Jonathan Brearley's speech to the Aurora Energy Transition Summit

Introduction

Thank you, Dan [Monzani, Managing Director, Aurora Energy Research UK] – it’s a real pleasure to be here. Before I kick off with my speech I must tell a story. Dan may not remember this but almost 12-13 years ago, we had Electricity Market Reform being set up, and we had a very well known analyst at the time. And he ran a survey ‘will government meet its offshore wind targets or not?’ 

He sent it out to all investors, and 90 per cent said no. So it was a great pleasure in 2022 to see that we smashed that target both in cost and in delivery. So all I will say is surveys are very good, but let’s see where we end up.

Also – I think Dan highlighted it when we started – what we want to talk about today is systemic reform. And it’s a real privilege to be here at the IET and the Kelvin Lecture Theatre – named after Lord Kelvin, one of the great system thinkers of the 19th century. His work on measurement, standardisation, and system design helped shape the electrical networks we still rely on today.

Now that is fitting, because we are once again at a moment of foundational change. Indeed we have been for a number of years. The UK energy system is being transformed – not just technologically, but institutionally. And at the heart of that transformation is a shared objective: to deliver an energy system that is cleaner, more secure, and over time, more affordable.

The question is: how best do we achieve that?

In my view, there are four essential steps:

1. We must choose low-cost pathways to decarbonise – prioritising solutions that deliver emissions reductions at the lowest cost to consumers and also meet modern energy demands – and Dan highlighted the rapid growth of AI, data centres, and wider industrial demand.
2. We must plan and deliver infrastructure in a coordinated way – aligning generation, storage, and transmission, and the use of demand, to reduce constraint costs and accelerate delivery.
3. We must drive electrification of the economy – while ensuring demand is flexible enough to keep peak use – and prices – down.
4. And finally we must spread costs fairly – tackling the growing challenge of energy debt and ensuring the transition is equitable for all consumers.

These are not abstract principles. They are the foundation of a system that works – for investors, and for industry, and above all, for consumers.

Many of you in this room have been part of this transition for years. You’ve built the infrastructure, you’ve shaped the markets, you’ve helped keep the lights on through some of the most turbulent times this sector has ever faced.

And it’s because of that experience and that commitment that I’m optimistic about what comes next.

Yes, the challenges ahead are significant. But the opportunity is even greater. We are at a pivotal moment in the energy transition. And the decisions we make now – together – will shape the system we build for decades to come.

One of the things I do as much as I can in my schedule is to talk to energy customers. 

Now, I talk to a whole range of people. I have talked to tech enthusiasts, who are building their own homemade flexibility equipment, and I have talk to customers who have massively struggled over the last few years.

The story that sticks most in my mind is a story that was given to me by a consumer group of a man who preferred to stay in hospital, simply because it was warm there than he was at home.

There are a whole range of people out there, and this sector has a massive duty to do its best for all consumers, and we must continue to do better. 

That’s why I support the energy transition we are on. Whatever political choices are made, strategically it is very clear we need to move to a different system that manages risks in the best interests of consumers.

We need to invest now to build out a system that’s secure, affordable, and fit for the future – and Ofgem can help deliver this at least cost.

Yes that means investment in the short term… 

… but that investment is the best way to ensure our energy security and greater stability for bills over the medium and long term.

It’s a big challenge, but it’s one I believe we can meet.

So today I want to talk about three things: 

First, where we are now – the shift to a more strategic approach to planning.

Second, what that means for how we regulate.

And third, what needs to change – from institutions to reform of the retail market.

System planning

So let’s start with where we are.

The question I am asked most often at is moment is why are our prices where they are today – why are they so high?

So looking at our history, there are a number of reasons. 

Gas has been a major factor, with wholesale gas prices increasing around fourfold, and because gas often sets the price for electricity, those costs have flowed through to both gas and electricity bills.

But that’s not the whole story. Network and system costs have also grown as we’ve invested in renewables, new infrastructure, and resilience. These are needed for a cleaner, more stable and secure system, but clearly that has also added to bills.

So when we talk about affordability, we need a whole-system view. It’s not just about generation costs; it’s about how we design and how we operate the system.

We have all heard the speculation in the press over the last few weeks about whether government will take action to help manage costs. Now it is not my job to say what they will do – and obviously the debates are outside of Ofgem.

The only thing I would say is that if government does act, as the Climate Change Committee have said, it would be preferable for action to be taken on the electricity price, because that will support electrification and the transition consumers need.

Equally, while unit costs may fall, others – like keeping the system running and investing in cleaner energy – may rise over time. So we’re reviewing how energy costs are passed on through bills, including standing charges, to make sure it’s fair and transparent. And that’s why we launched the Cost Allocation Review.

And of course looking  at many of those issues, the decisions rightly stay with government, but many of those choices will be made together. That’s why it’s so important we look at all the available options – guided by evidence, and focused on outcomes.

