Community Energy Schemes — [Mr Clive Betts in the Chair]

Part of the debate – in Westminster Hall at 4:17 pm on 30 November 2021.

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Photo of Greg Hands Greg Hands The Minister of State, Department for Business, Energy and Industrial Strategy 4:17, 30 November 2021

Fantastic. I will leave some time for the hon. Member for Bath to reply.

Finally, earlier this year, we jointly published with Ofgem our new smart systems and flexibility plan and the UK’s first energy digitisation strategy, which was also developed with Innovate UK. Many of the actions set out in those documents aim to improve locational signals and help to enable smart local energy solutions, such as facilitating further growth of local flexibility markets.

In addition, Ofgem’s access and forward-looking charging review seeks to deliver more efficient choices about where users locate on the networks, and how they use the networks on an ongoing basis. The introduction of better price signals is important in ensuring that local generation is rewarded for the benefits it can bring to the system. It is recognised that, in some parts of the country, the costs of connecting to the grid can itself act as a barrier. Ofgem has therefore proposed to reduce connection costs for generation connections, such as community energy, by socialising more of the network reinforcement element of connection charges. Any changes are expected to come into effect from April 2023.

Many Members have argued in favour of local energy suppliers as an option to mitigate global gas price impacts, which I have already referred to, but risks would continue to exist. For example, local energy suppliers are likely still to need to be connected to the grid during periods of low generation. The failure of a local energy supplier without a grid connection would also leave customers without energy supply in the absence of an effective safety net.

The Government continue to support the development of new business models to supply energy consumers and help achieve our net-zero ambitions. In response to the unprecedented rise in energy prices this year, we are working closely with Ofgem to consider broader reforms to the overall energy retail market regulatory framework. We want a market that will support the longer-term transition to net zero, recognising the need for continued competition and innovation while also ensuring that suppliers have sustainable and resilient business models. That includes Ofgem exploring a move towards a more prudential regulatory regime, recognising that energy suppliers are managing complex financial risks and ensuring that the energy sector is resilient against a wide range of future scenarios, including prices rising further or falling sharply.

This debate is testament to the fact that there is clearly extensive cross-party support for the community energy sector, which we very much welcome. Just as importantly, there is a wealth of innovative schemes—