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‘Change is coming’ as Ofgem chief talks of new world for energy supply

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Ofgem chief executive Dermot Nolan has warned traditional utilities that they could be made “redundant” in a future power market typified by change and new market entrants.

Giving the opening keynote at today’s (19 October) Energy UK annual conference, Nolan gave a wide-ranging speech that looked to take incumbent utilities to task.

But amongst stark warnings regarding looming price caps – he was particularly irked by suppliers who had allegedly briefed media sources against an extension of this winter’s safeguard tariff, stating it would be “spectacularly ill advised” for them to do so – Nolan’s principle message was one of change.

Nolan said the UK’s power market was transforming into one of ample new suppliers with energy rolled alongside associated services, emerging technologies and new business models. He paid particular mention of peer-to-peer trading, stating it to be “one of the most exciting new business models” he had seen.

“In a similar way that Paypal offers peer-to-peer payment platforms without going through a bank, this could allow consumers the convenience of buying their power directly from local, renewable small-scale generation and bypassing suppliers,” he said.

He mentioned how car manufacturers and other industries could soon enter the energy supply industry by utilising the battery capacities included in the electric vehicles they sell. Nolan also broached the possibility of energy being sold alongside household appliances by retailers, a concept which has been discussed on Clean Energy News before.

Last year IKEA raised the possibility of selling any surplus renewable energy it generates having amassed an impressive portfolio of solar and onshore wind generators.

Any such change would, however, require changes to Ofgem’s balancing and settlement codes which restrict the supply of energy to licensed suppliers only. Consumers can only be supplied by one utility per fuel as well.

Nolan remarked that this was forcing new entrants into the regulator’s sandbox, which has recently trialled peer-to-peer trading networks, before teasing how such restrictions may change as Ofgem moves to adjust its retail market framework.

Ofgem is to imminently consult on future market design and Nolan today implored those present to engage in the debate. But he did have words of caution for any prospective new entrants.

“Whichever new players enter the energy market in the future will have to treat their customers fairly. And I’m sure I don’t need to remind anyone that keeping the lights on remains non-negotiable as ever,” he said.

Nolan then closed his speech with a firm message for supply firms resistant to both the recently proposed price cap and transitional nature of the UK power market.

“I don’t underestimate the scale of the challenge or the amount of work that is required from all of us. To those who may think that they cannot afford to do it in a world of more price regulation, I would say ‘think again’.

“These reforms are overdue. Neither we nor parliament will take no for an answer. So you might as well embrace it. Because change is coming,” Nolan said. 

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