We call this Ofgem's 'Innovation Link'.
In cases where the rules may be preventing them from testing their proposals, we can look to offer a regulatory ‘sandbox’. Through it, innovators can trial their idea for a set time in a ‘safe space’ without having to meet the usual regulations, while ensuring that consumers remain protected.
We also support innovation for the energy networks through yearly competitions where new technology or approaches which can help network companies manage the change to a smarter energy system are trialled. We are announcing funding for the latest trials today.
The latest ‘sandbox’ trials
The four latest ‘sandbox’ trials will start soon. A range of organisations delivering low-carbon energy solutions are working with councils in Staffordshire and Nottingham to undertake two sandbox trials to supply locally-produced energy to homes and businesses.
Intelligent technology will automatically switch customers in the trial areas between electricity from the grid, or from local sources depending on which is the cheapest at different times of the day. Surplus energy will be sent back to the grid, which helps to keep the whole electricity system in balance.
The other two trials involve testing ways for consumers to trade electricity they have produced with each other. One of these trials is using blockchain to facilitate trades between residents of a tower block. The other will enable up to 250 consumers across Britain to use software developed by a large energy company which simulates electricity trades. The trades will be based on real-time consumer data but no ‘physical’ electricity will be bought or sold during the trial.
What next for the Innovation Link?
Talking to innovators and listening to their views on the market also helps with our policy development. We have encountered some challenges in running the sandbox, including that some innovators’ plans are being blocked by the complex mix of licensing arrangements, industry rules, codes of practice and charging arrangements.
In the near term, we have been working to extend the sandbox so it can provide opportunities to trial ideas that are blocked by these other parts of the energy-sector rulebook, in particular, industry codes. All code administrators have signed-up to work with us on this, starting with Elexon which has introduced the sandbox to the Balancing and Settlement Code (BSC). This can offer temporary relief from some rules in the BSC, enabling broader trials. Importantly, new entrants to the market can use this. The Innovation Link will continue to co-ordinate the process and we intend to provide more information on how this will operate shortly.
If we want to move to a smarter, more flexible energy system, we need to remove additional barriers to innovation. We think fundamental reform of the retail market arrangements may be needed. As Greg Clark, the secretary of state for energy, outlined in his speech on the future of the energy market earlier this month, Ofgem will work with Government to develop options in the coming months.
How to get in touch with us
In the meantime, we want innovators to keep talking to us. We will help businesses of any size and at any stage of development with fast, frank feedback about the regulatory implications of what they’re trying to do. The best way to get in touch is by emailing firstname.lastname@example.org.
Innovation can transform the energy market and consumers’ experience of it. Ofgem is playing its part in supporting the companies that can inspire this change.
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