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Zero Carbon Rugeley - policy findings and summary

Work Package 19 - Deliverable 4

Olly Frankland, senior project manager, Regen

What are the key findings and policy recommendations from Zero Carbon Rugeley?


Over 34 months, Regen has led the policy and regulatory working package (WP19) of the Zero Carbon Rugeley (ZCR) project - an innovative energy system design for a town-wide Smart Local Energy System (SLES) at Rugeley, Staffordshire - as part of the wider Prospering from the Energy Revolution portfolio of projects. 


The work package has tracked the energy policy changes in the GB energy market that are most impactful to SLES design projects such as this one, collating monthly summaries in a worksheet, summarising this over time using a ZCR energy policy timeline, running seven partner workshops and representing the project in various internal and external events.

Key findings

Click the tabs below to see the outline of our key findings from the policy and regulatory working package (WP19).

  • Policy change 

    Policy Change and Uncertainty


    The project has experienced an unusually high level of policy changes, causing significant uncertainty that affects businesses and other organisations. For instance, the Electricity Generator Levy was initially introduced with limited detail and confirmed only after months of uncertainty. Such broad, fast-tracked policy interventions have increased the risk premium used by investors and, in some cases, undermined business models. A stable policy environment is crucial for the development and delivery of SLES projects.

  • Policy tracking

    The Importance of Policy Tracking


    Energy policy tracking is critical to inform approaches and adapt business models. As the pace of policy change has accelerated, it is increasingly important to understand their impacts on different aspects and work packages of SLES projects. This work is time intensive but helps to ensure that policy risks are understood and that new areas of opportunity are identified and shared. For instance, the Balancing and Settlement Code change P375 was identified as a potential revenue opportunity in the project.

  • SLES informed plans

    SLES-Informed Decarbonisation Plans


    Good relationships with local authority partners and other stakeholders were built and maintained over the project lifetime. One of the main outcomes was using the SLES system design and data analysis to inform local decarbonisation plans. However, there is a need for more clarity on the role of SLES and Local Area Energy Planning (LAEP) assessments and how they interact with decarbonisation action plans at the local authority level. Moreover, delivery mechanisms of the recommended actions in decarbonisation plans need to be defined.

Top three policy barriers and proposed solutions

As well as the key findings, the work package identified a long list of policy barriers and solutions to help enable SLES project delivery. 


Click the tabs below to investigate the top three energy policy barriers and proposed solutions focused on local energy governance.

  • Short-term focus on energy security and delays in crucial energy system reforms

    The focus on near-term energy security has been the overriding force in energy policy development since the energy price crisis took hold of our energy markets. As the energy price crisis eases, there is a need to refocus on delivering planned but delayed market reforms such as energy retail market reform and market-wide half-hourly settlement. These building blocks are crucial for any SLES project to succeed.


    Current relevant policy
    		Potential solutions and responsible parties
    		Difficulty to implement
    		Impact on ZCR

    Energy Security Strategy


    Electricity Networks Strategic Framework

     
    Review of Electricity Market Arrangements (REMA)



    Ofgem and DESNZ to refocus efforts and accelerate delivering the crucial energy market reforms that are delayed or currently under review.


    As the energy price crisis eases, there is a need to refocus on delivering planned but delayed market reforms such as energy retail market reform and market-wide half-hourly settlement. In addition, confirming the future role of the energy retail company in the future energy system in GB is a critical priority.


    Further clarity on the longer-term reforms included in the Review of Electricity Market Arrangements (REMA) is also needed. A faster narrowing of options would help reduce uncertainty in the short term.


    Further decisions need to be made to deliver crucial market reforms needed to help SLES project delivery.


    DESNZ, Ofgem
    		High – consultations and primary legislation which takes time.

    High –

     Medium term

    More policy certainty and reformed markets.

  • Lack of ‘whole system’ policy focus at a national and local level

    For the ZCR project there was a clear “whole system” energy approach, working across all the vectors to assess the right energy system design from the start and it became clear very early that most other stakeholders we engaged with do not share the same approach. There are still a number of silos in how the local energy systems are governed and managed. This is particularly evident across the electricity and gas distribution system planning and management, one of the crucial aspects of any SLES project. Local energy system planning and the case for change in terms of local energy institutions and governance have been clearly outlined in a recent consultation (and the previous call for input) from Ofgem.


    And while the delivery of a publicly owned Future System Operator with new whole system functions (some of gas system operator) and some regional functions are planned, there is still a lack of whole system focus at the national and local level.


    Current relevant policy
    		Potential solutions and responsible parties
    		Difficulty to implement
    		Impact on ZCR

    Energy Bill


    Future System Operator development


    Future of local energy institutions and governance arrangements consultation (Ofgem)



    Engage all government departments in “whole system” approach to decarbonisation planning, accelerate Ofgem reforms for greater whole system thinking and coordination, and ensure this is decentralised with sufficient funding for effective engagement.


