As the UK works towards net-zero carbon emissions by 2050, the integration of electric vehicles, heat pumps and renewable power sources, such as solar, is transforming how energy is produced, distributed and consumed. In response to this shift, the energy retail market needs to innovate to meet the changing demands of consumers and industry.
To that end, Ofgem has launched a consultation entitled ‘Innovation in the energy retail market’, which focuses on understanding and addressing the barriers that prevent new, innovative energy products and services from reaching the market. The consultation aims to explore how potential regulatory changes could help accelerate the transition to a flexible energy system that offers customers more control over their energy use and bills and ultimately delivers net zero at the lowest cost possible.
The consultation aims to build upon 2023’s ‘Towards a more innovative energy retail market: a call for evidence’, produced by the Department for Energy Security and Net Zero’s (DESNZ), which began the conversation around retail market transformation.
Key topics include improving routes to market for emerging technologies, enhancing smart meter usage and introducing market-wide half-hourly settlements to create a more transparent energy market. The consultation also highlights how regulatory flexibility could help bring new offerings to market faster—without the need for legislative changes.
This move is part of a broader effort to reduce system costs by up to £10 billion to £16.7 billion by 2050 through greater energy flexibility and decentralisation.
Innovation and market flexibility
The consultation comes at a critical time as the energy market stabilises following recent turbulence. Some new energy products and services are already beginning to emerge, such as time-of-use tariffs and zero-bill homes, where households equipped with solar panels and batteries can eliminate energy bills by allowing suppliers to optimise energy use and generation.
Ofgem is exploring ways to reform the licensing framework, making it more flexible for innovators. Proposals include “reforming licence obligations” and “better enabling restricted or individual licences”, which would lower the regulatory barriers for companies entering the market and could enable quicker deployment of cutting-edge solutions while still protecting consumer interests.
The announcement comes hot on the heels of the launch of the annual DESNZ consultation into new generation technologies for participation in future Capacity Market auctions.