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Discussions of how the next potential leader of the Conservative Party will address the energy crisis and net zero dominate news in our weekly round-up of the stories from the weekend with Penny Mordaunt coming out as the only candidate to set out a green agenda. Water firms are criticised for asking customers to use water carefully as the country braces for the hottest day of the year.
Penny Mordaunt pledges to create ‘millions of green jobs’ if elected Tory leader
Penny Mordaunt has told Conservative critics of net zero that “environmentalism and conservatism go hand in hand” as she vowed to create “millions of green jobs” if elected leader.
The MP for Portsmouth North is the only Tory leadership candidate so far to properly set out views on climate change and the environment.
She made the intervention after a fierce debate over climate targets in her party, with two of the remaining contenders, Kemi Badenoch and Tom Tugendhat, critical of domestic carbon reduction pledges.
There have been fears that a new leader will ditch the controversial replacement of the EU’s farming subsidies, with the farming lobby complaining that they do not want to be paid to conserve nature rather than produce food.
Mordaunt has committed to the eco-friendly farming plan, telling the Guardian: “I have pledged to reform EU land subsidies and instead will reward those farmers here at home who champion nature and sustainable management of the countryside.
“We have seen so many farmers already take these steps, but I want to encourage and support those who actively take steps to leave a cleaner, greener environment for the next generation. Sustainable farming for the longer term is an absolutely crucial part of how we, together, can protect our natural world.”
Some of her colleagues, including Steve Baker, the MP for Wycombe who runs the eurosceptic ERG group of Tory MPs, have said the cost of living crisis means the UK needs to increase its domestic production of gas, rather than switch to renewable energy.
Mordaunt said, however: “The net zero transition provides the opportunity to create millions of jobs over the next decade. Fast. Investing in the domestic renewable energy sector reduces the UK’s reliance on fossil fuels like gas, which are exposed to volatile global prices. Low carbon electricity already provides about 50% of the UK’s total generation on average each year.”
She added that switching to more renewable energy would “rapidly enhance the UK’s energy security”.
The former defence secretary is attempting to convince colleagues that there is a positive case to be made for net zero, because of the green jobs it would create.
She said: “At the heart of my offer to the country is a relentless drive to harness the opportunities of greener industries and a plan to create jobs in those sectors most likely to benefit.”
Reassuring those who think a conservative leader may scrap climate commitments, she said: “Environmentalism and conservatism go hand in hand, and is a core principle of who I am – someone dedicated to the future of our world and the legacy we leave.”
Most candidates are committed to the net zero target, and all except Badenoch have signed a pledge written by the Conservative Environment Network vowing to continue climate policies put in place by Boris Johnson’s government. However, Tugendhat has said he favours restrictions on imports from countries with laxer environmental standards over reaching net zero emissions domestically.
Rishi Sunak said during Friday’s TV debate that he cared deeply for the environment and that he was committed to net zero, but did not give any firm policy ideas. Liz Truss said she would rip up the EU’s habitats directive and instead do a nature survey of the endangered species in the UK, but did not give any ideas on renewables or green jobs.
Climate chief Alok Sharma warns: I may quit if new PM dumps net zero pledge
The cabinet minister who led last year’s landmark Cop26 UN climate summit has made a dramatic intervention in the Tory leadership race, suggesting he could resign if the incoming prime minister fails to commit to a strong agenda on the climate crisis.
In an interview with the Observer, Alok Sharma said a total commitment to the net zero agenda from whoever is to lead the country would be essential to avoid “incredible damage” to Britain’s global standing, as well as irreversible harm to the UK and international economies.
“This is absolutely a leadership issue,” Sharma said, accusing some of the candidates of being “lukewarm” on net zero in the contest so far.
“Anyone aspiring to lead our country needs to demonstrate that they take this issue incredibly seriously, that they’re willing to continue to lead and take up the mantle that Boris Johnson started off. I want to see candidates very proactively set out their support for our net zero agenda for green growth.”
His comments came as the UK braced itself for record-breaking temperatures of 40C (104F) over the coming days, while fires raged across large parts of the continent.
