Savings of more than £100m could be achieved over the next 20 years by streamlining the administration of energy schemes such as the feed-in tariffs and capacity market, a new report has found.
Rationalisation of the many organisations now involved could also reduce the red tape burden for industry, according to the KPMG report.
The independent report – Future Delivery Options for GB Energy Administration – was commissioned by Gemserv, a service provider to the energy sector and highlights the growing complexity of schemes around policy areas such as support for renewables and energy efficiency.
There are now around 30 bodies involved in energy policy and market administration including the Environment Agency, Ofgem E-Serve and the Low Carbon Contracts Company with costs totalling over £500m a year.
The report says that the current drive to find savings across the public sector means streamlining service delivery systems is a possible way to help meet the government deficit reduction plans, while also decreasing the regulatory burden on the private sector.
Robert Hull, Director, Power & Utilities for KPMG, said:
“The energy delivery landscape is likely to face many challenges in future years as Government policy continues to have to adapt to meet the challenges of security of supply, affordability and decarbonisation in the most efficient and effective way.
“Policy support costs are already significant and are growing – the choice of the future administrative delivery model is an important one.”
KPMG’s analysis highlights examples across the public sector where savings in the order of 20% have been achieved through private sector involvement. The £100m-plus savings in energy sector administration over the next 20 years identified in the report is through greater efficiencies in areas such as registration and payment processing.
However the report also points out that public sector models can also offer benefits in particular situations where Government control of activities is more important than efficiency savings.
The report compares a public sector Non Departmental Public Body (NDPB) delivery model against a private sector Government Owned Contractor Operated (GoCo) model to identify the advantages and disadvantages of applying each model to energy administration delivery.
“When comparing these models, the report concludes that on balance the private sector model is likely to achieve a superior long term value for money outcome,” the report concludes.