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Energy Bill amended to provide Ofgem with Net Zero mandate

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The UK Government has published an amendment to the Energy Bill this week that will require Ofgem to consider how its decisions assist with meeting the nation’s Net Zero targets.

Ofgem’s principal statutory objective remains to protect the interests of existing and future gas and electricity consumers, but in what is being called a “huge step forward for energy’s place in Net Zero” the amendment to the bill will directly align said interests with the nation’s environmental ambitions, providing both a coordinated approach and an improved climate for additional renewable energy projects.

Wording in Ofgem’s duties about cutting greenhouse gas (GHG) emissions will be replaced with a specific reference to the Climate Change Act, with the new duty coming into force two months after the Energy Bill gets Royal Assent.

Ofgem CEO Jonathan Brearley said:

“Our fundamental objective will always be to protect the interests of existing and future consumers. It is at the heart of everything we do. Ofgem welcomes this mandate which brings us in line with the UK Government’s legal obligations and, for the first time, directly links consumers’ interests to specific net zero targets

“We’re clear consumers are best protected by building a low-carbon, low-cost energy system, scaling up long-term investment and stabilising prices with clean energy. The mandate sends a clear message we must end our historic dependency on fossil fuels and stop our exposure to volatile global markets.

“We’re laying the foundations for the energy system of the future. The net zero mandate has overwhelming backing from every part of the energy industry, consumer campaigners and climate activists. It underlines net zero is the best option, not only from a climate perspective, but to ensure a secure, low-cost energy future.”

Up until yesterday the Government had resisted these changes, with Energy Minister Lord Callanan labelling them as “not necessary” due to Ofgem viewing the transition to Net Zero as a fundamental part of its work. Critics however argued that by not having a central Net Zero mandate the energy regulator could choose if/when to prioritise actions essential to the country’s energy & environmental plans, such as investments in the energy network, ahead of less costly endeavours. 

The move has been warmly welcomed by organisations from across the clean energy sector – below we outline some of the reaction:

Morag Watson, Director of Policy at Scottish Renewables, said:

“For too long Ofgem’s remit has been past its sell-by date. Today’s decision remedies that position and ensures that the energy industry’s regulator is able to recommend more than just short sighted changes to the system.

“The energy networks we have today were designed more than half a century ago, when most of our energy came from fossil fuels burned near cities. Today we need clean, affordable power which delivers economic and environmental benefits to the whole country – and a regulator which is allowed to deliver an energy system to support that goal.

“This announcement is a huge step forward for energy’s place in net-zero and we look forward to working with both government and Ofgem to ensure it delivers the maximum possible benefits for Scotland and the UK.”

Dr Nina Skorupska CBE, Chief Executive of the REA (Association for Renewable Energy and Clean Technology) said:

“We are extremely pleased that Ofgem will now be tasked with protecting both existing and future consumers’ interests by supporting the Government to reach its 2050 net zero target. This is a hugely welcome commitment that makes sense from both a practical and cost-effective standpoint.

“A low-carbon and low-cost energy system will help to scale up long-term investment and stabilise prices. This in turn will help protect consumers, ensuring they receive the benefits of a decarbonised, affordable, and secure energy system. It should also encourage flow through to more supportive net zero decisions in the wider energy system, including addressing current substantial grid connection delays.”

RenewableUK’s director of future electricity systems Barnaby Wharton said:

“The Government’s landmark decision to give Ofgem a new duty to deliver net zero is essential to change how we prioritise building vital new infrastructure to connect clean energy projects to the grid.

“We’ve been calling for this key amendment as a matter of urgency to tackle the glacial pace at which grid is approved and built.

“The decision will strengthen Britain’s energy security, moving us closer towards energy independence.”

Chris Hewett, Chief Executive of Solar Energy UK, said:

“This was a common-sense decision by the Government. The era of costly renewables is long gone – consumer and environmental interests are now one and the same.”

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