected to each other.

A new fund administered by Ofgem will unlock investment in other innovative solutions to tackle climate change.

Ofgem has been criticised for failing to prioritise the climate crisis and has acknowledged that is has faced a trade-offs between its statutory requirement to protect consumer interests, often against price rises, and the need to support green investment. 

Last year the CBI, Britain’s largest business group, warned that the regulator’s statutory responsibilities must prioritise climate action, or risk undermining the UK’s decarbonisation goals. 

Meanwhile, Keith Anderson, chief executive of Scottish Power, said the regulator was hindering the electric vehicle rollout due to its “colossal disconnect” with the government's climate targets. Ofgem had refused to allow Scottish Power to invest £42 million in its electricity networks in Scotland and the north-west of England to prepare for increased demand from electric vehicles. 

The new manifesto, released the first day of new Ofgem chief executive Jonathan Brearley’s tenure, signals a shift in the way the regulator views its mandate to safeguard consumers.

Brearley said: “Britain has . . . decarbonised faster than any other major economy, but we must go further, particularly on heat and transport. We are taking an approach that recognises that our role protecting consumers includes achieving net zero.

“It is now vital that the energy industry rises to the challenge and demonstrates how it will work with the Government and Ofgem to decarbonise Britain’s energy system at lowest cost,” he added. 

Gillian Guy, the chief executive of Citizens Advice, welcomed the new commitments but said it was vital that decarbonisation be managed so as not to impact vulnerable consumers.

“Ofgem has set out the right challenges, it now needs to deliver on them. If we don’t get the difficult decisions about the low-carbon transition right, it will ultimately be those who can least afford it who end up hardest hit,” she said.