With the UK and EU governments setting targets for net-zero emissions and expanding renewable energy consumption, the onus falls on organisations to make these targets a reality by taking appropriate measures for clean energy production and distribution.
However, a closer look at the situation reveals that energy organisations have been slow to undertake this process due to the high risk of changing energy sources.
Moreover, organisations are riddled with complex energy regulatory frameworks that drive up the cost of energy compliance. Furthermore, most regulatory frameworks are strict, placing severe restrictions on what energy firms can do.
All this creates a situation where energy firms are reluctant to take on projects that have long-term potential but incur short-term costs, which makes the goal of net-zero emissions and higher renewable energy use more challenging.
Given this situation facing energy companies, regulators could do more to facilitate innovation within the industry by using national regulatory frameworks governing renewable energy law.
In this blog, we explain what regulators could do to change energy frameworks to encourage innovation and how organisations can benefit from it with regulatory compliance software.
What could regulatory organisations be doing to encourage innovation
Energy regulators could encourage organisations to take more risks by adjusting the regulatory framework through several means. Here are some things we can expect from regulators.
One option is to encourage organisations to perform a social cost-benefit analysis for larger projects, ensuring that societal benefits are accounted for when considering the project.
This would help energy organisations to implement projects with a wider social impact even if they do not have immediate short-term financial incentives. Accounting for social costs and benefits would encourage organisations to be braver in the type of projects they take on.
Moreover, they can account for stakeholder consultation as part of the process of facilitating net-zero emissions and increasing renewable energy consumption. Incorporating project level stakeholders could help organisations consider different options for projects, giving them more options to fuel innovation in the energy industry.
Furthermore, regulatory requirements could mandate the implementation of OPEX-based solutions. Leveraging these solutions would allow organisations to convert these functions into operational expenses that make the previously costly processes more efficient and affordable, reducing the risk of getting into a new project.
Facilitating innovation using regulatory compliance software
With regulatory organisations expected to make significant changes to legislative frameworks, it is crucial for energy organisations to have appropriate platforms and tools to help facilitate innovation. This is where regulatory compliance software becomes critical.
Regulatory compliance software can help organisations facilitate innovation by bridging the gap between the latest financial regulatory updates and internal operations.
Access to the latest updates and the means to incorporate them into internal operations can convert regulatory change management into a more cost-efficient, agile approach, allowing organisations to adapt to the latest updates.
When they have made the relevant updates, the organisation would have integrated the capacity for innovation into regular internal business operations because the latest regulatory updates now encourage innovation.
Furthermore, with regulatory compliance software, organisations can optimise part of their compliance process, effectively reducing the amount of time and money allocated to compliance.
Research indicates that the industry spends over £28 billion annually meeting compliance requirements. With organisations spending a significant amount to implement new regulatory processes. For example, implementing the Fifth Anti-Money Laundering Directive (5MLD) costs organisations three-quarters of a million pounds to implement.
Integrating regulatory compliance software can help organisations reduce the cost of compliance. This is because automating this operation would allow organisations to reduce compliance costs and make it a more cost-effective operation.
Reducing compliance costs can make an organisation undertake more innovative but riskier projects because they no longer see compliance as the obstruction it once was.
Maintaining a balance between regulation and innovation
In the future, we can expect regulators to adjust their regulatory requirements by easing the stringent requirements they have placed on energy organisations in the past. Instead, they will look to fuel innovation by giving organisations more room to change their operations as they see fit.
The purpose behind regulatory changes is to encourage organisations to adopt new methods of clean energy production, consumption, and distribution.
Hence, regulatory compliance software will be critical for most organisations. It will help them reduce the cost of compliance and capture the latest updates, allowing organisations to adjust to a changing regulatory environment.
This would not only prevent compliance fines but also encourage the firm to adopt best practices that can facilitate innovation in the energy supply.