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Ofgem recommends creation of independent body to run the grid

Published February 10, 2021

The energy regulator, Ofgem, is recommending the creation of an independent body that would take over the running of the electricity system, entirely separately from National Grid. 

 The body, or Independent System Operator, would design and plan the new grid infrastructure needed to reach net zero. 

The body is needed because there is a conflict of interest inherent in the present structure of National Grid. According to Alfa Energy’s corporate affairs officer, Jeremy Nicholson, “National Grid is incentivised to build energy infrastructure assets and get a return on that investment. The problem is, although we do need new generation, transmission, and vehicle charging infrastructure, building more assets isn’t the only way to reduce carbon emissions. For instance, if you use ‘demand side response’ or battery storage technologies, you might not need as many transmission assets.” 

The need to avoid such conflicts of interest has been floated since 2019, when a legally separate and more independent function was created within National Grid to act as the system operator.  

Now Ofgem is recommending the government goes further and considers full separation. Full separation would help ensure future decisions on how to manage the energy system keep costs as low as possible for consumers, rather than providing a return on investment for the National Grid.  Ofgem estimates the new body could save consumers £0.4 – £4.8 billion between 2022 and 2050.  

Jeremy Nicholson added: “It’s important that the system operator takes an independent view. This is probably the right decision for consumers anyway; the point is we need the right institutional architecture in the decades ahead.” 

Tags electricity grid Independent System Operator National Grid Ofgem