Taking Britain to net zero: Ofgem’s decarbonisation action plan

On 3 February Ofgem, the energy regulator for Great Britain, published its decarbonisation action plan to support the UK in achieving net zero carbon emissions by 2050. Outlining Ofgem’s role in facilitating decarbonisation, the plan lists the trade-offs faced and nine actions that the regulator will take. We look at what the plan says and its implications

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How could ownership affect performance?

In the decade since the global financial crisis, Western Europe has seen increased calls for changes in the ownership of essential service assets. For example, during the UK’s 2019 general election, the Labour Party campaigned for the nationalisation of key strategic industries such as energy, water and telecoms. We ask how ownership can affect operational incentives and outcomes, and explore the implications for current ownership models and independent regulation

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RIIO-ED2 framework decision

This note summarises the key aspects of the RIIO-ED2 framework decision; outlines the key strategic issues facing the sector that Ofgem is considering; and provides a commentary on what this means for companies, based on Oxera’s initial review of the document.

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Political control of state-owned utilities in the UK

The UK Labour Party’s proposal to nationalise core utilities has renewed debate about whether nationalisation is a good or a bad thing. Tim Tutton, Associate at the Centre for Competition Policy (University of East Anglia, UK), takes a different approach. Focusing on the issue of political control, he explores whether lessons can be learned—from both the nationalised era and the privatised era—and how any future (potential) nationalisations might be made to work more effectively than in the past

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Risky business: political uncertainty and the cost of capital for regulated firms

Statements by politicians about nationalising or intervening in the functioning of regulated industries have attracted substantial media attention in recent times, leading to an increase in political and regulatory risk for regulated industries. A case study focusing on National Grid, the energy transmission company in the UK, suggests that increased political and regulatory risk can affect the valuation of regulated utilities through a combination of lower expected cash flows and a higher cost of capital

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State aid spotlight on tax: the General Court’s judgments on Fiat and Starbucks

In 2015, the European Commission ordered Starbucks and Fiat to each pay €20m–€30m in the Netherlands and Luxembourg, respectively, as their tax arrangements were found to constitute illegal state aid. On 24 September 2019, the General Court upheld the Commission’s Fiat decision, but annulled the Starbucks decision. What were the key economic issues in these cases, and what are the implications of the judgments?

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Blinded by the sun: the future of renewables disputes

The deployment of renewable energy technologies looks set to continue to grow. However, it can be challenging to integrate these technologies into existing policy frameworks and energy systems. Renewables have also been prone to legal disputes, as illustrated by recent cases brought against the Spanish government. As such disputes become more commonplace, a range of economic, financial and public policy issues will need to be examined

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Gas markets, regulation and politics: implications of the energy transition

Until recently, gas was seen in Europe as a complement to renewable energy—i.e. a cleaner (albeit costlier) alternative to coal. Since 2017, opinions have been changing, primarily as a result of stronger evidence on the pace of climate change. Nonetheless, as Sir Philip Lowe, Oxera Senior Adviser, explains, gas will continue to have an important role—albeit this is contingent on future innovation and the roll-out of gas investment, both of which in turn depend on politics and market regulation

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Death of an old star…evolution of a new one?

‘Superstar firms’ are increasingly dominating markets. Network effects may consolidate the position of these firms, but they can also help new entrants to undermine them. In some markets, network effects will both dampen competition ‘within’ the market and spur competition ‘for’ the market. Francesca Arduini, Oxera Analyst, argues that we can employ the framework of evolutionary game theory to derive four key policy insights into this topic

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Nuclear in the UK’s energy mix? The core question

Choosing the right energy mix is a hot topic for many countries around the world. In the UK, for example, the government appears committed to supporting new nuclear capacity; however, sceptics point to the declining cost of renewables as a reason why this commitment may be misplaced. What is the economic case for new nuclear capacity, given the objectives of security of supply, affordability, and decarbonisation?

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The evolution of UK energy regulation

As the UK energy sector undergoes rapid technological transformation, the tools and frameworks that are being used by policymakers and regulators in the sector are also evolving. Ofgem’s RIIO2 network price control reviews are underway, with a framework decision published at the end of July and sector-specific methodology consultations due to be published by December 2018.

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