Sandys calls for bonfire of energy policy “obsessions”

Radical new vision for energy regulation will strip out policy “distortions” caused by preoccupation with the trilemma, fuel poverty and security of supply

A new report co-authored by Laura Sandys has called for a bonfire of the traditional “obsessions” of energy policy makers and regulators in order to enable a radically new regulatory model for the future.

The report, Reshaping Regulation, claims that an undue focus on the problem of the energy “trilemma” as well as fuel poverty and security of supply have “distorted” policy making and regulation “for too long”.

To realise a low carbon energy future characterised by flexible decentralised generation, demand side participation and innovative smart home services, the report insists a new policy and regulatory model is needed.

It says that current approaches to adapting regulation in response to significant system changes are too “incremental” and are “constrained by incumbent thinking”.

As such, the report’s authors say the energy system is being kept in a state of “transition” and is not moving fast enough towards an end destination.

To help achieve a fresh regulatory approach, the report calls for a review “of all bodies currently regulating the energy sector with a clear ambition to rationalise, simplify and identify any ‘gaming’ of the complexity.”

It also says that the “misplaced responsibility given to the energy sector” to act against fuel poverty “should be removed”.

“Fuel poverty is not an energy problem, but either one of real poverty or of bad housing, and as a result should sit clearly within a different set of policy areas and departments,” reads the report.

On the so-called energy trilemma, which has dominated policy making for decades now and seeks to balance security of supply, decarbonisation and affordability, the report says: “These are all problems not ambitions for the sector and, as a result, policy has found it difficult to move forward without one or other element dragging on the opportunities or clarity around the others.”

It continues: “The term ‘trilemma’ has created the impression that there are trade-offs, that these are competing problems rather than complementary ambitions, and it shapes an inherently zero-sum game.”

To facilitate a move away from policy “obsession” with the trilemma the report calls for “a deeper analysis of the term ‘security of supply’, and a clearer distinction between ‘service’ and ‘system’ risk.”

It also says the “much greater analysis” is needed “of the cost benefits of the different graduations of security of service” and that new measures around data risk need to be built into future regulation.

Commenting on the report, co-author Laura Sandys, chief executive of consultancy Challenging Ideas, said the new model it puts forward will “create new winners and losers in the market, new risks for consumers who will need less protection from an invisible energy product, but with many more risks around personal data.”  

She added: “The old-fashioned utilities who do not reform will find themselves under huge pressure from the growing number of new services that are designed around consumers, ensuring that consumers are market makers not market victims.” 

Sandys, who is a former Conservative MP and member of the now defunct Energy and Climate Change Select Committee, is also currently a member of the expert advisory panel for the controversial government-commissioned Cost of Energy Review, which is being led by Professor Dieter Helm and is due to report before the end of the momth.

Sandys has previously written for Utility Week about her belief that “security of supply” should become a “banned” term in the energy industry, and at Utility Week’s Energy Summit this summer, she expressed her firm view that fuel poverty should be a responsibility for social policy makers, not energy policy makers.

The authors of the Reshaping Regulating report plan to release a follow-up document which will provide a “roadmap” for achieving it’s recommendations. The report was produced with support from the Energy Systems Catapult, a government-funded innovation hub.