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— MPs and industry figures have called on the government to clarify its plans for electricity market reform.
— The political debate on energy and climate has gotten nastier in recent weeks. With an election looming, is this the shape of things to come?
— We’ve got exclusive polling which provides insights into how the public feels about Biden-style state spending on the green transition.
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REMA WARNING: MPs on the influential Public Accounts Committee (PAC) have told the Department for Energy Security and Net Zero (DESNZ) to set out a clear timeline for long-promised reforms of the electricity market — or risk energy bills spiking again. The committee said today that it is “very concerned” by the department’s “lack of urgency” in addressing issues in energy markets, as part of its wider investigation into the government’s energy bills support scheme.
Shaking up the market: The government opened a consultation on market reform last July — the Review of Electricity Market Arrangements (REMA) — which included proposals to decouple the price of gas and electricity and pass on the lower cost of renewables to consumers. The question of whether to introduce localized — or nodal — pricing is also in the (rather complex) mix.
Happy anniversary: In REMA, the government pledged to narrow down options for reform by 2023 and start work soon after. It later published a full set of responses. But one year on from launch, we are still waiting for further updates.
WHAT ABOUT NET ZERO? The U.K. has also set strict net zero targets, including the interim target of decarbonizing the electricity system by 2035. Cheaper-to-run renewables — think wind and solar power — are set to become a more significant part of the electricity system. As a result, industry leaders argue that reforming the electricity market is needed not just to keep bills down but so that the U.K. can meet its net zero ambitions.
Goals: “We set ourselves some really important goals of decarbonizing the grid by 2035,” Michael Chesser, an economist and market manager at the trade body RenewableUK, told MECUK. “Especially now, in the context of the U.S. and the Inflation Reduction Act and response from Europe, it’s important to get the market set up right so that it continues to drive investment into the U.K.”
Slow and steady wins the day: “There is a need to focus and make sure we get this right because it is setting up an electricity market for a net zero system,” Chesser added. “We can’t really rush through this. We really need to take our time and consider the implications of any major reforms we’re implementing.”
AGREED: Dhara Vyas, deputy chief executive of industry trade association EnergyUK, told MECUK that rushing through reforms would come with “unintended consequences,” such as pushing up prices in other areas of the market.
INVESTORS WEIGH IN: In the meantime, investors say they want clarity. “What we have seen over the last few years in the U.K., sadly, is an absence of policy,” said Alex O’Cinneide, CEO and founder of Gore Street Capital, a renewable energy investment company. The long wait for news on REMA has “basically created uncertainty in the marketplace,” he added, so “investors into the wholesale energy system in the U.K. have really no understanding of what might happen in terms of that policy development.”
COMMITTEE CHIMES: Labour MP Meg Hillier, who chairs the PAC, told MECUK that the government needed to be “really focused” on market reform.“We really want to make sure they’re very, very clear about the timetable for it,” she said.
TIGHT-LIPPED: We asked DESNZ about progress on the reforms. But they only wanted to discuss the committee’s findings on the government’s broader energy package, saying they were “proud” to have delivered the support.
NO GRID NATIONALIZATION, SAYS MILIBAND: Labour may want to create a national energy company and throw a whole load of cash at net zero — but they’ve got no plans bring the U.K.’s electricity grid infrastructure back under public ownership, Ed Miliband said Thursday.
Not in the plan: Asked at the Global Offshore Wind conference in London about Labour’s stance on the issue, the shadow climate and net zero secretary said: “We’re not planning to do that. Our priority is to drive forward with this renewable revolution that we need. We don’t want to be spending tens of billions of public money on trying to compensate shareholders of National Grid or whoever it is.”
Reminder: The National Grid was privatized back in the 1990s and is now split between the private company National Grid, which is responsible for much of the country’s grid infrastructure, and the legally separate National Grid ESO, which manages and balances electricity supply and leads on strategic planning of the grid. The latter will soon be effectively nationalized under the Energy Bill and become the ‘Future System Operator’ (still with me?). But Miliband has now nixed any prospect of the big privatized bit of National Grid coming back into state hands.
WHO’S IN CHARGE OF NET ZERO? Whitehall is “more joined up” on net zero than on any other issue, DESNZ Permanent Secretary Jeremy Pocklington told MPs on the Public Accounts Committee during his grilling Thursday. The claim came in response to a warning from committee chair Meg Hillier that net zero policies are so vast in scope that there was a risk of “silo-ing” key projects to disparate parts of Whitehall.
Step back: The exchange hit on one of the key questions for the government in its net zero mission. How can Whitehall produce coherent policy on something that touches almost all parts of the economy and society? DESNZ is supposed to act as a coordinating department, but the biggest slice of U.K. emissions by sector is transport — and responsibility for electric vehicle infrastructure sits with the Transport Department. Ditto agricultural emissions and DEFRA, or MHCLG’s oversight of housing and planning.
Chief Adviser for Net Zero? PAC member Geoffrey Clifton-Brown suggested that we need a cross-departmental “civil servant in charge” of net zero, similar to the Chief Scientific Adviser.
Shapps is your man: Pocklington said that while some might argue for bringing DESNZ “together with transport, together with the wider science system, together with oversight of land as well,” such a department would be simply “too big.” He added that secretary of state Grant Shapps was the already the person in government playing the role of cross-departmental coordinator.
