Comment by Ben Shafran, Head of Business Model & Policy Innovation, at Energy Systems Catapult.

School might be out for the summer, but energy policy doesn’t take a break – no matter how high the mercury rises. So, I’ve summarised some of the key clean energy announcements you need to know and what they mean for innovation.

Code governance

Energy codes – those hugely impactful instructions and rules for market participants – can be a real barrier to clean energy innovation. Lengthy, complex codes and resource-intensive governance processes hinder progress. SMEs often lack the capacity to navigate or influence these systems, while large incumbents benefit from the resources needed to fully engage.

Around this time last year, Ofgem set out its plans to consolidate the codes and their governance – going from 11 codes to 6:

• An electricity commercial code will bring together the Connection and Use of System Code (CUSC) and Distribution Connection and Use of System Agreement (DCUSA)
• An electricity technical code will combine the Grid Code, Distribution Code, System Operator Transmission Owner Code (STC), and Security and Quality of Supply Standard (SQSS)
• A gas network code will marry up the Uniform Network Code (UNC) and the Independent Gas Transporters Uniform Network Code (IGT UNC)
• Each of the Balancing and Settlement Code (BSC), Smart Energy Code (SEC) and Retail Energy Code (REC) will remain stand-alone with their respective code managers.

And now Ofgem has given its strategic direction to the (existing) code managers on the initiatives that they should be supporting. Ofgem identified 35 policy areas with relevance to the codes – highlighting just how much is happening in the sector, and conveniently summarised in this table. What’s particularly interesting are the initiatives Ofgem sees as requiring urgent action (implementation within the next two years) and those that are low priority (implementation more than three years away):

• The former group includes highly publicised matters such addressing the needs of non-domestic consumers, grid connections reform, half-hourly market settlement, and unlocking distributed flexibility, amongst others.
• The latter group includes matters that many of the innovators we work with consider to be just as urgent, such as retail market reform, and improving the electricity price signals at the national and local levels.

Code governance reform is an ongoing matter. We will stay tuned for the next moves from Ofgem.

Clean Flexibility Roadmap

To deliver the Clean Power 2030 mission, we’re going to need to complement the buildout of renewables and the grid with flexibility. The government, Ofgem and NESO’s Clean Flexibility Roadmap sets out the different types of flexible assets we will need, and the initiatives to deliver them

Many of these are a reiteration of existing commitments – such as the rollout of smart meters and market-wide half-hourly settlement, and a new regulatory approach to support investment in long-duration electricity storage. But there are also new commitments to make it easier for business and industrial customers to participate in balancing markets, rebate policy levies so they apply to ‘net’ electricity demand, and for Ofgem to fast-track a review of Distribution Use of System (DUoS) charges with the aim of making them more granular in time and space.

But arguably the most impactful change is the creation of an electricity system flexibility team within the Department for Energy Security and Ney Zero (DESNZ). Since flexibility is a system outcome, it has been poorly served by the typical structures within DESNZ (and Ofgem) that silo individual technologies and delivery programmes. The new team, and the appointment of a Flexibility Commissioner, promise a much-needed focus on the system as well as its components.

Greenhouse Gas Removals

We’ve looked at the evidence extensively and we don’t think the UK can get to Net Zero without greenhouse gas removals (GGRs) – sometimes referred to as ‘negative emissions technologies’ – such as direct air capture (DAC) and bioenergy with carbon capture and storage (BECCS).

The UK Emissions Trading Scheme Authority has now confirmed that these technologies, as well as nature-based removals, will be eligible to participate in the scheme from 2029. The aim is to provide a stronger basis for DAC and BECCS projects to be brought forward, although it is highly unlikely that the carbon price alone would ever be high enough to make sure projects commercially viable.

To ensure that the scheme maintains a trajectory towards Net Zero, a “gross” cap will apply to emissions credits – so for each negative emissions credit, a positive emissions allowance would be removed.

To ensure the scheme only rewards genuine removals, a new GGR Standard is being developed, which will be the standard for Monitoring, Reporting & Verification for GGRs to be eligible for UK ETS credits. It’s important that this standard builds on existing requirements and does not just add to the already messy landscape of carbon accounting.

Scotland’s Heat and Energy Efficiency Technical Suitability Assessment

The Scottish Government has been ahead of England and Wales when it comes to reforming Energy Performance Certificates (EPCs). In January it decided to change EPCs to three metrics covering: heat retention, heating system type, and electricity cost. Although not quite the metrics we would argue for, this is still a step in the right direction to address the well-known issues with EPCs. The changes are due to take effect from 2026.

Now, Scottish Government is seeking views on an additional process that would give homeowners more detailed recommendations on how to decarbonise and improve the energy efficiency of their homes. The ‘Heat and Energy Efficiency Technical Suitability Assessment’ (HEETSA) could be a pre-condition for accessing government funding for retrofits. It could also be the basis on which private landlords understand what is required of them to comply with the Minimum Energy Efficiency Standard – itself being revised to align with the changes to EPCs.

If introduced, the HEESTA would go some way to address two of the issues we identified with EPCs:

• The absence of consolidated data on the building, its use, and measures applied. HEETSA’s could feed into a ‘digital building passport’ that gives households and retrofit providers richer information.
• The tendency in EPCs to recommend specific measures despite the certificate being typically based on desk-based assessment and outdated assumptions.

The HEETSA and MEES consultations are running until 29 August.