How should you expect the energy market to change in the next 5 years?

by Tim Deakin Domestic Energy News

How should you expect the energy market to change in the next 5 years?

You don’t need a crystal ball to predict what the future holds for our energy usage

Like time itself, the energy market waits for no man. It’s a fast-paced world of constantly shifting benchmarks and expectations, which means trying to plan ahead can feel a bit like walking a tightrope without a safety net… In the dark… While wearing roller skates.

Thankfully, it doesn’t have to be quite so difficult to understand what the big wide world of energy has to offer. By turning to the industry’s regulator, Ofgem, we can gain a clearer idea of what to expect in energy’s near future.

Ofgem operates in a framework set by Parliament, with goals it works towards alongside providers. Over the next five years, plans are set in motion to make significant changes to the energy industry we see today. The three core priorities within this framework are:

**- Competition and innovation

  • Low cost decarbonisation
  • Protecting consumers**

Let’s dust off our magnifying glasses and take a closer look at each of these three factors.

Competition and innovation

By encouraging innovation and competition, the energy market aims to drive down prices and introduce new products and services.

Encouraging innovation can, in theory, benefit all consumers by leading to a more efficient energy market overall. Ofgem aims to remove barriers in the current framework, allowing for new business models and stronger market incentives for consumers.

Improving access to data and the quality of this data is a key part of encouraging innovation in the energy system. Implementing the recent Energy Data Taskforce recommendations will change the way the energy market manages and shares data.

Making greater use of tendering and competition for onshore networks will also help Ofgem to drive down costs, as well as make the market more effective.

Low cost decarbonisation

The environment is the talking point of our times, especially when discussing plans for future energy. Over the next five years, plans will be put in place to deliver a net-zero economy at the lowest cost to consumers.

This needs to be done using a whole systems approach. By breaking down the existing silos across the energy value chain, more competition and opportunities can be created that benefit customers. The environmental impact of all future decisions will be taken into account, and this means looking outside the energy sector as the heat and transport sectors decarbonise.

Part of this will mean developing effective deterrents to unethical or unsustainable behaviours. For both consumers and providers, it will be in their best interest to keep things green.

Ofgem have pledged to update their guidance on sustainability, in order to reflect the government’s ambition of net-zero emissions by 2050.

Greater efforts to protect consumers

Protecting customers is about striking a balance. Ofgem aims to encourage innovation in order to give customers a wide range of suppliers to choose from (generating healthy competition), while also offering a framework that ensures all companies are regulated effectively.

Intervening to provide backstop protections like default tariff price caps will make energy prices fairer all round. In theory, every customer will pay an acceptable price for an acceptable service.

Extra consideration should and will be made for more vulnerable customers. Extra care will need to be taken to retain policies and protocols that positively impact customers who need additional protection. And although there are limits to what Ofgem can do, they have promised to work closely with the government on upcoming policies to help improve things for vulnerable customers.

Here at The Energy Check we understand that we have a role to play in making it easier for consumers to find the best offers without hassle. By doing this we can help to prevent them from being shifted onto costly standard variable tariffs that can hit households hard. Ready to compare every tariff and every supplier now? Start comparing by clicking here.

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