Ultimately, our challenge is to deliver this transition at least cost – by choosing low-cost pathways, coordinating infrastructure, and spreading costs fairly.

As Ofgem, we are keen to ensure there is an independent source of analysis about the impact of the future transition. And we intend to say more about our assessment on that impact in the coming months.

The UK energy system is already changing fast. We’ve quadrupled transmission investment since the start of the decade. We’ve committed to £80 billion more over the next five years. And we’re seeing world-class innovation across the sector – from offshore wind and battery storage – and long duration storage - to EV charging, digital grid technologies, and demand side response.

But this isn’t just a story of more investment. It’s a story of a fundamentally different system.

We are moving decisively toward a more planned energy system. 

The market-led model that served us well in the past, on its own, is no longer sufficient.

The infrastructure we need – the grid, the generation, the storage – requires coordination. 

It requires planning. And it requires institutions that are set up to deliver that.

But here is the challenge: while the whole system is shifting, the institutional arrangements to support that are not yet fully in place.

And without them, we risk the worst of both worlds – no clear spatial plans, and no ability to deliver those plans on the ground.

So the challenge is ahead for all of us – for government, for the National Energy System Operator, the regulator, and industry – is to make strategic planning work. To do it in a way that in a way that delivers for customers.

What that means for regulation

That brings me to my second point: what does this mean for regulation? This shift toward more strategic planning has profound implications for how we regulate.

We’ve already begun that change. We’ve accelerated approvals for new network infrastructure, guided by NESO’s first strategic plan. We’ve strengthened supply chains – enabling earlier orders for critical kit through our Advanced Procurement Mechanism.

And we are working closely with industry to ensure that investment decisions are based on robust data, clear system need, and demonstrable consumer benefit.

And we are reforming the connections process to prioritise clean power and growth.

The growth of AI and data infrastructure, I believe, is one of the biggest paradigm shifts we've seen.

It has grown rapidly, placing major new demands on the connections queue.

But equally it is one of the biggest opportunities for economic growth for this country in the years ahead.

So we need to develop and design a system that can adapt to that. 

That means curating the queue, but also means looking at how we prioritise demand, particularly for AI.

That’s why last week we launched a new connections strategy focused on curating the queue, prioritising strategically important demand projects, including in line with the Government’s AI growth plan, and enabling faster and more secure connections.

We are also looking closely at demand applications so we can be confident the right projects are not facing unnecessary connection delays.

However, we know that regulation is only one part of the picture.

If we are to make strategic planning work, there is a case for government to consider how its own delivery arrangements will align with this new reality. 

So for example, there is a question about where price signals are most effective. For some technologies – like batteries or demand-side response – market signals make sense.

But for others, clearly like nuclear, or even larger offshore wind, it may not that a more strategically planned approach may be more efficient.

In the long run, government could consider whether there is an alternative case for a more area specific ways of running CfDs for example– where planners identify locations, secure leases and grid connections, and then run competitive tenders. I emphasise that that is for the very long run and something we should think about rather than something we need to do.

That approach could help us deliver faster, at lower cost, with greater certainty for investors, and ultimately better outcomes for consumers than the current model.

But to make that shift work, we also need to make the system investable.

Because without a market for investment that’s predictable, credible, and transparent, we can’t unlock the future.

That means attracting the capital needed to build the infrastructure for a cleaner, smarter future: one that can support low-carbon technologies, flexible demand, and rising electricity use from things like EVs and data centres.

We stand ready to unlock billions of pounds of investment, with clear oversight and the ability to move quickly when needed. 

But this is not investment at any cost. Every pound must deliver demonstrable value for consumers, and projects need to be held to a reasonable timeframe and a reasonable budget. That’s the principle that will guide the decisions we will be making in our upcoming network price control decisions.

That’s how we are approaching our final determinations: where network companies have provided robust data and strong evidence of system need and consumer benefit, we’ll reflect that in our decisions.

Our focus remains clear: making the system work for consumers, maintaining robust controls on prices and bills, and ensuring the investments we are making are good value, and that the incentives we set drive the right outcomes for customers.

What needs to change

The third area I want to cover is what needs to change.

If we are serious about delivering a more strategically planned system, then we need to make sure the institutions, processes, and market arrangements are aligned to that goal.

Let’s start with institutions.

We now have NESO – that is something I am delighted to see, and a change that has allowed us to move much faster.

NESO, DESNZ, and Ofgem all playing critical roles in shaping and delivering the energy system. But these roles need to be clearly defined, and they need to work together as part of a coherent whole. 

There may be a case for exploring how we better integrate planning and delivery across these bodies – so that we can move from strategic planning to execution with pace and confidence.

This is why the Ofgem Review, which we do expect to be published shortly, becomes so important.

The sector we regulate today is vastly more complex than it was 25 years ago. The Review is asking the right questions – about our duties, our remit, and our powers – and we stand ready to implement its conclusions at pace.

