Ofgem launches new, enhanced Energy Regulation Sandbox service

Neil Barnes profile

Neil Barnes

Deputy Director, Future Retail Markets
20th July 2020
Areas covered:
Electricity
Gas
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I am excited to announce to innovators and other interested parties that Ofgem’s new Energy Regulation Sandbox service is now open for applications. The Sandbox enables innovators to try out new ideas, with guidance and support from Ofgem and industry bodies.
 

This latest iteration of the Sandbox is expanded in scope and will support the step change we need to see in the way energy is produced and consumed in order to hit the UK’s net zero target.

In 2017, we ran two Sandbox application windows; working with 68 innovators to explore and develop a range of trials. Summaries of both windows are available on our website (window 1 and window 2), together with what we learned. Based on innovator feedback, the new Sandbox service offers an expanded range of tools and is designed to be always open, rather than having time-limited application windows. We want you to come to us with your innovative ideas when you are ready with detailed proposals.

Now is an ideal time for us to launch this new service. The energy system, and how we use it, is changing, but that transformation needs to accelerate in order to drive a massive shift in how we produce and consume energy. The economic and social impacts of COVID-19 have given us further insight into what a low-carbon future might look like, with consumer demand patterns changing as more people work from home, and more reliance on renewable generation due to lower levels of industrial demand.

Ofgem is already driving forward a range of reforms to create a greener, fairer and smarter energy system, including changes to electricity network charging and settlement arrangements. The Sandbox service complements these reforms by allowing innovators to trial or launch new products, services and business models without some of the usual rules applying. These can be rules that Ofgem controls (usually in licences) or, in some circumstances, from the rulebooks (codes) owned by industry, which underpin the day-to-day operations of the energy system.

The Sandbox offers a range of tools to innovators across all the areas we regulate, including suppliers, generators and network companies, and even those who aren’t directly regulated by us – for example third party intermediaries and energy services providers.  

This could include us giving bespoke guidance or providing some specific relaxation of certain market rules to enable innovation and provide a route to market. For example, we could provide some relief from some of the rules about how energy is traded locally, or how information is presented to a customer. The Sandbox doesn’t offer any funding for innovators, nevertheless, sandbox support could usefully supplement projects that have received funding from a variety of sources

Ofgem’s Innovation Link team offers support on energy regulation to businesses looking to launch new products, services or business models and  will act as the single point of entry for innovators who also wish to use flexibility available in industry codes, initially covering the Balancing and Settlement Code (BSC)] Distribution and Connection Use of System Agreement (DCUSA) and those parts of the Retail Energy Code (REC) which are currently live. We are in talks with other code bodies and organisations to expand the rules which are within the scope of the Sandbox.

Looking ahead, we want to go further in enabling innovation by improving the services we offer. To that end, we have published today a consultation seeking industry views on changes which would extend the range of supply licence conditions we can provide relief from; and to the circumstances in which we can grant supply licences for specific geographic areas or premises types. We’ll be organising opportunities to talk to us about these changes during the consultation period which ends on 12 October, you can register your interest.

Full details of the Sandbox and information on how to apply can be found on the Ofgem website.

I am looking forward to hearing from innovators on their plans for helping transform the GB energy system and what we can do to support you, and I’m keen to hear any feedback you have on the services we offer to innovators.