Government Seeks to Ensure Energy Regulation Supports Innovation

The government opened a consultation on 15 January on whether regulation in the commercial energy markets is allowing innovation to flourish.

A Balanced Approach

Innovation is a key driver of technological development in the energy sector, so is regarded as vital for delivering lower costs, greater reliability and an effective decarbonisation process. However, the government needs to balance the benefits that innovation can offer against the need to ensure safety and protection for consumers.

The government is seeking to understand if legislation can support innovation and consequently encourage growth, how technological developments will shape the sector in the coming years, and how regulators might utilise new technologies.

Oil and Gas Innovation

The consultation describes several areas of the industry in which the government is already reforming the legislative framework with a view to encouraging innovation.

In the offshore oil and gas sector, for example, legislation currently progressing through Parliament will seek to promote further collaboration within the industry, as well as technological innovation to reduce decommissioning costs.

Meanwhile, the government is also seeking to promote the development of a domestic shale gas industry, which it believes could help to bolster the UK’s energy security and keep bills lower for consumers.

Legislation sets high standards for oil and gas extraction to safeguard the environment; however, regulators have avoided specifying the techniques that operators can use, in the hope of allowing new technologies to emerge and encouraging innovation.

Stakeholder Views

The government will use stakeholder responses to assess whether reforms are necessary to ensure the regulatory framework remains appropriate in a sector that is experiencing rapid change.

This will inform the production of a final Innovation Plan by the Department for Energy and Climate Change, which will be published in spring 2016. The plan will explain how the government and regulators are working to adapt enforcement to support innovation.

Responses are invited by 11 February.

The government rightly recognises that the regulatory framework can significantly impact on the scope to innovate and must be sufficiently flexible to accommodate emerging technologies.