In south-western France and Spain thousands of people had to be evacuated from their homes. More than 12,200 people had fled France’s Gironde region by Saturday morning as 1,000 firefighters battled to bring the flames under control.
Asked if he could resign if candidates were weak on net zero, Sharma said: “Let’s see, shall we? I think we need to see where the candidates are. And we need to see who actually ends up in No 10. I hope every candidate realises why this is so important for voters generally and why it’s important for Conservative supporters. And I hope that we will see, particularly with the final two, a very clear statement that this is an agenda that they do support.”
Pressed a second time, he added: “I don’t rule anything out and I don’t rule anything in.”
While all of the leadership candidates, with the exception of Kemi Badenoch, have technically committed to the UK’s legislated target of reaching net zero greenhouse gas emissions by 2050, there are severe doubts over whether all the others would push forward the policies needed to reach the target.
Foreign secretary Liz Truss has called for a “temporary moratorium” on the green energy levy, while Penny Mordaunt has called for the green levies to be scrapped.
Tom Tugendhat has wavered on net zero, first questioning the target then reaffirming it, while Badenoch has called net zero “unilateral economic disarmament”.
Rishi Sunak has said he would keep the levies, supports net zero and called for more home insulation, though critics noted that he withdrew Treasury cash for insulation while chancellor of the exchequer.
Utilita Energy boss loses confidence in Ofgem after public warning
Utilita Energy boss Bill Bullen no longer has confidence in Ofgem, after the watchdog named and shamed the supplier over its handling of customers’ direct debit payments.
He told City A.M. he couldn’t trust them to navigate the industry through the ensuing crisis, describing Ofgem’s treatment of his firm as “outrageous.”
Bullen said: “I don’t have faith in Ofgem.”
In particular, the chief executive slammed Ofgem’s decision to label his energy firm as having issues with direct debits in a public press release.
He also raised issues over its handling of the price cap during the crisis, and the growing size of the regulator’s operations,
This follows Ofgem demanding a number of energy suppliers last week take immediate and urgent action after a review found a range of weaknesses in the way they charge customers direct debits.
Ofgem singled out six suppliers as having ‘moderate or severe’ issues with their direct debit processes.
This included Utilita, alongside Ecotricity, Good Energy, Green Energy UK, TruEnergy and the now defunct UK Energy Incubator Hub.
Bullen hammered the report as an “appallingly badly written press release” that encouraged people to “misinterpret it from the start” and demonise his firm.
“Ofgem seem to have taken a view of guilty until proven innocent,” he argued.
Issues over processing direct debit payments is particularly urgent, with energy specialist Cornwall Insight forecasting the consumer price cap could spike to £3,244 per year in October, and peak at £3,363 in January if it becomes t quarterly mechanism.
This would be when energy demand is at its highest during the coldest month of the year, putting more pressure on struggling households amid an escalating cost of living crisis.
Ofgem’s latest study showed that seven million customers on standard variable tariffs (SVT) saw an increase in their direct debit between February and April 2022 – reflecting soaring wholesale costs following Russia’s invasion of Ukraine.
On average, direct debit levels for customers on an SVT increased by 62% in this period, while eight per cent of SVT customers seeing an increase (around 500,000 households) experienced an increase of more than 100%.
This has concerned Ofgem, which has also seen evidence some suppliers’ processes are not as robust as they could be, and that this could lead to poor treatment for customers
The regulator has demanded a response from the six firms with ‘moderate to severe’ issues within the next two weeks.
Bullen has already written back to Ofgem’s boss Jonathan Brearley – and explained to City A.M. why he disputes the issues it has raised over how the firm processed payments.
The chief executive revealed Ofgem had highlighted three areas: documentation, communication and its low number of refunds.
He disputed Ofgem’s concerns with its documentation processes, and believed the watchdog exaggerated its importance.
