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The role and importance of energy regulators to decarbonisation

Traditionally energy regulators have two main goals: keeping the lights on and keeping prices fair for consumers. The energy transition poses a new problem, how do energy regulators keep that security of supply and affordability, while facilitating a revolution in how energy is generated, transmitted and used?

An energy regulator is the body responsible for overseeing the energy sector, often independent from the government. The systems they oversee might be fully liberalised, vertically integrated, or somewhere between the two. It’s a crucial job which involves some tough decisions, which impact on the lives of consumers, and the overall direction of energy systems. Regulators which were set up to oversee a transmission grid which had been in place for decades are now overseeing a grid which needs to rapidly scale up, by three times over globally, to allow for widescale electrification. Regulators which used to license small numbers of large fossil-based generation plants now need to license large numbers of small, distributed energy resources. And the roles of regulators are naturally expanding as new technologies disrupt the market: electric vehicles, heat networks, hydrogen and others.

No regulator has all the answers to the challenges and opportunities presented by this transition, which are being faced all over the world. That’s why the Regulatory Energy Transition Accelerator (RETA) was launched at COP26 as part of the ecosystem of the Green Grids Initiative, bringing together energy regulators globally, supported by the expertise of international organisations including the International Energy Agency (IEA), International Renewables Energy Agency (IRENA) and the World Bank, and other expert delivery partners. Initiated by Great Britain’s energy regulator Ofgem, RETA has grown from 20 regulators at its launch to 48 regulators and regulatory networks, covering every continent.

The grids of the future will be interconnected across borders, allowing renewable energy to flow from where it can be generated to where it is needed. RETA has brought together the International Energy Agency, IRENA and the World Bank to explore regulators’ roles and responsibilities in facilitating interconnectors, the challenge of transmission pricing, and grid code harmonisation. A series of knowledge products will be published from the end of October 2023 and into 2024, accompanied by various events around the world.

The grids of the future will also need much greater levels of digitalisation to create a truly flexible system and allow consumers to make the most of renewable energy. RETA partners including the Rocky Mountain Institute (RMI), Energy Innovation, the IEA and World Bank have convened regulators from all over the world in three workshops to understand the challenges faced by regulators when moving to more digitalised systems, and some of the evolving solutions made possible by advancements in technology.

And finally, the regulators of the future will need to have mandates fit to accelerate the energy transition. RETA has commissioned a global survey and report, carried out by the Regulatory Assistance Project, to understand how and to what extent regulators take decarbonisation into account in their decision making. Once the final report is ready in early 2024 it will provide a global snapshot of the current situation of where regulators do have the mandate to act, and how they use it. This should spark a global conversation on the role of energy regulators through the transition.

The goal of RETA is to get regulators talking to each other and learning from each other. Regulators from Small Island Developing States in the Pacific and Caribbean are already sharing their experiences with each other in regular workshops, and a RETA knowledge hub will soon be launched to facilitate expanded knowledge share and connections between and across regions. Sharing and co-creating knowledge peer-to-peer will be crucial as regulators step up to the challenge and play their part in creating the green grids of the future.

Written by Andrew Flagg, Coordinator of the Regulatory Energy Transition Accelerator (RETA) and a member of the global GGI Secretariat

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