No matter what happens with Brexit, the UK will soon have change at the top: at least a change of leadership for the Conservatives, and possibly a general election with the potential for a change of government.
Times are changing in politics, but so they are in power and energy too, as major structural shifts towards decarbonisation, digitalisation and decentralisation accelerate.
In its regular expert survey, run with market research company Accent, New Power asked what is top of the industry’s wish list.
What single action should a reconstituted or incoming government take as regards the power industry? y to achieve each of five industry goals:
- a smart, flexible system;
- 21stcentury governance;
- secure investment;
- an industry that serves its customers?
Here are some of our experts’ answers – subscribers login to read the full article. And use the comment box below to give your own response:
An action to progress decarbonisation
There was a near-unanimous call for better support systems for renewables – but less consistency about exactly how that should be delivered.
Some had failings in mind: one wanted “To counteract the catastrophic drop in solar installation which could destroy the industry”. Others thought the first action should be around specific measures. Top of the list was extending Contracts for Difference to onshore wind and PV because it they were the “Lowest cost low-carbon options”. An alternative approach offered was, “A carbon tax on fossil fuels,” because of its “Simplicity compared to renewable incentives”.
Simplicity was a common theme. One said, “The direction and commitments are all there, it’s how to deliver them that is becoming increasingly risky.”
For one respondent, a more ambitious – and perhaps less immediately deliverable – priority was integration of disparate initiatives, incentives, innovation stimulus programmes, duties, levies and so on into a more cohesive package.
The reason? “The fragmentation, cost and complexity is becoming too much for everyone to navigate, there isn’t even a single government department owning it all”
Finally, government should confirm that the current commitment to carbon pricing post Brexit will be retained: it is an “Essential signal for low carbon investors.”
The fragmentation, cost and complexity is becoming too much for everyone to navigate, there isn’t even a single government department owning it all”
An action to create a smart, flexible system
Continuity and coherence were an important theme in continuing the transition to a flexible energy market, according to respondents.
New Power/Accent were told that government is “very interested in stimulating many various and disconnected trials, stimulus investments” but the initiatives lack cohesion.” Some respondents wanted more opportunities, and clearly saw an opportunity to create a vibrant market. Peter Franklin of consultant Enstra summed it up in calling for government to “Support local renewables and demand response trading for DSOs.”
The fundamental change required was to “Facilitate the transition to half hourly settlement.”
But respondents sounded a note of caution: Colin Morgan of Everoze said government had to be careful to balance opening the market as widely a possible with creating a stable framework. That could be all in the timing: “Recognise the need for standardisation at the appropriate moment. Chaotic free market activity will only drive innovation if the risk of stranded assets is managed by standardisation around aspects which are not a major focus of innovation.”
An action to make industry structures and governance fit for purpose?
Governance in the energy and power industry has to be reformed to speed up change. One of our survey group said, “The UK market started opening in 1990, we have thirty years of incremental, additional, overlapping regulation, systems, processes – it needs a renewed business model. The market and industry is fundamentally based on a market model originating after WWII, it is not fit for this age.”
But what should be government’s action? Sweep away complexity: “Simplify the codes, integrate the bodies, have a national energy authority that includes an IT systems design authority.” But there was a warning: “Recognise that the trading market is not integrated into retail and metering in a strong enough way for governance and delivery of national objectives.”
The market and industry is fundamentally based on a market model originating after WWII, it is not fit for this age.
An action to secure investment
“Long term support frameworks” are needed to secure investment in UK power.
That could mean “Build on the success of CFDs in offshore wind by deploying [them] more widely to support generation investment,” but another approach would be to “Enable power markets that have long term contracts, to underwrite long-term capital investment.”
One thought it was most important to reject the Labour Party’s proposals on public ownership. They said a government must: “Commit to retaining market-based energy policy with private ownership of energy infrastructure – and explicitly reject any threat to nationalise it.”
As for the current market sentiment, “The market right now feels Ofgem is in response mode and so cannot trust their signals for long term stable investment,” one warned.
Enable power markets that have long term contracts, to underwrite long-term capital investment.
An action to serve customers’ interests
The energy market is there to serve its customers and they should be a priority for government. What should any new secretary of state do to serve their interests?
Some thought that, given the scale of change it faces, the industry was shaping up well: “Competition is growing quickly, Supply is transitioning to the digital age. Market failures overall are tiny compared to retail, banking and other sectors.” They feared that more intervention could put that in doubt: “The government is relentless at adding more, changing supply. The market genuinely needs some time to catch up, we already have a 5-10 year programme in front of us.”
But focused on keeping prices down: extending CFD contracts to the lowest cost technologies, in the form of onshore wind and PV. For others it was about demand: “Creating 10 million virtual power stations will give customers more ability to choose,” one said.
There had to be consumer legitimacy for energy choices and “Political support for deep decarbonisation is conditional on costs being socially tolerable for domestic consumers and avoiding damage to the international competitiveness of industrial users.”
The market genuinely needs some time to catch up, we already have a 5-10 year programme in front of us
More questions than answers?
We asked: what’s missing at the top of the energy agenda?
There were many suggestions. At the top of the list were a longstanding issue and one that has arisen in the last couple of years: decarbonising heat and Brexit.
What do you think? What should be top of the agenda for a new energy minister or a new government? Comment below