We believe there is a strong case for a regulator that is more strategic, more outcomes-focused, and better equipped to support growth and innovation across the system.

That includes clarifying our duties – to reflect not just consumer protection but also net zero and economic growth. It includes expanding our scope – to cover the full range of energy services consumers will rely on in the 2030s. 

And it includes ensuring we have the powers to manage risk in a more turbulent energy world.

We welcome this opportunity to reset and redesign what we are asked to do. And we look forward to working with government, and across the sector, to make those changes happen. 

Retail reform

Let’s turn to one of the areas we know is the amongst most pressing areas of reform: the retail market.

Retail is the part of the system that consumers see. It’s where trust is built or lost. And it’s where flexibility, ultimately, will either flourish or fail.

Since the gas crisis, the retail market has been on a path of stabilisation and recovery. Supplier failures imposed real costs – around £64 per household at their peak. But our financial resilience regime has resulted in £7.5 billion in net assets in the sector. Suppliers, overall, are now more robust. And consumers are better protected if things go wrong.

Customer service has also improved. Satisfaction is now higher than at any time since we began tracking it. Call waiting times are down. Complaints are at their lowest since 2020. Prices, though still high, have risen more slowly than inflation over the past 18 months – ultimately a real-terms decrease. I want to emphasise that we are not taking away from the struggles that are still out there for customers – I am merely pointing out that things have at least stabilised.

But we cannot stop at stabilisation and recovery. We need to build a retail market that supports the wider energy transition – and that means tackling three big challenges: debt, pricing, and innovation.

Debt

Energy debt is one of the biggest challenges we have to face. It undermines supplier confidence, increases costs for consumers, and hits vulnerable households hardest.

As I mentioned earlier, one of the things I’ve done over the last few years is to talk to many energy consumers. I’ve been to food banks, I’ve sat talking on the phone with customers, and I’ve often seen people in really tough circumstances.

And I’ve seen real distress over the energy debts that they have built up. 

That’s why we’re launching phase one of our debt relief scheme – supporting around 195,000 low-income customers by writing off up to £500 million in debt that is unsustainable. But we also need to prevent debt from building up in the first place.

So our new debt strategy outlines what we expect from the sector in the future. 

Specifically:

• high standards of debt collection – proportionate, fair, and consistent
• better identification and protection of vulnerable customers – including through improved data sharing with government
• preventing debt at change of tenancy, where up to 40% of arrears originate – this includes trialling new ways to engage consumers when they move home

Price Cap

Moving on to prices and the price cap.

Equally, the price cap has played an important role in protecting consumers. But it is increasingly clear that the current model may soon become a barrier to the kind of flexibility that we need.

The way people consume energy – and the way they are charged for it – is changing. The cap, in its current form, was not designed for a world of smart tariffs, flexible demand, and zero-bill homes.

Looking ahead, we will be consulting on reforms to the price cap to ensure it remains fit for a more flexible, dynamic energy system – particularly as we move toward market-wide half-hourly settlement.

The amount people pay for their energy in the future will depend not just on how much they use, but when they use it, how energy efficient their home is, and what access they have to low-carbon technologies. These opportunities should be available to everyone – and we want to create a market where suppliers are incentivised to innovate and offer the best deals for their customers.

Innovation 

So in addition to looking at pricing and debt, we need to create space for more innovation.

We’re already seeing promising developments: time-of-use tariffs, zero-bill homes, subsidised solar and battery trials. But suppliers tell us they feel constrained by the regulation – and we hear that.

That’s why we’re launching our Consumer Confidence programme – to revisit the rulebook, reduce unnecessary prescription, and focus on outcomes. We want to regulate for what matters – not wholly for how it’s done.

We will also apply this approach to new areas like heat networks and aggregators – where a more data-driven, outcomes-based approach is essential. And also across the wider retail market, we will look for a consistent approach.

Ultimately, we want a retail market that is:

• investable – with predictable returns and manageable risks
• Innovative – with space to trial and scale new ideas
• and inclusive – with protections for those who need them most

That’s how we unlock flexibility. That’s how we reduce the need for new infrastructure. And that’s how we build a system that works for everyone.

Conclusion

So finally, the Ofgem Review has provided an opportunity for many of you to contribute to what a future energy regulator looks like.

The demands of a changing sector means how consumers are protected will evolve, especially as new products and innovations mean those consumers will likely interact with the energy system in a very different way. And we welcome that change the Ofgem Review will bring – we welcome the debate that is around us.

And of course we welcome constructive challenge, as long as it’s rooted in genuine consumer interest. It helps us improve, change – and that’s vital as we deliver a major programme of reform.

So let me end where I started: just as Lord Kelvin helped define the standards that still shape our energy system, we – as a sector and as a regulator – must now reshape the system for tomorrow.

Thank you.