This summer marks the third anniversary of the UK becoming one of the world’s first major economies to enshrine net zero in law. The legally-binding target commits the country to reducing all greenhouse gas emissions to net zero by 2050. And, three years later, the energy price crisis and war in Ukraine have only increased the impetus for action.

Not up to net zero
Despite this, Ofgem, the energy regulator, recently announced that the UK's energy system is a significant barrier to net zero and in desperate need of modernisation. It should not come as any surprise that the grid is in need of a shake up, however. While net zero celebrates its third anniversary, the UK’s electricity gird is marking its 85th.

To boost our energy independence with homegrown renewables requires a future-proof redesign of the system – one with flexibility at its core. Gone are the days when Nottinghamshire’s ‘Megawatt Valley’ delivered a quarter of England and Wales’ energy needs.

Today, rather than distributing energy produced in concentrated regions across the country, we need a system that recognises towns and cities across the UK have unique energy needs and differing capacities to produce homegrown electricity. To harness our clean energy potential and deliver net zero, we need to recognise the future of energy is local.

To state the obvious, it makes sense to harness the hydroelectric potential of the Mersey in Liverpool while capitalising on the suntrap valleys in Wiltshire to power their own local communities – rather than the other way around.

The future is local
As recognised – and recently reaffirmed  – by Ofgem: ‘Local power grids will play a critical role in helping to reduce our reliance on expensive imports of gas, bring down energy bills and meet the country’s climate goals.’ In other words, the energy networks that fuel our lives by connecting our homes and workplaces, and commercial and industrial buildings, to energy sources for heat and power must adapt.

The companies that currently run these direct connections are known as network operators. There are eight distribution network operators (DNOs) across the UK. Each DNO is responsible for operating its local power grid and planning to meet future energy demand. That means, for example, connecting new electric vehicle charging points and heat pumps to the grid.

At UK100, we have been supporting our members to work directly with DNOs to ensure they can play their part in the future development of their regional and local networks effectively. And Ofgem has recently confirmed they, like us, believe that interaction should be the default. Because, as its says: ‘Local authorities also play an important role and need to make sure that these network companies meet the needs of local transport and housing.’

Conflict of interest
But there are some serious gaps in the current system, with the potential to create some unintended conflicts of interest that could make net zero more expensive than it needs to be.

Local energy markets, run in partnership with local authorities, are the key to balancing power generation and demand flexibility. They will also reduce the need for more connections to the grid, more wires and more power – which, as our energy expert Hywel Lloyd explains, is the most expensive way forward.

But if DNOs – whose revenues are dependent on building new grid capacity – are in charge of these new markets then there will be a potential disincentive to building the localised energy systems we need, as cost-effectively as possible.

The way forward
Accordingly, Ofgem recently held a ‘call for input’ on four proposals for reorganising the energy system. The proposals now under consideration range from separating the local system operation function internally within DNOs to creating new independent regional bodies. UK100 responded with a call for a ‘tailoring of local energy systems’ that ‘brings together the many local actors and all that they can contribute (including resources outside of the current energy system).’

We believe Local Area Energy Planning (LAEP) should give a greater role and more powers to local and regional authorities to develop a balanced energy system that combines a mix of large-scale power generation with local decentralised energy systems. And Ofgem has heeded our call with its new five-year vision for building sustainable and affordable regional energy grids that recognise the power of local, including the creation of a Net Zero Advisory Group, and support a low carbon, cheaper future for the UK.

As we continue to engage with Ofgem, DNOs and LAEP on the future of a net zero energy system, the new watchwords are ‘flexibility’ and ‘optimisation’. We need to deploy local storage and other energy assets, reach off-grid communities, manage demand peaks and harness the kit we have while improving its resilience to extreme weather events – all without the expense and impact of overcapacity.

Within government, the Department for Business, Energy and Industrial Strategy (BEIS) has accepted Ofgem’s recommendation for a new Future Systems Operator (FSO) to ‘balance the UK’s electricity systems and ensure continued energy resilience and security of supply for households and businesses’. However, little has been said about how the FSO will be implemented – and ministers have remained all but silent on the role of local authorities.

As the Climate Change Committee notes with the publication of its latest progress report, while the UK is a champion in setting new goals, it has a long way to go in delivering against them. Something also reflected in our soon-to-be-published Local Net Zero progress reports.

Three years on from signing net zero into law, we need to be turning declarations into delivery. And urgently. With that in mind, the new Energy Security Bill is the perfect time for the government to recognise the power of local and spark a much-needed overhaul of the energy system.

Local authorities, Ofgem and UK100 are ready to work with ministers to make the necessary changes.

The views and opinions expressed in this article are strictly those of the author only and are not necessarily given or endorsed by or on behalf of the Energy Institute.