Week in Energy
Monday 25/09 – Policy Exchange finds that quick wins in energy efficiency are capable of producing annual energy savings of £1.3bn for businesses. The Committee on Climate Change (CCC) says that Scotland’s plans to reduce its greenhouse gas emissions into the 2030s will need to bring forward firmer policies in transport, heating and other sectors if it is to remain world-leading.
Tuesday 26/09 – Following an in-depth study, the CMA announces that it is to set clear rules for all online price comparison tools. Former Shadow Business and Energy Secretary Clive Lewis calls for Labour to do more to get involved in the renewable energy sector. Lord Adonis, Chairman of the National Infrastructure Commission, welcomes the opening of the UK’s first subsidy-free solar farm.
Wednesday 27/09 – Labour leader Jeremy Corbyn commits to create a £250bn National Transformation Fund that will invest in energy infrastructure in his Leader’s Speech at the Labour Party Conference. Research by Frontier Economics backs the creation of a comprehensive Buildings Energy Infrastructure Programme to decarbonise the UK’s buildings, boost the economy and help meet carbon and fuel poverty targets.
Thursday 28/09 – The government’s latest Energy Trends statistics reveal a record-breaking quarter, showing coal decreased from 5.9% in Q2 2016 to reach a record low 2.1% in Q2 2017, while renewables’ share of electricity generation increased from 25.3% in Q2 2016 to a new high of 29.8% in Q2 2017. The Public Accounts Committee announces it is to examine Hinkley Point C on 9 October, where it will ask officials behind the decision-making process whether the project demonstrates value-for-money.
Friday 29/09 – The Prime Minister is urged to approve the Swansea Bay Tidal Lagoon plan by senior Welsh Conservatives. The European Banking Federation urges European banks and governments to make a number of changes to encourage continued green investments.
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Policy 1 | Policy Exchange calls for new approach to business energy efficiency
Businesses could save £1.3bn annually through “quick wins” in energy efficiency, according to new research published by Policy Exchange.
The think tank released its Clean Growth report on Monday, 25 September, explaining that energy efficiency is a crucial driver of boosting productivity and decarbonisation. It made a series of recommendations for a new approach to encourage investment in business energy efficiency, such as establishing an Energy Efficiency Delivery Unit (EEDU) and for Energy Performance Certificates (EPCs) to be linked to business rates. This would be to incentivise landlords to invest more in energy efficiency.
The EEDU would focus specifically on the development stage of projects and broaden its scope to include the private sector. It explained that offering finance for development work which could match the cost of conducting feasibility studies or investment grade audits could help to close the gap between projects and the development risk needed to take them forwards.
The report further called for the existing Energy Saving Opportunity Scheme (ESOS) to be extended so that it covers public sector institutions, where the energy saving potential is “large and cost effective”. For example, Policy Exchange said the NHS could save £200mn a year through energy efficiency gains, noting schemes such as ESOS can be used “much better”. ESOS sees qualifying organisations carry out assessments every four years of energy use and energy efficiency opportunities identified.
Policy Exchange said there was a need to increase the transparency of ESOS to understand how well it is working. It also called for board level action on energy efficiency recommendations by either rejecting or accepting them – noting while ESOS requires board level sign off, it does not translate into board level action.
The report also touched on how policymakers have introduced a complicated package of fiscal policies to try and drive energy efficient behaviour. Such policies include the Climate Change Levy (CCL), Climate Change Arrangements (CCAs) and the Carbon Price Support (CPS). It drew on CCAs in particular, which offer discounts on the CCL for businesses that pledge to improve their energy efficiency. It said that these have been a weak driver and called for the discount businesses gain to be made “more stringent” and linked to sector deals as part of the industrial strategy. It further called for long-term certainty over the Carbon Price Support to be provided beyond 2020.
Joshua Burke, who authored the report, said that improving energy efficiency was among the “easiest and cheapest” ways to decarbonise the energy system. Burke explained that with almost the equivalent of 5% of GDP being spent by businesses and public sector organisations on energy each year, it was clear many organisations were not investing enough in energy efficiency. Burke called for it to be seen as a “major strategic investment” which is both good for the environment and also for profitability.
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Policy 2 | Energy UK lists industry priorities for cost of energy review
Trade association Energy UK has set out its position on what it believes should be considered in Dieter Helm’s independent cost of energy review.
