Towards a more innovative energy retail market: a call for evidence (update)

Published 24 July 2023

Last updated 23 February 2024 — See all updates

Towards a more innovative energy retail market: summary of responses

Detail of outcome

This Call for Evidence asked about:

• the barriers to, and enablers of, innovation in the retail market
• how to unlock greater innovation in the market
• the role for government in this

The government response provides an overview of the key themes identified through the Call and sets out government’s position on these issues, with a full summary of responses in Annex A.

The Call helped clarify 2 key points:

• there is widespread consensus in the sector on the fundamental ‘building blocks’ that are critical if we are to significantly evolve away from the current market and deliver on our vision for the future. These refer to ongoing reforms aimed at delivering improved technological infrastructure and more efficient price signals in the market. Our view, as informed by the call, is that a renewed focus on the delivery of these building blocks is the most important action we can take towards unlocking a step change in innovation in the market
• there is a lack of consensus on the specific elements of the current retail market regulatory framework that may be acting as barriers to innovation, or on what government should do about this. While critical, delivering the building blocks in isolation may not be sufficient to deliver on our vision for the market, and reforms to the regulatory framework could play an important role. We welcome the increased attention being given to the question of regulatory reform by industry in recent months but note that this is a highly complex subject and on most issues a consensus view is yet to emerge

Reflecting this lack of consensus and the complex trade-offs involved with any potential reforms (particularly when it comes to those aimed at increasing innovation), in most areas more work is needed before specific proposals for regulatory reform are brought forward. It is also clear that while we expect certain changes to the regulatory framework will be required, there will not be a silver bullet or single regulatory ‘fix’. Rather, we expect that there will be an iterative process of scoping and implementing reforms as we prepare for, and transition to, new market arrangements.

We will be guided by 2 overarching aims for any regulatory reforms relating to innovation in the retail market:

a) making sure that the consumer protection framework is fit for, and that consumers are empowered to engage with, a market that may be more varied and dynamic than today

b) removing regulatory barriers to innovation where in the interest of consumers, noting the varied benefits we expect such innovation to bring (as outlined above).

Any reforms pursued in line with these aims must also align with our overarching priority to deliver the building blocks for the future retail market.

This Call helped identify and prioritise the key issues that government and Ofgem will be considering as part of this iterative process. By mapping out these issues and government’s view on how they relate to our objectives for the retail market, we hope to provide an effective basis for collaboration with the sector as we work towards specific reforms.

It was published alongside Delivering a better energy retail market, which set out government’s vision for an energy retail market that works better for consumers, is more resilient and investable, and supports the transformation of our energy system.

Feedback

We received 41 responses from:

• consumer groups
• energy suppliers
• other market participants
• think tanks

We also held online meetings with individuals and stakeholder groups, attended by over 50 stakeholders. We used their feedback alongside the written responses to inform our next steps.

This call for evidence considers barriers to innovation in the energy retail market.

This call for evidence ran from
9am on 24 July 2023 to 11:59pm on 18 September 2023

Call for evidence description

As the main interface between consumers and the energy system, the energy retail market has the potential to play a positive role in supporting decarbonisation and ensuring that consumers see the benefits. However, if this is to happen, we need to unlock significantly more innovation in the market.

While there is broad consensus that the current retail market is unlikely to deliver the innovation required for a net zero energy system, there is no such consensus on the extent to which government intervention is needed or on where any interventions should be targeted.

That is why we are launching a call for evidence on this subject, with a commitment to follow up with policy proposals for consultation later in 2023.

We’re seeking views on aspects of the retail market policy and regulatory framework which may be acting as either barriers to innovation itself or to the ability of consumers to access the benefits of such innovation.

The call for evidence will be of particular interest to:

• the energy industry
• Innovators
• non-governmental organisations (NGOs)
• consumer groups
• academics and policy think-tanks

Towards a more innovative energy retail market: a call for evidence