Oxera responds to Ofgem’s call for input on AI assurance
We welcome Ofgem’s recent call for input on AI assurance. The transition to a net-zero, highly dynamic energy sector relies on the successful integration of AI, and we support the development of a framework that addresses the unique economics, innovation drivers and risks of the energy market.
While our response is tailored to the UK energy market, the principles outlined address foundational challenges of AI governance that are highly relevant across sectors and international jurisdictions grappling with similar algorithmic risks.
The response highlights how sector-specific AI regulation can effectively bridge the gap between technical AI capabilities and real-world market dynamics. Doing so provides market participants with the clarity needed to drive innovation while ensuring appropriate governance.
Concretely, the response focuses on five key areas to shape this future framework:
- Applying an ‘additionality test’ to ensure sector-specific regulation strictly targets unique energy-market risks without duplicating existing cross-economy frameworks;
- Clarifying the allocation of accountability between regulated firms and their third-party AI suppliers;
- Moving beyond static audits to mandate continuous monitoring and outcome-based testing against messy, real-world data;
- Establishing risk-based, quantitative boundaries to replace operationally uncertain qualitative mandates like ‘algorithmic fairness’; and
- Fostering safe innovation through shared testing environments (sandboxes).
An outcome-focused supervisory approach that pairs robust, system-level testing with clear quantitative guidance will be vital to protect consumers, ensure market integrity, and provide the structural certainty required for private investment in the net-zero transition.
Download
Contact
Dr Sebastian Wernicke
PartnerContributors
Related
Download
Related
Options for greater public control in the water sector
Recent years have seen significant debate about the successes and failures of privatisation in UK utilities sectors and, in particular, whether changes in water company ownership would improve public outcomes. While past governments avoided calls to review the ownership model, the landscape has now shifted materially. With the increasing… Read More
Podcasts
AI and fairness: who captures the gains and who is bearing the costs?
Who benefits from AI’s economic value? Much of the discussion around AI focuses on the tasks the technology is replacing. But arguably just as important are the economic questions about competitive advantage: who is capturing the gains, and how widely are they being shared? In this episode of… Read More