Industry reacts to Helm review

Michael Grubb, Professor of International Energy and Climate Change Policy, UCL“There is a lot to agree with here – and much to chew on.  But it would help if Helm acknowledged that the dramatic technology cost reductions he highlights were largely driven by the kind of policies he now suggests should be phased out.  Policies need to evolve, but in ways that continue to support new waves of innovation.

“His proposal that renewables contracts should be ‘merged into a unified equivalent firm power (EFP) capacity auction’ so that the ‘costs of intermittency will then rest with those who cause them’ risks making the system less efficient, because backup should come from the cheapest source and only as much as the system overall needs – we don’t expect other generators to pay directly for backup should their own turbines fail.

“So on this: right problem, wrong answer. The fundamental benefits of having an integrated system – when the whole is more efficient than sum of its parts – need to come first.”

Richard Black, director of the ECIU“There are some strange holes in the review – for example, on energy efficiency, where he recognises the huge benefits of improvements, not least in reducing people’s bills, but produces no policy ideas to accelerate their uptake. There’s also more than a hint of alarmism in the frequent statements that electricity system capacity margins are dangerously low, when there’s been no power cut relating to a shortage of generation for well over a decade.”

Sarah Williams, public affairs manager, Aldersgate Group: “The UK needs a framework that supports the cost-effective growth of a secure low carbon power system. However, it is important to recognise that policies that have supported the deployment and economies of scale achieved in areas such as offshore wind have played a key role in driving clean energy innovation and cost reductions.
“We note the suggestion of an equivalent firm power auction with interest, but would suggest that managing a low carbon power grid at the system level is likely to be far more efficient and cost-effective than asking individual renewable generators to arrange for their own balancing services.”

Chris Hewitt, head of policy, STA: There are plenty of contradictions in Helm’s Review and his fixation with solar R&D is an unfortunate distraction. However, even if we don’t agree with all of his answers, this Review is asking the big, strategic questions that need to be asked today, given massive technology change. Helm is also rightly looking at how to inject market forces back into energy policy for the benefit of consumers. Something has gone very wrong with the Government’s approach to energy markets when the cheapest & most popular technology is shut out. We hope this Review will prompt an urgent rethink and without further prolonging uncertainty for our industry.

We need to look into his auction proposals in more detail, but it is obviously cheaper and more efficient for renewables variability to be handled at a systems level rather than on a plant by plant basis.

James Court, head of policy and external affairs, Renewable Energy Association“There is broad thinking in this report that the renewables industry can get behind, especially that we need to decarbonise in the lowest cost way, and that uncertainty and continual government interventions can add to overall costs. We are glad the report notes the huge cost reductions renewables have had. We agree it is time for policy reform that gives industry longer term certainty about how the sector will be structured so that companies can make proper investments in manufacturing capacity.  

… “This report hints at the evolution of the industry, but perhaps doesn’t fully recognise the fundamental shift that is happening from centralised and inflexible generation to a smarter, more connected and decentralised energy system, and the policy framework needed to make that happen.”

Alex Neill, managing director of home products and services, Which?: “It is clear that competition isn’t working well in the energy market and this report only serves to confirm to people struggling with their bills that they aren’t paying a fair price. 
“As the government sets about introducing an energy price cap, it must learn the lessons of this and countless other reviews and make sure that further interventions in the energy market do not result in higher bills, a failure to improve service or a halt to much need innovation.”

Lawrence Slade, chief executive, Energy UK, commented: “We fully share Professor Helm’s goal of ensuring that the transition to a low carbon energy system comes at the lowest cost to customers. And we are committed to working together with the Government to look at the best ways of ensuring that the billions of investment needed can be delivered competitively via a range of technologies. In line with our stated position, we’d agree that with the right framework is put in place, the industry can get on and deliver.  

“The industry has made great strides forward, with half of our generation now coming from low carbon sources and, as shown by the recent Contracts for Difference auction results, the cost of renewables is falling significantly. However when costs outside of suppliers’ control are levied onto customer bills we should be clear about these as well as working hard to minimise them.”

 

 

 

 

2 comments for “Industry reacts to Helm review

  1. October 28, 2017 at 12:55 PM

    Maybe Lawrence Slade could follow through on this: “…a low carbon energy system comes at the lowest cost to customers. And we are committed to working together with the Government to look at the best ways of ensuring that the billions of investment needed can be delivered competitively…”

    He needs to point out to his members that investing £1,800 million in building a 950 MW offshore wind farm and settling for a CfD price of £57.50/MWh is ludicrous. Even if the that price was received for the whole 25 year lifespan, it would only reach £3,660 million and £28.28 of each £57.50 received would be needed to cover the cost of building it – then there’s O & M on top of that.

    If EFP contracts become a reality – which they should in fairness to other low carbon technologies – investment in offshore wind at competitive prices would become insane.

    On the other hand, CfD or EFP contracts make no difference to the price bids nuclear power can make.

    Investing a mere 22% more – that’s £2,200 million in a 440 MW Small Modular Reactor [SMR] will generate 3.3X more income – that’s £11,980 million [a build content of £10.56 in every £57.50 received]:

    https://smart-and-fabb.blogspot.co.uk/2017/09/invest-22-more-in-smrs-and-get-over-3x.html?view=sidebar

  2. October 31, 2017 at 11:00 AM

    Prof Helm completely overlooks large scale electricity storage, which is cheap enough to build and operate in a level playing field without subsidy, and which can balance renewables completely, complementary to batteries, DSR and interconnectors. I fail to understand the consistent head-in-sand approach to large scale, long duration (>100MW, 500MWh) electricity storage: because their policies actively discourage its development, they conclude that it doesn’t exist cost-effectively. All we need is a set of long term contracts, and we can build it with private capital and zero subsidy. And it can have zero or minimal emissions within the price; we also have a transitional technology that can be retro-fitted to existing power stations.

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