In this week’s Energy Perspective, we put Ofgem’s strategic review of the microbusiness retail market under the microscope, reiterating one point very clearly: the microbusiness market is different to the domestic market. And while the review is aimed squarely at ensuring access to a competitive and secure market for businesses, it does raise concerns about unnecessarily rolling in untested remedies that are based on domestic consumer behaviours when technology developments are likely to widen the gap between the household and microbusiness markets further. Ofgem has the opportunity to create detailed understanding of the sector, which is crucial given new usage, control and engagement innovations. It must, however, find a decent market segmentation moving forwards.
Last week saw confirmation of the government’s intention to roll forward a fifth of the second Carbon Budget surplus, specifically in an exchange of letters between Interim Energy and Clean Growth Minister Chris Skidmore and Committee on Climate Change Chair Lord Deben. Skidmore’s confirmation, which also requested advice on the roll forward, foreshadowed a proposal by Chairs of the Commons Science and Technology Committee and BEIS Committee Norman Lamb and Rachel Reeves to legislate for a 2050 net zero emissions target for the government.
We discuss these developments, as well as BEIS’s confirmation that certain renewables technologies (wind and solar) will be included in the Capacity Market, in this week’s Policy section. The latter, we believe, was inevitable given the scheme’s aims of lowest cost and technology neutrality, but it will not lead to significant build of subsidy free capacity due to the low de-ratings.
If Ofgem is to recommend the removal of the default tariff it would require the market to meet certain criteria. The regulator’s consultation on these conditions essentially describes the ideal functioning of a competitive market, we find in this week’s Regulation section. The real challenge, we suggest, is in devising trackable metrics with which it can assess the necessity of the cap.
The Challenge Group for the Significant Code Review (SCR) on Forward-Looking Charges and Access is providing details engagement in Ofgem’s latest thinking on content and process as the SCR develops. Also in this week’s Regulation section, we discuss in more detail the third meeting of the group, in which it considered cost models and the links between charging aspects. We will consider the Delivery Group reports in the next issue of Energy Spectrum.