Ofgem chairman Martin Cave has said the regulator is “wrestling” with how to address net-zero commitments in the price control process.
Speaking at Utility Week’s Investor Summit, Cave said the business plans for the next five years had to address the challenge of decarbonisation by 2050 but be flexible enough to adapt to evolving policy, innovation and societal change.
As a consequence, the price review will have to include “substantial net-zero re-openers”, he said.
He also pointed to the difficulties of the individual targets of cities or regions aiming to hit net-zero emissions before 2050.
He said: “There’s a new wrinkle to this price control – we don’t know what the key policies are going to be, we don’t know how rapid the uptake of electric vehicles is going to be or what experimentation may take place in connection to heat networks.
“We anticipate this price control will include very substantial net-zero re-openers, which will enable us, as policy becomes clear and as the process of evidence of take-up is revealed, to make investments in a calculated way.”
However, Northern Powergrid chief executive Phil Jones warned against re-opening price reviews, saying it could impact on how investors perceive the potential risk factors.
Cave said the decarbonisation process presented a number of trade-offs, chiefly the question of how much of the financial burden is placed on bills as opposed to taxes.
He added: “There is also the question as to whether we should address the decarbonisation strategy at a national or a regional level. How do we react to those democratically elected mayors who have chosen to achieve more aggressive decarbonisation targets than the government?
“That is something we are still wrestling with and is something the networks are also having to get to grips with.”