In July 2021, BEIS and Ofgem published ‘Digitalising our energy system for net zero: Strategy and Action Plan 2021’. It sets out a high-level roadmap for the energy industry to hit its net zero targets. It intends to do this through digitalisation and greater integration of (currently dispersed) data.

The plan highlights that data and digitalisation are “vital” to achieving our shared goals. (‘Digitalisation’ is the transformation of an industry by implementing digital solutions.) It suggests that digitalisation will allow BEIS and Ofgem to:

Support competitive markets.

Seize economic opportunities.

Capitalise on new low carbon technologies.

This piece will aim to cover the following:

Why digitalisation?

Current barriers

What’s the solution?

Summary

(It’s worth noting here that this plan is understandably vague. These plans are at an embryonic stage, and as such are light on concrete strategy or policy detail. We have attempted to explain the main points and high-level goals of the plan as succinctly as possible, and to focus on the directions that those involved - BEIS, Ofgem, Innovate UK - are likely to take moving forward.)

1. Why digitalisation?

The importance of data openness

The plan calls for the various arms of low carbon technology to be “talking to each other”. At the moment, a lack of incentives and a culture of keeping asset information private have led to the overprotection of data. This in turn has meant several barriers to integration, including:

Inaccurate and/or incomplete datasets.

Data silos.

Data hoarding.

In their place, the move to digitalisation should mean:

Presumed data openness as default.

Adequate, standardised data.

The correct deployment of infrastructures, processes, technologies, and skills.

Clear rules and regulations, costs and benefits, and roles and responsibilities.

(The data mentioned here refers to system data, i.e. data on system operations, markets, and physical infrastructure. What this consists of, specifically, is not stated.)

This shift will require new standards, new regulations, new services, new roles, and new institutions (such as the Future System Operator - check out Modo’s explainer here). The goal is to increase data quality, visibility, and access.

Greater integration

The plan also expresses a desire to see households and businesses become active participants in the energy system. It acknowledges the difficulties of integrating “millions” of new energy assets (“each with a potentially different owner”) into the same system as assets owned by large, often competing organisations.

As these new energy assets enter the market, there will be challenges in protracting and managing the subsequent new datasets. For the system to work as smoothly as it can, the FSO and/or Ofgem will also need to predict what these datasets will look like.

2. Current barriers

No incentive to innovate

There are a number of further barriers which are slowing progress towards digitalisation. For a start, the scale of investment needed is significant. In a rapidly changing landscape, there is an inherent lack of stability. Organisations will be understandably reluctant to invest heavily in digital infrastructures that may not be widely adopted. This leads to perceived “first mover disadvantages”.

All of these things, taken separately or together, are offputting to potential investors and actors.

Lack of appropriate policy and regulations

As outlined above, the sector does not currently have the cohesive or coordinated standards and infrastructure needed for easy data exchange. Therefore, policy and regulations need to be updated to better support and encourage investment. Cheaper, adaptable, digital solutions need to be incentivised and rewarded appropriately (which is where Innovate UK comes in).

Data monopolies

Currently, there is no incentive to make data more transparent. Too many datasets are hidden from public view within large organisations. The action plan is understandably keen to discourage what it calls “data monopolies”, where data can only be sourced from one organisation or service. They plan to do this by incentivising transparency or adapting the relevant regulations.

Radical change required

The plan makes clear that the cheapest, quickest route to net zero is not via an overhaul of existing physical infrastructure. Instead, we must rely on energy that is already on the system. However, it also notes that digitalisation will require “radical” changes to a legacy energy system that “cannot be turned off”. Therefore, these changes will need to take place in real-time, working around the day-to-day operations of the physical system(s).

3. What’s the solution?

Coordinating change

Over the past couple of years, there has been a surge in digital and data projects in the energy sector. The plan welcomes this, but also recognises that it can create a dynamic and incoherent landscape of activity. Therefore, Ofgem is working with EnergyREV and Energy Systems Catapult to put together the Catalogue of Projects on Energy Data - prototype expected summer 2021 - which will help those involved develop a more formal solution.

The plan has also identified a data literacy and skills gap, which will hopefully be bridged by the government’s Green Jobs Taskforce solutions (whose July 2021 report can be found here). There is also further gap analysis taking place to improve data and digital skills throughout the energy sector.

Regulatory changes

Data and digitalisation expectations have been built into the design of the RIIO-ED2 control (the regulatory incentives regime for distribution network operators, or DNOs). The intention is that DNOs comply with both Energy Data Best Practice guidance and the Digitalisation Strategy and Action Plan. Ofgem has already asked DNOs to voluntarily adopt this guidance until RIIO-ED2 comes into force.

Ofgem will also seek views from across the energy industry on how these sets of guidance can be applied to other licensed entities, such as generators and suppliers.

Other planned changes

BEIS, Ofgem, and Innovate UK plan to review some valuable datasets and processes, and benchmark these against their upcoming Energy Data Best Practice guidance. This should create a “tighter feedback loop between innovation, regulation, and policy”.

Ofgem has created a Data and Digital Insights team, which is currently working on a Strategic Change Programme for Data and Digitalisation.

The government and Ofgem are considering the feasibility of localised mapping and planning, to give local decision-makers access to high-quality data which will help inform local strategy.

BEIS, Ofgem, and Innovate UK have also launched a new, independent Energy Digitalisation Taskforce (EDiT), which should recognise barriers, identify new priorities, and provide the basis for future actions.

The government is developing a coordinated asset registration strategy for smaller-scale assets. This should streamline the registration process, and increase the visibility of smaller-scale assets.

Further upcoming projects

The government are funding an Energy Data Visibility Project, to develop an energy data tool to search for published energy data that meets specific requirements.

The Energy Networks Association is developing a National Energy System Map. This will integrate network data and make the information publicly available as a digital map. (Proof of concept due Q4 2021.)

Ofgem and Innovate UK are working in partnership to deliver the new Strategic Innovation Fund. The first funding calls (Q3 2021) will focus on data and digitalisation.

Innovate UK has launched a £3m competition to deliver what it calls Modernising Energy Data Applications.

4. Summary

As mentioned in the introduction, this Strategy and Action Plan is understandably vague. It recognises that energy data is too dispersed, or too hidden, or too low-quality for it to provide the value it should on our journey to net zero.

BEIS and Ofgem, alongside Innovate UK, have kickstarted a number of projects, reports, taskforces, etc., to combat these problems, but the reality is that they are still figuring out what they actually need to do. They understand the need for greater data transparency and exchange, and they understand that digitalisation is the best way to achieve those goals.

Crucially, they also understand that new regulations and better incentives will be needed to encourage innovation. They do not, however, know what this innovation will look like - yet. (Or, if they do, they haven’t yet made the specifics public.) Regardless, this recognition of the problems around energy data, and the attempts to build towards digital solutions, are undoubtedly steps in the right direction.