Towards a more innovative energy retail market: a call for evidence

[18 September 2023] Energy Systems Catapult has responded to the Department for Energy Security and Net Zero’s call for evidence on a more innovative energy retail market. The consultation, Towards a more innovative energy retail market: a call for evidence, ran from 9am on 24 July 2023 to 11:59pm on 18 September 2023.

The government sought views on aspects of the retail market policy and regulatory framework which may be acting as either barriers to innovation itself or to the ability of consumers to access the benefits of such innovation.

Energy retail must play a central role in supporting consumers to transition to Net Zero. Current arrangements are inadequate and ambitious reform is needed to unlock innovation and drive retail propositions that meet the diverse needs of future energy consumers.

Four overarching priorities stand out:

1. Aligning underlying incentives with Net Zero outcomes.
2. Making competition work for consumers and opening the market to new players.
3. Looking to wider enablers (e.g. digital; local coordination; etc).
4. Embracing experimentation to overcome policy inertia and achieve high ambition.

While the Catapult welcomes this call for evidence and the forthcoming consultation, ambition must be scaled up to meet our Net Zero target. Retail market reform must be fully aligned with reform of the wholesale market – including through REMA – in order to unlock the benefits. In addition to this Call for Evidence, evidence and analysis should be gathered in other departmental and wider government programmes.

Many of the tools to reform retail energy markets in line with our recommendations already exist, but they have been held back due to policy inertia. We think that policy and regulatory experimentation, which we are set up to help you deliver, can help overcome much of that inertia and gets us on the path to Net Zero.

Getting all this right will be central to securing affordable, low carbon power over the coming decade and full decarbonisation of the economy by 2050. It will also set the UK up with significant economic opportunities, enhancing the UK’s strengths in areas such as digital and services.

Response to Ofgem on the development of a competition framework for the domestic retail market

[20 September 2023] Energy Systems Catapult recently responded to Ofgem’s consultation on the development of a competition framework for the domestic retail market.

With regard to the proposals made in the consultation paper, key main messages include:

• The competition framework should be designed to unlock innovation and not hinder it.
• It should be simple and accessible to consumers.
• Tariff comparison must take into account innovative tariffs (such as dynamic tariffs).
• The framework should be used proactively to guide reform in existing policy / regulation (not just future interventions).
• Energy Systems Catapult tools, such as the Living Lab, can be used to improve evidence to demonstrate indicators – especially with regard to measuring innovation and customer satisfaction.
• The competition framework should be embedded within a wider, forward-looking consumer protection framework.

Ofgem – standing charges: call for input

[19 January 2024] We welcome Ofgem opening up the debate on different forms of retail energy tariffs – a subject the Catapult highlighted in our Clean Energy Retail report in 2022. However, it is difficult to tell how the timing and scope of the call for input relates to the Department for Energy Security and Net Zero’s programme on retail energy reform. Without clear alignment, there is a risk that Ofgem and DESNZ’s interventions on energy retail would contradict each other.