ICE submission to the Strategy and Policy Statement (SPS) for Energy Policy in Great Britain consultation

This consultation from the Department for Energy Security and Net Zero marks the first time a Secretary of State has designated a strategy and policy statement for energy policy in Great Britain.

This step is welcome.

However, it’s important that the statement aligns with the wider policy landscape, including for example the Climate Change Committee’s Carbon Budgets.

As the consultation document states, Ofgem and the Future System Operator (FSO) are vital in delivering government’s strategic priorities for the energy sector.

Now is the time to recognise the considerable urgency of the establishment of the FSO and the need to develop key capabilities within Ofgem and the FSO.

This needs to be accompanied by the development of governance and other arrangements to ensure effective working and decision-making across government, Ofgem and the FSO.

As the energy landscape changes at pace and is characterised by uncertainty, the SPS needs to be able to adapt and evolve to ensure that it remains relevant.

The ICE’s submission highlighted:

• Gaps within the SPS when it comes to resilience and adaptation. In a recent report, the ICE called for an economic review of resilience and adaptation, led by the Treasury to ensure investment in climate mitigation and adaptation is allocated correctly. This can then feed into developing existing resilience standards the government has already committed to in its National Resilience Framework.
• It’s important for Ofgem to have a more strictly focused net zero remit, expanding on its previous role as a downstream regulator for electricity and gas in a decarbonised electricity system, as outlined in the National Engineering Policy Centre (NEPC) consultation response to the SPS ICE contributed to.
• However, the SPS omits how Ofgem can work more closely with the Department for Energy Security and Net Zero relating to the future of the market while still supporting market growth.
• Alongside our NEPC partners, the ICE welcomes the introduction of the Future System Operator (FSO) to enable the decarbonisation of the electricity system, particularly the stipulation that this will be from a “whole system perspective”.
• The ICE has called for a systems-thinking approach to infrastructure to be embedded in policy development and infrastructure planning, as outlined in our 2023 paper on climate resilience.
• The SPS indicates that “the FSO should be looking to support the delivery of market developments” to create a more flexible energy market. However, it must be made more explicit that it is the FSO’s responsibility to design and deliver markets for key system functions, rather than support the delivery of market developments as this wording is unclear and obscures effective reflection of the FSO’s role.