Read more on City AM
EDF’s problems pile up as full nationalisation looms
At the site of France’s first new nuclear reactor in more than 20 years, robots are whirring away fixing faulty welding as developer EDF races to open the plant after a decade of delays that have damaged its reputation. Ahead of it lies a challenge of a different order of magnitude: a construction programme to build six more, just as the French government, which owns 84% of the business already, plans to take full control. The full nationalisation of EDF, which was announced earlier this month, comes as a series of crises pile pressure on the group’s finances. In theory this will provide it with some relief away from the glare of public markets. So far, however, the state buyout has raised more questions than it has answered, including how the government thinks it might do a better job at fixing long-running industrial problems that have plagued projects at EDF, some of them as basic as a lack of experienced welders.
“It’s not because the government will now have 100 per cent that it’s going to suddenly take three years less to build a reactor,” one person close to the company said. “Right now we’re in symbolic territory with this nationalisation. It doesn’t resolve any of the main problems we know the group is facing — will it allow EDF to bolster the skills it needs?” said Cécile Maisonneuve, a senior adviser at the centre for energy and climate at French think-tank IFRI.
“None of the industrial or regulatory issues were linked to its capital structure.” Just as Europe attempts to move away from its dependence on Russian gas and grapples with soaring power prices, problems at some of EDF’s existing 56 reactors in France have caused shutdowns and sent its energy output to multi-decade lows.
Instead, it has had to turn to expensive wholesale markets for supply and this is expected to all but wipe out its core profits this year. Rating agencies have warned that this will further push up EDF’s debts, beyond last year’s €43bn, and it is likely to need a second capital injection soon — after one as recently as April. At the same time, political battles have made EDF’s listed status increasingly untenable. It was made to pay for an annual electricity price cap announced in January to shield consumers from the spiralling market, sparking a stand-off between the state and EDF managers, and enraging minority shareholders.
The Flamanville 3 reactor on France’s northern coast has come to symbolise some of the technical problems faced by EDF and its contractors. Now due to start loading fuel next year, construction began in 2007 with a target finish date of 2012. The budget is now nearly four times the initial €3.3bn estimate. Setbacks include regulators finding faults in the finishing standards of some of the pipe welding. To address this, EDF commissioned purpose-built robots to work inside the pipes, rather than dismounting an entire piping system already encased in thick concrete walls. Keeping EDF on track is vital for energy security not just in France but more broadly. Other European nations have long relied on its exported nuclear energy, and its dwindling output has come at the worst possible time as the bloc braces for a potential total cut-off of Russian gas.
“France has traditionally been the source of cheap nuclear power for its neighbours but now it requires help and this will cause problems in Italy, Switzerland and Britain this winter,” said Phil Hewitt, director at energy consultancy EnAppSys.
The UK is also a major construction client. EDF is building its only new nuclear power plant — Hinkley Point C, a project that has been plagued by cost overruns and delays. All but one of Britain’s remaining nuclear power stations are due to close by the end of the decade. But its home country is especially reliant. France lags European neighbours on wind and solar power, and is much more focused on nuclear as a source of low-carbon energy. It accounts for more than 60 per cent of the country’s energy production and in February, the government announced plans for at least six next generation, EDF-made European Pressurised Reactors (EPRs) — a programme of some €50bn that will need to be financed with debt. In private, French officials have criticised EDF and the way it has managed some operational problems, although the preventive checks and reactor shutdowns were demanded by the regulator.
Read the full article in the Financial Times
Jim Ratcliffe rides the energy crisis as Ineos bets big on oil and gas
After 34 years climbing the ranks of a FTSE 100 stalwart, Brian Gilvary is enjoying the nimbleness of his new employer – the private chemicals giant Ineos.
“We’ve got three shareholders – Jim, John and Andy,” says the former BP finance chief. “The decision-making process is no less rigorous than in a PLC. But there is a dynamism about a company where everybody is living and breathing it every minute.”
That trait should help Ineos as it makes its next move: a major push into the energy system, seizing on the opportunities created by the global drive to cut carbon emissions and secure energy supplies in the wake of Russia’s invasion of Ukraine.
Gilvary, 60, was a few months into his retirement from BP when he was lured to chair the new Ineos Energy division in December 2020. The business could prove a major rival to his former employer, with a growing presence in oil and gas production, gas trading, hydrogen and carbon capture.
