The transition to an affordable zero-carbon electricity system will be at risk unless there is a fundamental step change in the use of digital technology and digital innovation. Achieving this brings challenges to the incentives, capacity, processes, and governance that support digitalisation of the electricity system. The work of the Energy Data and Digitalisation Task Forces has been positive and BEIS should establish a digital delivery body as recommended by the Task Force. However, it needs to go further. Specifically, the market design and governance processes being developed in BEIS should consider how to fully integrate digital considerations to ensure they are fit for a digital future.
The upcoming Energy Bill presents an opportunity to create a modern, digitalised, decarbonised, and consumer-focused energy system. It must ensure policy decisions by BEIS and Ofgem are fully informed by considerations relating to digital technologies and opportunities. Additionally, BEIS, Ofgem and UKRI should implement measures that enable electricity networks to move from innovation to deployment of digital technologies in line with the target to decarbonise the electricity system by 2035.
This briefing paper sets out specific recommendations for how to achieve this:
- BEIS, Ofgem and UKRI require advice from industry experts to identify the digital standards and architecture needed to achieve an efficient, secure net-zero energy system by 2035. The ‘independent energy expert panel’ proposed in the recent BEIS decision document on the Future System Operator includes representation from individuals working in the tech sector or with independent expertise in digital technology, to advise on the digital implications of policy proposals
- BEIS and Ofgem need to ensure greater coherence between the digital and energy system market design policy development teams.
- BEIS and Ofgem need to integrate digital expertise in their senior management teams and build digital capacity within market design teams. BEIS should appoint a Chief Energy Data and Digitisation Officer in a senior civil service (SCS) grade to oversee the integration of energy policy and digitalisation
- Ofgem should consider developing specific digital missions for the Strategic Innovation Fund in the future.
- UKRI and Ofgem need to re-evaluate how innovation funding can connect with digital rollout to support third party innovators to scale their solutions.
- BEIS, Ofgem and UKRI should consider how to support third parties to offer digital solutions to networks in a more open and competitive manner.
- The Review of Electricity Market Arrangements (REMA) process should identify a digitally enabled target market design consistent with the efficient operation of a fully decarbonised power system.
- BEIS and Ofgem should establish a Digital Delivery Body for the energy sector to drive the deployment of strategic digital infrastructure and implementation of the associated regulatory framework. Policymakers need to consider carefully whether this should merge at some point with system operation functions to create a Future System Operator with the correct culture and capabilities.
- BEIS should give Ofgem a specific mandate or guidance to use its regulatory powers to support the electricity system to achieve net zero by 2035.
- Ofgem should work with networks to support them in transitioning legacy digital network operation systems towards a common core digital architecture.
- Network companies need to rapidly increase their digital capacity at all levels of their organisations including board, executive management, management and throughout their operational teams.
- Network companies need to overhaul their procurement and contract management processes to support iterative development of digital solutions.
- IUK should launch an independent review of intellectual property requirements for the electricity networks to ensure these align with the requirements of third-party digital innovators.
Read the full briefing here.