It is a privilege to have taken up the role of Ofgem chief executive at this critical time. Energy is essential to the welfare of people today and to the economic and environmental future of the UK.
Fundamental to thinking about the future is how we will step up to ending the UK’s contribution to climate change, and reduce greenhouse gas emissions to meet the government’s 2050 net zero target.
Our climate commitment
Ofgem has a pivotal role to ensure that the costs and benefits of transitioning to a low-carbon energy system fall fairly. So that every pound from a consumer’s bill is working for them – and the planet – today and tomorrow.
Significant progress has already been made. Almost half of our electricity came from renewable or low-carbon sources last year. But to meet net zero we must go further and faster, not least in transport and how we heat our homes and businesses.
Ofgem’s Decarbonisation Action Plan, published on my first day in charge, explains our immediate steps in making low-cost decarbonisation a reality. The plan includes:
- setting up an innovation fund to help unlock investment in innovative climate solutions.
- supporting the development of an offshore energy grid to enable a four-fold increase in offshore wind generation by 2030.
- rewiring our energy system to ensure network companies invest efficiently and can support the growth of renewables and new technologies, like the 10 million electric vehicles expected to be on our roads by 2030.
Given the challenge of net zero, and especially the need to all but eliminate emissions from heat in buildings, we will need to work more closely with the government, industry and consumer representatives than ever before. For example, the government is currently consulting on giving us a new role in regulating heat networks. Our decarbonisation plan will adapt as government policy, technologies and circumstances in the energy market change.
Ofgem has a pivotal role to ensure that the costs and benefits of transitioning to a low-carbon energy system fall fairly.
The thorniest dilemma of achieving net zero is not technical, but deciding who pays for it and when. I’ve spent the last few months meeting as many of you as possible and listening to your perspectives (you can watch a selection from our recent energy conferences above). How we balance the intergenerational interests of consumers will not be easy.
In the short term, making the transition will incur additional costs as new technologies are rolled out. In this, we will be as robust as ever to protect consumers today. But we no longer have the luxury of time to explore all options perfectly before deciding to act. Putting off action now could mean higher costs later for future generations to bear. There will be risks. However, experience so far tells us that, thanks to innovation and economies of scale, the cost of decarbonisation comes down over time and low carbon energy sources, like offshore wind, could become cheaper than fossil fuel equivalents.
We will also need to decide how to balance the costs we control among different types of consumers. For example, if all electricity consumers – including those who don’t drive or are on low incomes – should pay for the network changes we need to support electric vehicles, or whether only drivers should foot the bill.
In this context, it is more important than ever to attract the necessary investment into the energy networks – and to ensure company returns are no higher than necessary and keep bills as low as possible. That is what our network price controls seek to do.
Under my leadership we will be a more listening regulator, flexible in our approach and open to developing ideas so that our regulation adapts to protect consumers and supports good service as effectively as possible in a fast changing landscape. We will do more to identify and call out unacceptable behavior early on where we are concerned by how customers are treated, and will always enforce rigorously to stamp out sharp practice.
We will also strive to lead by example in driving diversity too. As a father in a mixed race family, I know that Ofgem, and indeed the industry, need a greater range of talents and perspectives to help us propose new solutions to the new challenges we face. I don’t believe we can serve well if we don’t have people who are representative of the different groups that make up society. Our Diversity & Inclusion Strategy sets out our current ambitions.
Stepping up to net zero is a huge challenge, but one with far reaching opportunities – to create a smarter, more flexible energy system that serves consumers’ needs at the lowest cost, and that empowers local communities, to improve the quality of our environment, and in turn public health, and to drive innovation which creates new products, jobs and industries.
With the United Nations Climate Change Conference in the UK this November, I hope to see 2020 as a turning point. In rewiring Britain for a greener tomorrow, our principal duty will be reinforced in every decision we make – to protect today’s citizens and those of the future.