Remaking the regulatory model? Taking stock of ten years of customer engagement in Britain’s energy networks

It is uncontroversial to state that the customer will play an increasingly important role in decarbonising energy systems. In the UK, future energy scenarios show that meeting the country’s 2050 net zero target will require the increased electrification of transport and heating demands, a move towards hydrogen/biogas or heat networks for domestic and industrial heat, and the increased use of demand-side options, such as domestic demand response, and improved energy efficiency. The  Energy White Paper acknowledged the value of ‘place-based solutions’ and stated that there would be local authority funding available for certain aspects of the transition to net zero. However, the extent to which customer preferences will shape the energy transition, as opposed to centralised top-down decision making, is highly uncertain and most likely to be enhanced if the new energy landscape is characterised by decentralised local and regional energy systems.

Within a traditional centralised energy system, the role of customers has generally been confined to switching between suppliers and making decisions about the uptake of small scale technologies (e.g. solar PV, electric vehicles, end-use appliances etc.). However, in a scenario with a radical restructuring and decentralisation of the energy sector, it may be the case that end-users – individual customers or energy communities (organised at the local level or through social networks) – may begin to exert a greater influence over energy markets, regulatory frameworks and decisions to construct (or not) large scale infrastructure projects. Recognising the need to open up the regulatory process, over the past decade or so a concerted effort has been made in Britain to encourage and incentivise regulated companies to engage directly with their customers through a process known as customer engagement.

As part of Theme 2 of UKERC, Ronan Bolton and I have been researching the gradual implementation of customer engagement (CE) as a regulatory device between 2010-2020.  While societal engagement in the energy transition has been recognised within public policy literature (as noted within this recent UKERC blog), its use and value within regulation is perhaps less understood. Our paper, available as open access until January 18 2022, introduces this ‘new’ area for energy regulation. Drawing on expert interviews and document analysis we followed the introduction of customer engagement as a regulatory tool, analysing how it was experienced and evaluated by the various stakeholders involved in the regulatory process.

Based on this analysis we recognise the positive contribution that customer engagement has made to the current network price control and discuss the future of customer engagement should energy systems become more decentralised. However, we also note that there are challenges to overcome to embed customer engagement in the regulatory framework, primarily:

1. To clarify the role and remit of customer engagement so it is able to play a more meaningful role in energy network transitions.
2. To ensure that as customer engagement builds a level of trust between the network and its customers that this is replicated by the networks and the regulator.
3. Recognising the place-based nature of decarbonisation solutions, to allow the new voices in energy transitions, from aggregators and prosumers to local authorities and devolved governments, to be further incorporated into the price control process.

To read the full publication click here.