Event: Utility Week Energy Summit

The energy industry faces numerous challenges as it seeks to balance the demands of supply security, sustainability and affordability – and all of them must be tackled. By Tom Grimwood.

One of the most striking impressions left by the Utility Week Energy Summit, held in Westminster on 29 June, was the sheer scale and number of challenges facing the industry in transforming itself to meet the energy trilemma.

A common topic for discussion throughout the day was how to ensure security of supplies as fossil fuels are phased out of the energy mix and intermittent renewables become the driving force in the power sector.

Batteries, demand-side response and interconnectors have received much fanfare in recent years as key solutions to the conundrum, but UK Energy Research Centre chair Keith MacLean had a warning for delegates.

“Batteries do have their place, but in replacing fossil fuel storage for the purposes that we’re used to having it, they are not a solution,” he said.

MacLean explained that the reliable operation of a power system relying entirely on wind and solar for generation would require a whopping 15,000GWh of annual storage capacity. At current prices, the cost of providing this with batteries would be £15 trillion. He petitioned the industry and government to “redouble” their efforts to develop green fuels such as hydrogen and biomethane.

Tom Glover, chief commercial officer for supply and trading at RWE, joined Maclean in raising concerns over the ability of interconnectors to provide reliable capacity. He said their modelling indicated that the “portfolio effect” of creating a highly interconnected energy system across Europe could be as little as 4GW.

Laura Sandys, a former Tory MP and now chief executive of Challenging Ideas, called for public debate about how much Britain as a country is willing to pay to avoid blackouts.

She questioned the wisdom in trying to recreate the “perfect system” we currently have with regards to security of supply, asking whether the power system risks becoming “over-engineered” and excessively expensive in future. “I’m not answering the question but I think it needs to be posed.”

Sandys also called for discussion of how the costs are paid; whether by consumers through energy bills or by taxpayers from the public purse. How to fund the transformation of the energy system was another regular talking point during the summit.

MacLean said that although it has been “convenient” to pay via energy bills, they are becoming so high that “we can’t continue to do that without raising really serious issues for social equity and fuel poverty”. He chastised policymakers for loading costs on to bills and then calling utilities “nasty names” when they inevitably rise. Labour shadow energy minister Alan Whitehead said the costs should “clearly” be paid through general taxation.

Sandys suggested that dealing with fuel poverty should not be considered the responsibility of utilities and should be tackled as part of wider government policy rather energy policy alone.

Speakers raised concerns over the role of government in the transformation of the energy system and the absence of clarity over the direction of policy. Uniper chairman for the UK, Felix Lerch, said he worried about a lack of political continuity due to a “revolving door” of energy ministers over the past few years. He said investors would be discouraged by the implication by that energy policy is “not a priority” for government.

MacLean warned that the government had increased its power over the energy industry without building up the necessary institutional memory and competence needed to wield it effectively. At the same time, he said, policymakers continue to operate under the “pretence” that they will let the market decide but “always intervene when it picks something they don’t like”.

Whitehead noted the repeated delays to key policy decisions such as the clean growth plan and the resulting lack of visibility for investors. “Renewables, at the moment, are going off a cliff in 2020 in terms of the fact that the levy control framework has not been sorted out.”

Rachel Cooper, head of energy storage at the Department for Business, Energy and Industrial Strategy, argued that “consistent advice from industry” has helped maintain the direction of policy despite the “huge disruption” caused by recent political turmoil and the high turnover of ministers.

One of the noticeable gaps in policy concerns the decarbonisation of heating, which Ofgem chief executive Dermot Nolan described as the biggest challenge facing the energy industry over the next 30 years. John Morea, chief executive of SGN, told delegates that multiple demonstration projects were needed to provide an “evidence base” for long-term decisions.

This was just the tip of the iceberg, and from Brexit and the role of nuclear to shale gas and carbon capture and storage, speakers touched on many other topics over the course of Summit.

Utility Week will be exploring these themes in greater depth in a series of features over the coming weeks and months.