    All government departments working across housing, transport and energy need to be working to embed whole system energy solutions and decarbonisation planning into their projects, procurement/funding and policies.


    Ofgem need to prioritise the delivery of a solution that ensures a greater whole system thinking and coordination, engages local stakeholders and improves governance arrangements. The proposed Regional System Planner role and implementation of the publicly owned Future System Operator is one approach being investigated. In any solution there must be a clear focus on locally decentralised solutions in these new entities to avoid the historic bias towards the larger centralised solutions and assets.


    These organisations will need sufficient resources to work effectively with SLES projects, local authorities, and wider stakeholders/communities to deliver place based whole energy solutions. And local stakeholders should also be funded to engage in an integrated whole system energy plan.


    DESNZ, Ofgem, National Grid ESO
    		Medium – consultations and primary legislation required which takes time.

    High –

     Long term

    Improved governance arrangements and joined up approach for whole system energy solutions gives more certainty to funders and business models.

  • Less local authority policy resources and capability in non-urban locations

    In the ZCR project, the engagement locally was mainly with Cannock Chase District Council. This local authority does not have very many resources in the climate and energy sectors, compared to larger authorities in urban areas, as they rightly have to focus on the delivery of statutory duties. Cannock Chase DC declared a climate emergency in 2019 and “committed to the vision of carbon neutrality by 2030 at the latest". This included hiring more staff and increasing capacity. They have a costed net zero action plan developed in 2022 by Aecom,

    which outlines the need for approx. £21 million of resources costs and capital costs of £4.7 billion across the council area. This is in comparison with a total revenue budget for 2022/23 of £12.4 million. This led to the Council Cabinet, “recommending that Cannock Chase Council modifies its 2030 carbon neutral target to become an organisational target rather than a commitment for the whole District.” A significant reduction in ambition.


    The mismatch between ambition versus the ability to deliver (resources, funding, skills) is not just evident in Cannock Chase DC, but it is particularly stark in a non-urban location, such as Rugeley. Compared with budgets and resources available in energy teams in urban centres such as the West Midlands Combined Authority or Greater Manchester Combined Authority. And while the net zero hubs are there to provide support, and collaborative work across authority boundaries is already happening, there remains a lack of local authority resources and capability, and this impacts the ability to deliver a SLES project.


    Current relevant policy
    		Potential solutions and responsible parties
    		Difficulty to implement
    		Impact on ZCR

    Devolution deals


    Energy Security Strategy




    Prioritise the review of statutory responsibilities of local authorities in terms of net zero delivery and look to deliver long term non-competitive grant funding for project delivery. 


    Additional statutory duties (e.g., acting on net zero and delivering a decarbonisation plan) are needed to ensure local authorities prioritise net zero delivery. A net zero duty would fit alongside those additional responsibilities already proposed such as heat network zoning and EV infrastructure provision.


    Alongside these new responsibilities, long-term non-competitive allocation of central funding is needed to help build capabilities across local authorities and the net zero hubs. Devolution has a role here, and the recent devolution deal in the West Midlands is due to pilot how a more devolved allocated funding mechanism might work in practice from 2025.



    DESNZ, DLUHC, Ofgem

    		Medium – consultations and primary legislation required which takes time.

    High –

     Long term

    More capability and budget available from local authorities to engage with ZCR project and help deliver new projects.

About Zero Carbon Rugeley

The Smart Local Energy Systems (SLES) programme for Rugeley town aims to identify a way forward for an optimised suite of energy and services solutions which can offer a more localised control than the standard energy company model. This output is part of the Zero Carbon Rugeley (ZCR) project which has been extended to include a new implementation phase up to February 2023, named implementation ZCR or iZCR. The project webpage provides an overview of the project.

Find out more by visiting the project website and project outputs.


Regen led on the policy and regulation work package (WP9 in ZCR & WP19 in iZCR) and inputted to several other work packages.

Including a summary worksheet, ZCR energy policy timeline, summary report and seven partner policy workshops.


This piece of work is funded by the Prospering from the Energy Revolution challenge funds run by the UKRI and Innovate UK.


About Regen

Regen is an independent centre of energy expertise with a mission to accelerate the transition to a zero-carbon energy system. We have nearly 20 years’ experience in transforming the energy system for net zero and delivering expert advice and market insight on the systemic challenges of decarbonising power, heat, and transport.


Regen is also a membership organisation, managing the Regen members network and the Electricity Storage Network (ESN) – the voice of the UK storage industry. We have over 150 members who share our mission, including clean energy developers, businesses, local authorities, community energy groups, academic institutions, and research organisations across the energy sector.


Find out more by visiting our website.