Fair energy costs must include the funding needed to get to net zero
Today, Ofgem is setting out how the energy regulator will step up to the UK’s biggest challenge — reducing our greenhouse gas emissions to net zero by 2050 and ending our contribution to climate change, writes new Ofgem chief executive Jonathan Brearley.
Our remit is to protect the interests of consumers both today and in the future. That means keeping energy bills as low as possible while investing the money to help build a low carbon energy system for future generations. The balancing act needed to manage these sometimes conflicting intergenerational issues has been brought into sharp focus by activists such as Extinction Rebellion and Greta Thunberg. The thorniest dilemma of net zero is not technical, but deciding who pays for it and when.
Ofgem’s decarbonisation action plan, published on my first day in charge, explains how we will tackle climate change and build a low-carbon energy system at the lowest possible cost to consumers. The regulator is taking an approach which recognises that protecting consumers includes helping to hit the net zero target passed by parliament. This equal commitment to protect today’s citizens and those of the future will be reinforced in every decision we make.
There is not a moment to lose: the next five years are crucial to putting the UK on the path to net zero. Significant progress has already been made. Almost half our electricity came from renewable or low-carbon sources last year. But we must go further and faster and seek to all but eliminate emissions from transport and heating.
There is no firm estimate for the overall bill for consumers. In the short term, making the transition will incur additional costs as new technologies are rolled out. But these can be gradually recouped from energy bills over the decades. The plummeting costs of offshore wind shows that, thanks to innovation and economies of scale, low-carbon energy sources can become cheaper than fossil fuel equivalents. In the long run, the bill for consumers may well be higher if we do not hit net zero than if we do.
We no longer have the luxury of time to explore all options perfectly before deciding to act. Government, industry and Ofgem need to take some risks. Provided energy network companies make the best use of the existing capacity and make a strong business case, Ofgem will consider allowing them to invest in further grid reinforcement so the electric vehicle revolution is not held back by a shortage of charging points.
Ofgem will also have to decide how to distribute the costs we control among different groups of consumers. We will consider whether all electricity consumers, including those who don’t drive or are on low incomes, should pay for the system and network changes we need to support electric vehicles or whether only drivers should foot the bill. Whatever happens, we will ensure that consumers, especially the vulnerable, always have access to affordable energy to heat and light their homes. There will have to be trade-offs but costs must always be reasonable and shared fairly. Putting off action would leave the country an even steeper mountain to climb later — and much higher costs for future generations to bear.
To make the transition to net zero, Ofgem must meet the needs of all users, including industry. That means keeping prices as low as possible and ensuring they receive proper customer service. Public support of climate goals will evaporate if we as an industry are seen to be profligate or neglect their needs.
The UK’s 2050 net zero target is one of the world’s most ambitious. Getting it right will show that saving the planet doesn’t have to cost the earth but can create cheaper sources of energy, new industries and jobs. I call on energy companies, business and consumer groups to help Ofgem and government meet the challenge of net zero to ensure we protect consumers both today and in the future.
FT Weekend
Sacked climate summit chief may sue No 10
Claire Perry O’Neill, the former energy minister, is consulting lawyers after she was removed from her role running the UN climate change conference.
Perry O’Neill has told friends that Boris Johnson and his most senior aides gave three different reasons for her dismissal from her role at the conference, known as COP26, which is due to take place in November in Glasgow. She is considering legal action if she does not receive a proper explanation.
She took on the job after leaving parliament at the election but was informed that her services were no longer required in a telephone conversation with Dominic Cummings, Johnson’s most senior aide, on Friday. A minister will replace her. Perry O’Neill is then understood to have talked to the prime minister and to Sir Edward Lister, another senior figure in No 10, with whom she had been discussing plans for the conference.
Government sources have accused Perry O’Neill of bullying civil servants and failing to get a grip on the unit planning the summit. It is understood that she faced an investigation into a claim made against her by one official in her team but was fully exonerated.
The incident occurred when Perry O’Neill was supposed to be travelling to Clarence House for a meeting with the Prince of Wales. The staff member told her 15 minutes before the meeting that they had forgotten to book her a cab. Perry O’Neill is said to have responded: “What the actual f***! This place couldn’t organise a piss-up in a brewery.”
A friend said: “Claire is not a diplomat but there are untruths circulating about her. She was completely exonerated. She is consulting an employment lawyer.”
Allies said she became frustrated that the COP26 unit had failed to produce a proper plan for the summit and that the estimated costs had nearly doubled from £250m to £450m because of poor estimates by other departments. Johnson decided that Glasgow should host the conference — in order to stress the value of the union — “against the express advice of officials”, who wanted it in London.
The former minister is a colourful character who once asked, when she could not attract the attention of then Commons Speaker, John Bercow: “What do I have to do? Give him a blowjob?”
Perry O’Neill’s removal has prompted concerns in Whitehall about dysfunction at the heart of the government. She reported directly to Johnson, who was supposed to chair the cabinet sub-committee. But Perry O’Neill revealed on Friday that not one meeting had been held.
Johnson will make his first public intervention on the issue on Tuesday, when he launches the UK’s COP26 strategy at an event with Sir David Attenborough.
