Recommendation 25

In July 2021, the Department published its Energy Retail Market Strategy for the 2020s, which set out its vision for a retail market which enabled net zero. In December 2021 the Department announced it needed to refresh the strategy to take account of the lessons from recent months and launched a call for evidence with the aim of publishing a new strategy once the market had stabilised.60 The Department told us that in order to deliver net zero, it needed to ensure the energy system supported innovation whilst balancing resilience, flexibility and cost. We therefore asked the Department and Ofgem how they intended to manage the transition towards renewable energy sources.61 Ofgem recognised that it would be important to consider how best to influence changes in customer behaviour. It explained that, for example, people would need to be rewarded for 54 Department for Business, Energy & Industrial Strategy, Net Zero Strategy: Build Back Greener, October 2021 55 Department for Business, Energy & Industrial Strategy, British Energy Security Strategy, April 2022 56 Qq 61–62, 99 57 Q 102 58 C&AG’s Report, Figure 1; Ofgem, What drives wholesale electricity prices in Britain?, 15 July 2016 59 Qq 96, 99 60 C&AG’s Report, para 3.17 61 Qq 2–4, 61, 99 Regulation of energy suppliers 17 being willing to charge their electric vehicles at different times, such as when the wind is blowing or when demand is low. It committed to working with the Department in addressing this issue. Ofgem also told us that in the future customers are likely to use and be charged for energy differently, for example through more flexible tariffs, and that this might require different forms of pricing regulation.62 62 Qq 61, 99 18 Regulation of energy suppliers