It comes as Ineos’s core chemicals business faces pressure from high energy and carbon costs, and competition from rivals in Asia.
Billionaire Sir Jim Ratcliffe and his lieutenants Andy Currie and John Reece created the London-based company from scratch by snapping up unloved chemicals plants during the late 1990s and 2000s, including a transformative $9bn (£7.6bn) deal in 2005 to buy BP’s chemicals business Innovene.
With sales of more than $60bn across 29 countries, it is one of Britain’s largest private companies, and among the most important. Ineos’ chemicals are used in everyday products from soaps to fabrics, while its co-owned Grangemouth oil refinery, in Scotland, is one of just six major sites left in the UK.
Its push into energy is a more natural extension of its skills – and comes amid demand from its manufacturing plants. In 2015 it bought $750m worth of North Sea gas fields from the Russian billionaire Mikhail Friedman, followed in 2017 by BP’s Forties Pipeline System, which carries about 40pc of North Sea production to the shore.
In November, Gilvary was joined by former BP colleague David Bucknall, who led its oil and low carbon trading business and is now chief executive of Ineos Energy. One of their first big moves is a deal with Sempra Infrastructure to ship and trade about 1.4m tonnes of liquified natural gas (LNG) out of the US each year – it will start within the next few years and extend over two decades, both for use at its own plants and to sell.
Gilvary describes the deal as a “starting block” which Ineos wants to “significantly” build out. It could also develop gas storage sites. “If you’re really going to compete in energy, you have to be able to be an intermediator and be in that midstream trading space,” he says.
Global competition for gas is extremely high as Europe searches for sources outside Russia amid concerns the Kremlin will turn off the taps. Ben van Beurden, the boss of oil and gas giant Shell, is among figures warning of rationing this winter, with heavy industry likely among the first affected.
“Like all companies, we will be looking at what the consequences might look like for manufacturing plants we have in areas that would be affected by curtailment of gas supply,” says Gilvary. “Let’s not kid ourselves. It’s impossible to replace Russian gas right now in Europe.”
Shortages have pushed gas prices to record levels, triggering the worst cost of living squeeze in a generation in Britain. Ministers have been encouraging oil and gas producers to pump more in the UK, to try and protect its own market. Yet Gilvary reckons current market dynamics, including the new windfall tax on North Sea oil and gas companies, makes shipping gas out of the US a better bet.
Read the full interview in The Telegraph
Water companies report supply issues as heatwave causes demand to soar
Water providers are experiencing supply issues due to the hot weather, with some reporting lower pressure levels and others warning of further disruption.
Affinity Water said the heat is resulting in lower water pressure in areas such as London, Essex and Surrey.
The company urged customers to avoid non-essential water usage and said it predicts an extra 164 million litres of water will be needed on Monday compared to normal demand.
“Because of the hot weather, many of us are using much more water,” the provider said.
“This means you may notice lower pressure or no water when demand is higher in your area.”
Anglian Water, which operates in the east of England, said sudden high demand due to “extreme hot weather” is likely a contributing factor in causing interruptions to water supply in King’s Lynn over the weekend.
A spokesman said its teams are working to restore water supplies “as quickly as possible” in some areas of King’s Lynn following a burst water main.
Similar weather-related supply issues are being seen in Bristol, with Bristol Water Foundation warning this week’s heatwave might affect the pressure and taste of its water.
“With the weather getting warmer, you may experience a drop in water pressure, especially during peak times,” it told customers.
“As temperatures rise, water use tends to increase as we all try to cool down with showers, hoses and paddling pools, which increases the demand on our network.”
It said water supplies might be temporarily redirected so customers’ water comes from different treatment works or reservoirs than usual.
“This may mean you notice your water tastes a little bit different to normal. Don’t worry, though, this will return to normal as temperatures start to cool down again,” it said.
Meanwhile, South East Water reported supply issues in the Challock and Molash area of Kent on Sunday, caused by an unprecedented amount of water usage.
The company has set up a bottled water station and told customers the continuous hot weather and increased demand for water “has put a significant pressure on our network”.