One Whitehall insider said planning for the summit had become “a seething bear pit” of infighting between ministers over who should take charge.
Andrea Leadsom, the business secretary, and Perry O’Neill are understood to have clashed when the latter was allowed to travel to the World Economic Forum in Davos last month while Leadsom was grounded by Downing Street. Leadsom is also said to be incensed by Perry O’Neill’s decision to appoint Mark Carney, the outgoing governor of the Bank of England, to a panel of 25 experts despite his “unhelpful” statements about Brexit.
Sunday Times
Sale of petrol and diesel cars to be banned five years earlier
The sale of petrol and diesel cars will be banned five years earlier than planned, under a climate change drive to be unveiled by Boris Johnson.
The Government announced in 2017 that it would impose a ban on diesel and petrol cars from 2040 as part of an effort to tackle air pollution.
However the Prime Minister is said to be speeding up the plans with a view to implementing the ban by 2035.
The idea was first mooted by Grant Shapps, the Transport Secretary, in October last year, when he indicated that 2035 was a target he would like to aim for.
“The government’s own advisory committee on climate change said 2035 is a date for which we should aim,” he told the Conservative Party conference.
“We need to test these arguments and work in partnership with industry to examine how to proceed.”
A joint committee report in 2018 criticised the 2040 target as lacking “sufficient ambition” and urged for it to be brought forward.
The Commons’ Environment Food and Rural Affairs, Environmental Audit, Health and Social Care, and Transport Committees warned that “there is insufficient urgency in current policies to accelerate vehicle fleet renewal”.
”Whilst we welcome the Government’s commitment to end the sale of new petrol and diesel cars by 2040, this target lacks sufficient ambition,” they said. “It is too distant to produce a step-change in industry and local government planning, and falls far behind similar commitments from other countries.”
Daily Telegraph
Oxford hydro project shines light on electric future
When parts of Oxford were struck by severe flooding in July 2007, Saskya Huggins and a group of fellow residents decided to make their own contribution to limiting climate change.
“We feared that kind of extreme weather event was going to be far more frequent,” said Ms Huggins.
The group formed a community organisation and raised money through government funding schemes and share offers to build low carbon energy projects in the area. Among them was Osney Lock Hydro, which since 2015 has been generating an average of 188 megawatt hours a year of electricity on a stretch of the river Thames — enough to power around 60 homes.
Osney Lock Hydro is an example of how Britain’s electricity system has become far more diverse with the rapid growth of renewable energy projects, ranging from solar panels on the roofs of homes and businesses to vast wind farms off Britain’s coast.
The change is challenging energy companies to rethink the design of Britain’s electricity networks, through which power has traditionally been exported from large, centralised power stations to the main transmission network and then distributed to homes and businesses by local network companies. Smaller, renewable schemes instead export power to local grids, forcing local networks to accommodate two-way flows.
National Grid, which is in charge of balancing the system, said 29 per cent of Britain’s generation capacity was now connected to local grids rather than the main transmission network. It has forecast that the proportion of this “decentralised” energy could rise to as much as 58 per cent by 2050 as the UK strives to meet its 2050 net zero emissions target.
Local electricity networks will be at the forefront of many other changes as key sectors of the economy decarbonise, including meeting demand for electric vehicle chargers. Capital Economics, the London-based consultancy, has estimated that the cost of upgrading electricity infrastructure to support the installation of electric vehicle chargers and heat pumps to replace polluting gas boilers could total as much as £48.5bn by 2050.
Osney Lock Hydro is one of up to 90 local energy schemes that are participating in a £40m study in Oxfordshire called Project Leo, looking at how new grid models could play a role in balancing the electricity system.
Backers of the research, which is being led by SSE, believe that managing how local energy projects trade their excess electricity to the grid or use and store power, can help to avoid large spikes in demand and avoid costly network reinforcements.
“The more electricity you can balance locally, the less you need to reinforce the network,” said Ms Huggins, who has become social impact director of the Low Carbon Hub, a social enterprise that develops community-owned renewable energy schemes in Oxfordshire and is involved in Project Leo.
“We’re looking to sort out how we’re actually going to bring decarbonisation into people’s lives and into businesses much more locally,” said Alistair Phillips-Davies, chief executive of SSE.
The way that companies invest in the power network is also coming under scrutiny as the country’s regulator, Ofgem, prepares for the next regulatory period, which begins in April 2021 and 2023 for local network companies.
Ofgem determines the returns companies are allowed to give their investors and must balance the need for investment with complaints that electricity networks have been making “unjustified” profits at the expense of consumers, who pay for grid costs via their energy bills.
Energy networks warn too harsh a crackdown on returns could thwart the investment needed to reach net zero. “There is a risk that proposals for the next price control period could have damaging impacts on the energy networks’ ability to deliver the government’s plans for clean growth and the wider economy,” said a spokesman for the Energy Networks Association, the trade body.
Keith Anderson, chief executive of ScottishPower, said companies, regulators and policymakers needed to start “mapping out milestones” of how the UK is going to achieve the 2050 target and where investment would be best directed. Otherwise, demand for electric vehicle chargers, for example, could swiftly outpace networks’ ability to cope, he said.
