As the GB energy market undergoes a rapid change, the regulation and governance that underpins it will need to keep pace. New business propositions and technologies, bringing in hundreds of new actors into the energy system, necessitate a change in the way OFGEM approaches implementing regulation. ESC’s recent paper on digitalising licensing goes into some detail on licensing regulated companies themselves, and OFGEM note in their forward work programme the need “to [make] changes within OFGEM to make us more agile and responsive.”

OFGEM’s implementation of the “Data Best Practice” (DBP) and “Digitalisation Strategy and Action Plan” (DSAP) guidance documents within the RIIO2 price control is an example of the way OFGEM has begun to regulate the digital realm in energy. The approach taken hints at the way regulation of digital aspects of the energy system might be beginning to adapt and coalesce around agile principles, as described by the forward work programme. DBP & DSAP provides a useful case study, providing insight into what we can learn from this first digitalised regulation approach, and what else could be done.

Digitalisation Licence Conditions, an iterated approach

The first iteration of the Data Best Practice guidance was created by Energy Systems Catapult after being commissioned by BEIS & OFGEM. This work was developed through a series of stakeholder engagements with the sector, taking learnings from other sectors, and bringing together a series of approaches that described a set of best practices for data management. The approach through which the work was delivered by ESC is important.

The work took a current best view of data practices across multiple sectors and, in relatively technically minded language, published openly a document that set out the intention of what “Data Best Practice” meant in energy. This brought the conversation on those topics to the forefront of the digital/energy space and served as a useful reference point for further stakeholder engagement. OFGEM were, through ESC, doing very early policy development and iterating that work in the public domain. This early engagement helped key stakeholders buy into the concepts enabling them to feel some ownership of the emergent best practices.

Following this period, OFGEM took on the guidance work and began working with stakeholders to transition the guidance itself from a technically minded document which discusses implementation techniques into a regulatory guidance document, which provides organisations certainty on what is expected of them by the regulator when complying with the requirements.

This phase of work took on the approach of the work done by ESC and prioritised working in the open and developing new versions of DBP, and publishing those in the public domain. Over the course of a year, several different versions of DBP were published openly on OFGEM’s confluence page with an open expectation of challenge and feedback to be provided by anyone who were to engage with the work. This gave stakeholders, and the regulator, ample opportunity to suggest changes and consider the implications of the guidance. This also allowed organisations to start embedding the principles developed into their own projects and BAU activities. Additionally, OFGEM were clarifying in the public domain to stakeholders that Data Best Practice guidance would be a requirement for network companies through the price control mechanism.

Learning from the experience of developing DBP in the open, the DSAP guidance was being developed in much the same way, albeit from scratch – with OFGEM running workshops and following the same lines of engagement described above of openly publishing iterated versions of the DSAP guidance.

The material difference between the approach on DBP and DSAP guidance was that OFGEM, ahead of ever publishing guidance on how to publish a Digitalisation Strategy and Action Plan, invited companies to publish their own DSAPs. This was a way for the sector to engage with the intent of the future regulatory requirement and for OFGEM to generate useful material that would go on to strongly inform the guidance itself.

This iterative approach of doing, then regulating, allowed the companies to buy into the intent of the guidance, help shape it from a place of understanding its challenges, and therefore design better quality guidance that got to the centre of the intended outcomes. The iteration and agility of the regulator in this instance is surely an approach that can be utilised elsewhere to meet other similar challenges in the future. The governance of the digital energy system will be best co-developed over the coming years and the approaches taken by DBP & DSAP provide a solid framework for that co-development.

What does this example teach us?

With both guidance documents having been implemented, there are some key themes that can provide insight:

1. Early stakeholder engagement can provide clarity of intent: Key stakeholders can become engaged in the work which creates a collaborative environment at a much earlier phase of policy development.
2. Working and iterating in the open: This gives opportunities to anyone to engage with the work, air concerns, suggest improvements and create a higher quality piece of regulation.
3. Trialling ideas early: The approach described in the DSAP guidance highlights what effective stakeholder engagement can do. Bringing companies along very early in the process to co-create can help more accurately shape the requirements to meet the desired outcomes.

The approach undertaken by OFGEM in implementing these guidance documents into regulation provides useful insights into how regulation can be done in the open. As OFGEM seeks to meet the challenges of how to nurture the digital energy landscape into a coherent ecosystem and make market design choices that inform its operation – keeping in mind the approach to DBP & DSAP guidance will help ensure the decisions made are open and in collaboration with the sector.

Greg Johnston – Digital and Data Consultant

Greg is a Digital and Data consultant who specialises in data and digitalisation policy and regulation in the energy sector. Greg joined Energy Systems Catapult from OFGEM, where he was most recently a Senior Manager working on data policy. Greg contributed to data and digitalisation topics across OFGEM and BEIS including licence condition implementation in the RIIO2 price controls and the government’s first Digitalisation Strategy and Action Plan. Most recently at ESC, Greg has contributed to the recent Energy Digitalisation Taskforce as well as the upcoming Offshore Data Taskforce.