South East Water told the PA news agency: “Despite seeing record demands for water, we are currently seeing minimal customers’ supplies interrupted due to hot weather in our water supply region of parts of Kent, Sussex, Surrey, Hampshire and Berkshire.
Anglian Water says ‘we must be more robust towards drought’
A water firm said it was confident it had solutions to long-term shortages and “must be more robust towards drought”.
Anglian Water said it was taking “the long-term view” to ensure supplies for its 4.3 million customers.
That included building two reservoirs and re-using more sewage water.
The company, which operates across eastern England, said sea water de-salination plants were “not high in our priorities” at this time.
Previously it has said that it could have a water deficit of hundreds of millions of litres a day by the 2050s.
Laura Tuplin, water resources strategy programme manager, said: “What we do is look at the long-term supply and challenges for the future as we need to reduce the water we take from the environment.
“In the East we’re seeing a change in weather conditions. We have less water available as well as seeing growth [in population].
“We must be more robust towards drought.”
Anglian Water is the largest water company in England and Wales by geographical area, while the region is one of the driest in terms of rainfall.
The firm was planning on building two new reservoirs – in south Lincolnshire and the Cambridgeshire Fens – and would continue to re-use more water from the sewer network after treatment.
Ms Tuplin said: “We’re looking all the time to engage with customers, like with the smart meter programme, that can look at the amount of water they’re using and get them to change their habits and also see if they have a leak – it gives more control to the customer.”
Prof Paul Jeffrey, director of water theme at Cranfield University in Bedfordshire, said climate change and population growth was driving significant increases in the use of water resources, and water companies were required to tackle that.
“Being more efficient in the ways we use water, and storing or moving water between areas of deficit and areas of surplus, will all help to ensure more resilient supplies,” he said.
“Specific initiatives which can make a difference include water re-use, new reservoirs, leakage control, water conservation, and bulk transfers.”
Converting salty sea water to drinking water, as many countries with hot or desert climates do, “is not high in our priorities”, Ms Tuplin said.
“We’re confident new solutions will work, we have a very thorough planning, modelling and decision process.
“We need to work together, customers and stake holders, to make sure we’re using water responsibly.”
Three killjoy water firms responsible for wasting 7,500 litres of water every second have ordered families to conserve supplies – by not overfilling their paddling pools.
As the record-breaking spell of hot weather continues, Bristol Water, Northumbrian Water and Severn Trent Water last week issued pleas to customers to save water.
Bristol Water asked people not to use paddling pools at all and requested for them not to plant ‘demanding flowers’ that require regular watering.
As well as urging people to avoid washing their cars, Northumbrian Water pressed families not to spill water from paddling pools. And Severn Trent suggested lowering the levels of water in paddling pools to reduce the risk of waste.
The three firms contribute 654 million litres to the extraordinary 3.1 billion litres of water estimated to be lost every day by water companies, according to the industry organisation Water UK. By contrast, a 7ft by 4ft paddling pool filled to a depth of 40cms has a capacity of 400 litres.
The three water firms between them reported annual profits of more than £530 million last year and their chief executives enjoyed total pay of more than £5 million. Water UK, which represents the major providers, has estimated that the average water bill in England and Wales will increase from £412 to £419 during the 2022-23 financial year.
Critics last night ridiculed the requests which, they pointed out, would save a minuscule proportion of the water lost by companies through leaks from Britain’s 215,000 miles of pipes. Cat Hobbs, the founder of We Own It, which campaigns for water firms to be publicly owned, said: ‘Water firms’ hypocrisy is unbelievable. They say every drop is precious but are leaking thousands of Olympic swimming pools’ worth of water.
‘It’s patronising to tell customers to be careful not to spill water. They are treating us like idiots. The pay of these water bosses is enormous. Water firms are prioritising paying shareholders rather than investing in infrastructure and fixing leaks.’
Severn Trent, which is one of the country’s biggest water firms, supplying eight million people in the Midlands, issued its request on its website. While conceding that ‘it’s fun to fill the paddling pool’, its message added: ‘Don’t fill your paddling pool to the top. You could save 30 litres of water for every inch lower the water level gets.’
Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House
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