SPEAKING OF TRANSPORT: The Conservative chair of the Commons transport committee, Iain Stewart, has said he’s “disappointed” with the government’s response to the committee’s report on decarbonizing fuel supplies. In a letter to Transport Secretary Mark Harper, Stewart complained that the government had not been clear enough about how they plan to cut emissions from “the large number of legacy petrol and diesel-powered vehicles that will remain on the road following the 2030 and 2035 bans on the sale of new petrol and diesel cars and vans.”
NO 10 ON ROSEBANK: Responding to MECUK’s interview with John Gummer Thursday, Rishi Sunak’s official spokesperson declined to comment on the upcoming Rosebank decision. They said: “Our position on getting to net zero shows that we are ahead of most economies … When it comes to the use of oil and gas, not just the U.K. but other countries have recognized it as an important transition fuel.”
WINTER OUTLOOK: Power supply this winter looks more secure than it did last year, National Grid ESO said Thursday in its “early view of winter outlook.” However it acknowledged “continued risks and uncertainties” linked to the Russian invasion of Ukraine — including potential effects on gas supply and the potential for EU shortages impacting British power supply. To avoid any potential for blackouts, last year’s “demand flexibility service,” which incentivized customers to reduce electricity use at peak times, will run again.
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BURNHAM AT THE LAB: Greater Manchester Mayor Andy Burnham will be at Siemens Energy’s HQ in Didsbury, Manchester this morning to open a new “high-tech function performance testing lab” — which sounds both vague and pretty cool. Siemens is working on several electricity grid infrastructure projects in the U.K. and the firm has taken on 100 new staff at its site in Manchester.
IT’S GETTING HOT IN HERE: Anyone else noticed that the political debate on all things energy and climate has heated up in recent weeks? Us too.
What’s going on? With little more than a year to go until a likely general election, the contours of the net zero debate are starting to come into view. Labour’s pledge to ban new oil and gas developments in the North Sea marks a clear dividing line with the Tories — and it’s one that Energy Secretary Grant Shapps and Prime Minister Rishi Sunak have enthusiastically seized on.
Who pays? Throw in a clear ideological divide between Labour’s big state-spending vision of the green transition, inspired by Bidenomics, and the Conservatives’ skepticism about any major subsidy push and you have the outline of two very different stalls going into the election. Read more from Charlie here.
Tone and tenor: But it’s not just what they’re saying, it’s the way they’re saying it. Shapps told POLITICO that Labour’s oil and gas plan is a no less than a “clear and present danger to the country” that will leave it more exposed to the likes of Vladimir Putin.
Chill: Shaun Spiers, executive director of the Green Alliance, said the “recent change in tone on the environment from some Conservative politicians is worrying.” “Of course we should debate the future of North Sea oil and gas and the role of government investment in the green transition,” he added. “But responsible politicians should be careful not to undermine the case for climate action, and the cross-party consensus that has made the U.K. a world leader on the climate.”
To be fair … Miliband plays the Putin card too, telling POLITICO that in fact it is “thirteen years of failed Tory energy policy” that has “made Britain vulnerable to fossil fuel dictators like Putin.”
Step back: Joss Garman, Executive Director at the European Climate Foundation, said that the arguments brewing in the U.K. have been a long time coming. “Right across the world governments are grappling with difficult questions about how quickly new clean technologies can be rolled out, who should pay to make that happen, and how to seize as much of the economic opportunities from them as possible … It was always inevitable that with an election looming this debate would hot up in the U.K. too.”
BRITS BACK GREEN SPENDING: The debate about public spending on the green transition has well and truly arrived on these shores — but how do the public feel? New polling from Opinium and the Energy and Climate Intelligence Unit (ECIU), shared exclusively with MECUK, suggests there’s significant support for the government putting big money behind net zero goals.
Growth opportunity: The poll of 2,150 people, carried out earlier this month, found that “renewable energy and green technology” is the sector seen as most likely to create long-term growth for the U.K. economy — 47 percent selected it as an option, while 32 percent picked manufacturing and 26 percent financial services.
Up for an Inflation Reduction Act: Asked to choose between two statements — one supportive of the U.K. matching “the ambition” of the U.S. and China on renewable energy and one warning that spending like the U.S. and China was “not a good use of public money” — respondents backed the first statement 48 percent to 19 percent.
Green Prosperity Plan verdict: Labour’s proposal to spend £28 billion per year in pursuit of net zero goals also got more support than opposition, with 45 percent agreeing with a statement arguing that the plan was necessary and would “create much needed jobs, growth, and energy security” versus 32 percent who backed a statement arguing the plan was “reckless” and would “push up government borrowing, deficits, and inflation.”
Backing batteries: Respondents were also supportive of a £500 million incentive package for Jaguar Land Rover, offered by the government to persuade them to build a battery factory in the U.K. 53 percent backed the plan versus 27 percent who opposed.
Not rot: “The global race towards net zero is now hotting up with the U.S. and EU pushing ahead with tax cuts and incentives,” said Peter Chalkley, Director of the ECIU. “With the list of companies switching investments to the other side of the Atlantic growing, will the U.K.’s response be bold enough to stop the rot?”
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