Words by Anthony Bivens, Senior Advisor The current framework for governance and regulation of the energy industry has remained largely unchanged since 1998; a time when DVDs were first released in Britain, Nokia and Ericsson dominated the mobile phone market, Google was a start-up and Amazon was operating as an online bookstore. Since then, the number of energy codes and licence conditions have proliferated and evolved, but the framework and governance structure has remained largely the same whilst the market has evolved significantly.
From an energy system perspective, we have also witnessed large-scale change since 1998 and the codes have played a role in this. However, as energy system requirements become ever more complex due to Net Zero targets, there is a need to implement new, innovative services, solutions and systems changes.
To do this, we need to consider the role codes currently play and how their future role may look in underpinning the energy system transition and helping market participants to make sense of a complex market. We also need to understand the relevant rules, policies and regulations that exist now and those that will need to adapt or be developed and implemented.
The role for codes in the energy systems transition
Some key principles that can enhance the role of codes and ensure that they continue to function as a key building block in energy system change include:
Code agility refers to the need for codes to be responsive and flexible to change for new proposals and subsequent modifications, ensuring that change can be developed and adapted or implemented in shorter timescales.
As we have witnessed in recently implemented changes (e.g. DCP350 – Embedded Capacity Registers), steps are being taken to include principles of agility at design stage to ensure that any future modifications can be implemented in weeks rather than months. This futureproofing enables code changes – in areas that are likely to change regularly in the coming years – to be designed accordingly, mitigating the need for the traditional change process in fast-moving areas such as data provision and, ultimately, open data.
- Simplicity and accessibility
The energy market is a complex place made up of multiple participants with broad-ranging skills and expertise. Improving accessibility to codes through initiatives such as digitalisation and standardised impact assessments can help market participants to navigate the code landscape and not only understand how the codes impact them but how the codes can enable the rollout of new systems, technologies and solutions.
Whilst this does not necessarily mean that we need to strip detail from the codes to bring about simplicity, providing market participants with the tools to better understand these complex areas can support this ambition. ElectraLink’s Advisory Services team has already worked with many organisations to build roadmaps and frameworks for a smooth journey through code requirements. We have also completed digitalisation of two codes.
- Code consolidation and harmonisation
In recent years, there has been discussion around the potential for a single network code which would look to consolidate the others and better enable system-level code change and industry governance. Any move to unify the codes in this way would enable a single point of access for energy market participants and would allow the code manager/s to better coordinate holistic system change.
In the short term, gradual harmonisation of key governance touchpoints would be a positive start in not only assessing code impacts but in ensuring that codes are complementary, and that change is well considered in the short term.
- A new role for code managers
Any change to the way codes are administered and change is implemented will create new opportunities but also short-term challenges, and as such the role, responsibilities and skills of code administrators will need to adapt.
If change becomes more frequent and more complex as expected, in the short term code managers will need to be empowered and given a level of autonomy as well as new responsibilities. This will ensure that code managers have the tools, requisite skills and authority required to manage change proactively and ensure that change keeps pace with the needs of the system and the wants of consumers.
Keeping pace with industry change
Many services and solutions could arguably exist within the established set of industry codes and regulations with some additions and amendments. However, reviewing and updating GB’s governance and regulatory frameworks – while being mindful of the new technologies and pace of innovation – provides an opportunity to assess and understand if the current frameworks could be improved. This would play a key role in enabling the large-scale changes required to meet Net Zero targets and deliver the energy system of the future.
Developing a framework that is flexible and can accommodate new, innovative solutions will require a cultural change from a rule-based governance and regulation approach to one that is based on outcomes, enabling market participants flexibility to deliver change. Regulation should be simple so that the requirements and outcomes are clear but do not suffocate creative solutions. Whilst this will create risks, it is a key enabler for innovative products and services to enter the market.
Regulation has served us well for many years, but if we are to enable the energy market to transform, we must ensure the regulatory and governance structures are transformed too.
To find out more about how ElectraLink is facilitating change in the energy system and code landscape, and what we can do to help your organisation prepare for code updates, please get in touch at [email protected] or message me on LinkedIn.