Greg Clark has unveiled reviews of network codes and the retail market in a landmark speech which included the claim that the so-called energy “trilemma” is dead.
The speech, delivered at the Institute of Directors late yesterday afternoon, laid out the BEIS (business, energy and industrial strategy) secretary of state’s long-awaited response to the Helm review of energy policy.
The speech paves the way for an upcoming policy paper on energy, which will be published in the coming weeks and a White Paper “early next year”.
Clark’s core message was that the “trilemma”, the perceived tensions between the government’s three objectives of ensuring “green, cheap and secure” energy, is “well and truly over”.
He said the plunging price of renewable electricity generation means that it is possible that “low-carbon power actually can subtract from consumer bills”.
Clark added: “Moving beyond subsidy does not mean to say we are reverting to the dirty, polluting world of the past, it is one where green energy can be cheap energy.”
Addressing the conclusions of Helm’s review, which was submitted to the government just over a year ago, Clark outlined the four key principles that should underpin the transition to a subsidy free and low carbon energy system.
These are:
- Market mechanisms wherever possible to take full advantage of innovation and competition.
- Government intervening to insure against shortfalls in supply and maintain options.
- An agile and responsive system of energy regulation to reap the opportunities of digitalisation.
- Ensuring that all consumers should pay a fair share of system costs.
Clark said that as part of a push to introduce a more agile regulatory system, the government and Ofgem will launch a full review into industry codes and code governance, which will be followed up by legislation if required.
He said: “The system of industry code self-regulation has, over the long term, meant less innovation, less competition, and ultimately higher prices for consumers.
“Incumbents have often been able to put their interests ahead of those entrants or consumers. We need to find a solution that harnesses industry knowledge of the system without handing over the keys to insiders.”
The government will also be initiating an Engineering Standards Review to ensure that existing network technical standards are up to date for the next phase of the energy system’s development, Clark said: “Armed with data and new technologies, it may well turn out that there are new ways of operating and controlling the networks that are safe and efficient but that are not allowed under old regulations that now contain now defunct technology assumptions.
And he said that Ofgem and BEIS will carry out a review of the future of the retail market.
This exercise would be carried out alongside a review of supply licenses by the regulator, which is designed to address the eroding distinctions between suppliers and distributors.
He said BEIS will “shortly” announce the parameters for the next Contract for Difference auction (CfD) round next May and an action plan setting out the government’s approach to large scale deployment of carbon capture use and storage (CCUS) in the 2030s at an upcoming event in Edinburgh.
But Clark rejected Helm’s proposal to exempt industry from all historical policy costs on the grounds that such a move would add £1.5 billion onto household bills.
Responding to the speech, RenewableUK expressed bafflement that Clark had not acknowledged the contribution that onshore wind could make to providing cheap, low-carbon power.
Emma Pinchbeck, the body’s executive director, said: “The secretary of state is right that we’re in a new age of electricity, driven by low-cost renewables and innovative smart systems.
“With so much of his speech focused on energy costs and cheap renewables, it is inexplicable that the secretary of state made no mention of the lowest cost source of power we have in the UK, onshore wind. It’s nearly a year since ministers told Parliament that the department is working on plans to bring forward new onshore wind but, sadly, we’ve seen nothing new from government since then.”
But Dr Nina Skorupska CBE, chief executive of the Renewable Energy Association, said it was welcome that Clark had found time for the speech during what had been a day of high political drama at Westminster.
She said: “Amid all the urgent items on the secretary of state’s desk, it was reassuring to hear him talk about the importance of the power sector to the UK economy, and the contribution renewables can make.
“The most welcome part of the speech was the end of the trilemma and the unambiguous acknowledgement that renewables are cheap and will bring down consumers bills. We look forward to seeing the white paper and working with government to drive forward deployment of a smarter, cheaper and cleaner energy market.”