Energy infrastructure and the role of regulation
The Utility Regulator plays a significant role in the regulation of some of Northern Ireland’s critical infrastructure. Understanding how the Utility Regulator operates, and the importance of the work it carries out, is key to explaining how it can play a significant part in enabling Northern Ireland’s future development.
The Utility Regulator is the economic regulator for gas, electricity, water, and sewerage in Northern Ireland. It is an independent non-ministerial government department, which means that it is not part of, or “sponsored” by, any other government department.
The Utility Regulator is, however, accountable to the Northern Ireland Assembly, and it is governed by a publicly appointed board.
The Utility Regulator’s principal statutory duty is to promote the short and long-term interests of Northern Ireland’s gas, electricity, water and sewerage consumers. John French, Chief Executive, explains: “We do this by setting minimum standards for energy and water suppliers. We issue licenses for electricity, gas and water companies operating in Northern Ireland, both network and supply. We conduct price controls for monopolistic electricity, gas and water companies where we scrutinise and challenge their business plans to ensure that end prices for consumers reflect efficient costs and reasonable levels of profitability. We promote competition in energy and we are jointly responsible for the regulation of the wholesale single electricity market in Ireland.”
The Utility Regulator can only do what legislation empowers it to do. French continues: “The Utility Regulator is a ‘creature of statute’ – we can only do the things that we are empowered to do by the relevant legislation. Our role is defined by:
- The Energy (NI) Order 2003: This sets out the objectives of the Utility Regulator in relation to electricity and gas.
- The Electricity (NI) Order 1992: This sets out our functions in electricity.
- The Electricity (Single Wholesale Market) (Northern Ireland) Order 2007: This sets out the arrangements under which the Utility Regulator and its counterpart in the Republic of Ireland are jointly responsible for the regulation of the single wholesale electricity market on the island of Ireland.
- The Gas (NI) Order 1996: This sets out our functions in gas.
- Water and Sewerage Services (Northern Ireland) Order 2006: This sets out our role in terms of water and sewerage.”
French summarises: “To be a successful regulator it is essential that there is a clear legislative mandate, we are democratically accountable, we follow due process, we have the knowledge and skills to exercise expert judgement, and we are effective and produce the desired impact of our legislative mandate.”
How can regulation enable Northern Ireland’s vision for the future?
Two major factors impact Northern Ireland’s energy future: climate change and energy strategy and action.
The Climate Change Act (Northern Ireland) 2022 (Act) sets a target of an at least 100 per cent reduction in net zero greenhouse gas emissions by 2050.
The Department for the Economy’s Energy Strategy for Northern Ireland, “The Path to Net Zero”, states that energy accounts for almost 60 per cent of Northern Ireland’s greenhouse gas emissions.
“Northern Ireland has an abundance of renewable energy options and the Utility Regulator is well placed, subject to legislation, to step up and enable Northern Ireland’s future renewable energy infrastructure.”
In this context, the Energy Strategy Action Plan requires Northern Ireland to double its renewable energy generating capacity in order to meet new demands, including heating homes and powering vehicles. The Action Plan goes on to set out an initial focus on established renewables, such as onshore wind, offshore wind, solar PV and lithium batteries, but also references hydrogen as a substantial opportunity for Northern Ireland.
French explains: “Unlike Ofgem, we do not have a statutory duty to support the Government in meeting its legal obligation to get to net zero by 2050. However, we continue to work with the Northern Ireland government through our existing statutory powers to support the implementation of the Executive’s Energy Strategy and long-term water strategy. And, very importantly, our own Corporate Strategy looks directly at how we can protect consumers on the way to net zero.”
He continues: “Our Corporate Strategy is focused on four objectives, summarised as follows:
- Corporate objective 1 – Supporting the just transition to net zero:
We will support the statutory targets within the Climate Change Act 2022 and related strategies (energy, fuel poverty, water etc.), enabling the achievement of the statutory 80 per cent renewables target by 2030 by ensuring that Just Transition principles are inbuilt in our analysis and decision making. - Corporate objective 2 – Securing our energy supply and water and wastewater services: We will ensure the efficient and resilient operation of utility companies in Northern Ireland to ensure delivery of reliable energy supplies to homes and businesses. More market interconnection with GB and Ireland and continuing work with Irish regulator through the Single Electricity Market will help deliver net zero goals.
- Corporate objective 3 – Enabling best in class energy and water companies: Through our analysis, monitoring and decision-making, we will continue to ensure that energy and water companies are fully compliant and that they compare with the best. Our price control process will continue to enable long-term investment and value for money that drives innovation and benefits consumers.
- Corporate objective 4 – Providing the highest level of consumer service and protection: Through new consumer protection frameworks, increased reporting and increased data capabilities we will enable a measurable improvement in customer service.”
What is in scope for future energy infrastructure?
When it comes to renewable energy, what has happened so far and what is in scope going forward for Northern Ireland’s energy infrastructure?
“Well, to date,” French explains, “we continue to work closely with the gas industry and in November 2023 a trial in Dungannon saw the successful injection of biomethane into the natural gas network.”
“Through our price control process we have enabled £2.23 billion investment in Northern Ireland’s electricity network (RP7) over the next six years. Over 40 per cent of Northern Ireland’s electricity is now renewable (wind and solar). There is a long way to go to achieve 80 per cent by 2030 and the electricity network needs to undergo radical change to deliver.”
“Currently, the Utility Regulator sits on numerous steering groups and working groups including offshore wind, hydrogen, district heating, geothermal, smart meters, batteries and interconnection, amongst others. All are in scope for future energy, but some will require additional legislation in order to move forward.”
French concludes: “There is no doubt that Northern Ireland has an abundance of renewable energy options and the Utility Regulator is well placed, subject to legislation, to step up and enable Northern Ireland’s future renewable energy infrastructure.”