“When that demand starts to come through, you can’t slow it down,” said Mr Anderson.
FT Weekend
Douglas Millican: Climate change water strategy must stand the test of time
Scotland’s weather is famously fickle. Now more than ever it is impacting on our lives and communities, writes chief executive of Scottish Water, Douglas Millican.
As the global climate crisis deepens, evidence shows that its impact on our country’s weather patterns is having an ever-greater bearing on our public water and waste water services and we must move boldly and decisively to ensure we can cope well with future challenges.
Nowhere is the effect of our changing climate and weather more evident than in our relationship with one of our most precious resources – Scotland’s water.
During three summer months in 2019, extraordinary amounts of rain placed unprecedented pressure on our vital sewer networks.
The sheer intensity of the downpours meant the capacity of this network was simply overcome in some areas. Half a month’s worth of rain fell in Edinburgh in the space of three hours. In Stirling, where someone was spotted surfing down the street, the equivalent of a week’s worth of rain fell in just 15 minutes.
Our detailed assessment confirmed that the nature of these almost Mediterranean-style rain storms was well in excess of what our sewer network is capable of draining.
The disruptive effect across communities was such that in the Tayside and Tweed catchments, there were more flooding investigations carried out by our specialist teams as a result of incidents during that short period than across the previous two years combined.
Yet the previous summer was a very different picture. In parts of Scotland months went by with almost no rainfall. When temperatures spiked during July 2018, water usage increased in some areas by more than 30 per cent and we produced an additional 140 million litres daily to maintain customer supplies at their taps. We asked our customers to reduce the amount of water they were using around their homes and gardens to help with the challenge, and they responded well.
That record-breaking hot summer came only weeks after large parts of the country froze solid for several days due to the “Beast from the East” winter storm.
These weather events placed real pressures on our publicly-owned water services, our infrastructure – more than 2,000 water and waste water treatment works and 60,000 miles of water pipes and sewers.
The long-term forecast is that there is more on the way. Our analysts concluded these events are in line with climate change model predictions. For water and waste water infrastructure never built to deal with storm waters of such volume or intensity, this presents a real challenge.
New partnerships delivering innovative solutions to deal with storm water on the surface rather than in sewers – risking further flooding and overspills into river courses and coastal waters – are part of the answer. Engaging with our customers to encourage changes around water use and taking simple steps to use less will see it appreciated as a valuable resource.
At Scottish Water we must transform how we deliver water and waste water services to deal with the changes in our climate. Transforming our approach is essential to protect vital services – delivering excellent quality water at customers’ taps and recycling used water before returning it safely to the environment.
Next week we will publish our strategy for the next 25 years, setting out how we will safeguard and improve these vital public services. The water sector should be one of the best in long-term planning. Investment priorities and decisions made now result in new infrastructure that will last for decades or longer. These investments need to stand the test of time and the uncertainty of climate change.
I can think of no time in my life or my working career in the water sector – including time working in Australia, a country no stranger to grappling with water management – when there has been such a focus on the climate and our environment.
As custodians of Scotland’s public water network, we are committed to reducing our carbon emissions and being net zero by 2040, five years ahead of national targets. Our aim is to go beyond net zero thereafter.
Like the Victorians 160 years ago facing a public health crisis, who built fresh water pipelines to our cities and sewers to transform sanitation, our response needs to be similarly generation-defining.
The Scotsman
Hinkley Point C bans workers from flying to China over coronavirus fears
The £22bn Hinkley Point C nuclear development has banned its workers from flying to China over fears that its links to Beijing could make it particularly vulnerable to the recent outbreak of coronavirus.
Hinkley Point C, which is jointly owned by China General Nuclear Power Group (CGN) and French energy giant EDF, has suspended all travel to China, and postponed all worker family visits.
Meanwhile, all expats returning from China have been asked to self-quarantine and work from home for two weeks.
The company said it had “issued protective advice to staff advising them on the common sense precautions we can all take to minimise our individual risk,” and would continue “to closely monitor the situation.”
China’s involvement in the project has long been a source of controversy, with then-Prime Minister Theresa May launching a shock review of the plant – echoing the current Government’s review of Chinese tech titan Huawei – before finally giving it the green light in 2016.
There is currently not believed to be any operational impact to the construction of Hinkley Point C, which has already been delayed by around 15 months.
The Chinese state-controlled nuclear firm CGN paid £6bn in 2015 to buy a third of the project, Britain’s first new nuclear plant in a generation, but less than a year later was mired in scandal.
CGN was accused by the US justice department of nuclear espionage, and after a review it was placed on a trade blacklist for helping to acquire advanced US technology for military use in China.
The company denies any wrongdoing.
Sunday Telegraph
Video: Inside the hidden ‘power tunnels’ of London
Deep underneath London is a hidden network of tunnels powering the network.
With Londoners encouraged to buy more electric cars and London needing more energy, ‘power tunnels’ have been created under the city’s streets.
The first phase, completed in 2018, built 20 miles (32km) of tunnels carrying high-voltage cables. The next stage is due to start construction this year.
BBC News
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