This is a record of Ofgem’s Sustainable Development Advisory Group meeting, held 26 June 2014 at Ofgem, Millbank.
1. Present
Chair
SD Advisory Group members
Attending on behalf of absent members
Ofgem Staff
2. Apologies
3. Review of minutes and update
3.1. The minutes of the previous meeting were approved.
3.2. Adam Cooper (Associate Partner, Sustainable Energy Policy) gave updates on the areas which were discussed at the previous meeting:
3.3. The Chair introduced the new format for the meeting, which, in response to member feedback, will focus on single subject area to allow for a longer, more substantive discussion, followed by short updates.
4. Non-traditional generation and supply arrangements
4.1. Adam Cooper presented our emerging thinking on the implications of non-traditional, innovative and disruptive energy models (see attached slide pack). He introduced the topic by discussing how Ofgem is considering non-traditional models in the context of a number of agendas, including cost to consumers and security of supply. He explained that interest was also spurred by our recent state of the market report, which identified barriers to new entrants.
Orientation and defining terms
4.2. The first part of the presentation set out our current understanding of the terminology used when discussing community energy, innovation and disruption. Adam asked for feedback on whether these terms were recognisable and if their meaning was consistent with their use outside Ofgem.
4.3. Key points raised by members during the discussion included:
Volume and type of enquiries
4.4. Adam continued by discussing the impact of increasing interest in non-traditional models on Ofgem. He set out how enquiries regarding non-traditional supply arrangements have increased, and explained that groups are considering a number of different models, which are at different levels of market readiness. He welcomed the reaction of group members to these enquiries and asked if they were aware of any further models being considered.
4.5. Key points raised by members during the discussion included:
Nature of the issues and our current activity
4.6. Adam outlined the three most common issues in enquiries related to non-traditional models: network access, local balancing, and licensing/compliance burden. He described the current regulatory context for these issues, and the current actions Ofgem is taking in the space of non-traditional models. He welcomed views from group members on whether the issues have been correctly identified, what other issues there may be, and what more we could do within existing arrangements.
4.7. Key points raised by members during the discussion included:
Future context: how might we act differently?
4.8. Adam introduced possible long-term disruptive developments, including local markets or peer-to-peer supply arrangements, as well as more radical changes. He welcomed views on how the group saw the benefits and risks to consumers of such changes and how Ofgem could or should behave towards new entrants.
4.9. Key points raised by members during the discussion included:
Chairs summary
4.10. The Chair summarised the discussion. He agreed that we would seek to use established terminology in our work. While he felt that we are not currently missing any obvious developments, he acknowledged the risk of surging demand and that we may need to react more quickly to change. He stressed that innovation is important but that we must act to protect consumers from failure. The Chair also welcomed feedback on the new format of the meeting.
5. Green tariffs and Community Energy Update
5.1. Natasha Smith (Senior Manager, Sustainable Energy Policy) presented a brief update on our work on both green tariffs and community energy.
Green tariffs
5.2. Natasha set out our final proposals on improving consumer protection in the green and renewable offers market. These consist of three key principles: additionality, to ensure that environmental benefits occur as a direct result of a consumer choosing the tariff; transparency, to ensure that suppliers are clear with consumers about the environmental claims they make; and evidence of supply, so that renewable supply in a tariff must now be backed by Renewable Energy Guarantees of Origin and Levy Exemption Certificates. These are now being consulted on, and a further statutory consultation will follow in September.
Community energy
5.3. Natasha explained that we have now concluded the three meetings of the grid connections working group, which was set up by DECC as part of their Community Energy Strategy, and chaired by Sarah Harrison. We are now preparing the final report to submit to the Secretary of State in July, which covers a range of actions to be taken forward within the current regulatory framework to improve the experience of community energy projects in connecting to the grid. It also sets out a number of more transformational changes desired by the sector.
5.4. At the previous meeting the Group was concerned that Ofgem had insufficient working level engagement with community energy groups. Natasha explained that since then we have held a meeting with local community energy groups in Devon, spoken on a panel at a community energy event in Leeds and attended the launch of Community Energy England. She also set out our engagement with the DG SANCO working group run by the European Commission on a project looking to collate best practise across member states in work areas such as community energy and collective switching.
6. AOB
6.1. No other business was raised.
7. Date of next meeting
7.1. The next meeting will take place on 2 October 2014, 10:00-12:00. The dates for 2015 will be confirmed following this meeting.