Government must reassure energy investors after Brexit vote, say MPs

The government must publish its Emissions Reduction Plan to restore investor confidence in the energy sector, according to a new report from the influential Energy and Climate Change Committee.

The report contained the committee’s concluding thoughts on its last three enquiries (Energy revolution, Leaving the EU: implications for UK climate policy, and Leaving the EU: implications for UK energy policy), after the House of Commons agreed to disband the Energy and Climate Change Committee on 17 October, following Theresa May’s decision to scrap the Department for Energy and Climate Change.

The report found that the short-term impacts of the vote to leave on electricity and gas supply appear to be limited and the UK’s departure from the EU is not expected to change the general direction of UK energy and climate change policy, since this is driven by the Climate Change Act 2008, and domestic concerns about security of supply and affordability.

However, the MPs found that the vote to leave has reduced already-weak investor confidence in the energy sector, which Government must address by publishing its Emissions Reduction Plan.

In the longer term, the committee was concerned that the UK’s departure from the EU could end its access to processes such as the EU’s proposed ‘solidarity principle’ – a policy designed to ensure that Member States receive immediate assistance in the event of a gas supply crisis. The committee urged government to examine how the UK can continue to participate in this and urgently investigate alternative back-up arrangements to ensure security of supply in the event of a crisis.

The committee heard from stakeholders that remaining within the EU Emissions Trading Scheme (ETS) and other European energy arrangements like the Internal Energy Market could allow the UK to avoid costs and retain benefits.

On energy storage, the committee recommended that government move quickly on addressing regulatory barriers faced by energy storage, with a clear definition for storage, an end to double-charging, and a separate asset class for grid-level electricity storage established.

On demand side response, the committee found that unfair bid bonds and the length of contracts available under the Capacity Market are currently disadvantaging DSR providers in favour of more polluting new build power stations. The market should be given a clear signal that DSR capacity is a strongly preferred alternative to diesel generation plants.

The committee’s chair Angus MacNeil MP, said: “Getting Demand Side Response right will empower consumers, reduce bills, ease pressure on the grid, and lower carbon dioxide emissions. Energy storage is a vital keystone in building a clean electricity system. It will mean we won’t have to wait for the sun to shine or the wind to blow to get our energy from renewables. We can generate electricity, store it and turn it on when it’s needed. If current regulatory barriers to storage were removed, some £7bn per annum of savings to consumers could be achieved.”

“The Government needs to tackle the issues making the economics of energy storage and demands side response challenging. We need to learn from California where strong public financial support and clear legislation have helped develop a storage industry and integrate storage infrastructure into the grid.”

Related content:

Fear of disruption limiting DSR uptake by UK firms

The real failures on energy security

National Grid has attracted just a fraction of its target in a new demand response product (members only)

Decc: a flexible energy system could save billions by 2050 (members only)

Risk vs reward: adding storage to a renewable energy site

Energy storage: legal and regulatory barriers to overcome

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