Writing to Helm, Chief Executive Lawrence Slade said that for the review to be a success, it was important for the whole industry to feel included and represented. The trade association submitted a list of ten priorities to Helm, ranging from reviewing the costs associated with decarbonisation to the upgrade to a smart energy system.
Energy UK said it would “seriously question” the review if it did not acknowledge that exempting the cheapest technologies from participating in competitive renewables tenders, such as the Contracts for Difference (CfD) auction, drives up costs to consumers. It explained a delivery plan for investment post-2020 in low-carbon electricity generation was needed, framed around a UK strategy for delivering the Fifth Carbon Budget. It called for it to ensure the lowest cost large scale renewables have a route to market. The delivery plan would consist of a policy roadmap and associated planning route map comprising needs for both national and regional investment.
It also called for a clear policy in relation to energy efficiency requirements to be provided. It explained there was a strong case to develop a roadmap around energy efficiency requirements and provide for business, commercial and large users to improve the emissions performance for their business premises. The letter also urged a “major ramp up” in energy efficiency investment in homes and businesses.
It explained the current energy efficiency policy framework had been overly reliant on funding through supplier obligations, leading to an expectation it should be provided free of charge. It said the government should kick-start a sustainable energy efficiency market through targeted incentives to encourage demand, supported by regulation to set a clear trajectory of the government’s expectations. Other priorities listed included setting out the government’s position on the future of carbon pricing, including the carbon price floor and the EU’s carbon trading scheme. Energy UK also urged the establishment of fit for purpose controls to support the cost of decarbonisation, to review the future of Carbon Capture and Storage and to work with the industry to address the “urgent need” for a strategy to decarbonise both the heat and transport sectors.
It also called for recognition of the benefits the energy sector can provide to the wider economy – especially when linked to the development of a supply chain plan through the government’s industrial strategy. It said creating a new environment supporting research and development funding for low carbon technologies, linked to education, would deliver innovations in a wide range of technologies. Particularly this could encourage businesses to reduce energy costs and enhance the promotion of the UK as an attractive place to invest, boosting exports of energy related services and equipment.
Slade warned that there is a risk of continued uncertainty and potentially detrimental intervention into the energy market, which could result in a negative impact on both consumers and investments.
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Policy 3 | Labour Conference reiterates support for renewables
The Labour party has reiterated its pledge to ensure 60% of the UK’s energy comes from low-carbon or renewable sources by 2030.
In a speech at the party’s conference on Tuesday, 26 September, Shadow Business, Energy and Industrial Strategy Secretary Rebecca Long-Bailey also pledged to invest in energy infrastructure “to make it fit for the 21st Century” and to support projects like the Swansea Bay Tidal Lagoon and Moorside Nuclear plant.
At a conference fringe event Alan Whitehead, Shadow Energy and Climate Change Minister, said that the party needed to refine details of their previous manifesto, such as its pledge to decentralise the energy system. Whitehead said that this transition was already underway and that the rapidly changing role of Distribution Network Operator to Distribution System Operator meant they could be central actors in the energy system, rather than just “postman for energy”. He noted that this could facilitate the return to the more localised, municipally run energy system that existed before the development of the National Grid. Whitehead clarified that there would still be a need for National Grid to transmit electricity from the remaining centralised power stations, such as new nuclear and offshore wind farms.
Also at conference, Shadow Chancellor John McDonnell confirmed that a Labour government would look to increase public control over utilities, while Labour Leader Jeremy Corbyn pledged the creation of a £250bn fund to invest in new infrastructure, including energy.
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Policy 4 | CCC calls for Scotland to take more action to meet climate goals
Independent watchdog the Committee on Climate Change (CCC) has delivered its progress report on Scotland’s efforts to reduce its emissions, stating that it will need to take more action to meet its ambitious climate change targets.
Issued on Monday, 25 September, the CCC said Scotland had made good progress and met its emissions target in 2015 while an interim target of at least a 42% reduction in net emissions by 2020 is well within reach. However, more effort is required to reduce emissions from other sectors of the Scottish economy, alongside the good progress that has been made in electricity.
It further noted that the balance of effort in the draft Climate Change Plan between the transport and building sectors was “unrealistic”. Although, it did note that recent Programme for Government announcements had indicated stronger action was to be taken in the transport sector. It also noted that the draft plan contained limited new policy to deliver emissions reductions to 2032 beyond existing commitments.
It warned that without effective new policies, progress seen in recent years would be unlikely to continue into the 2020s. This would compromise the credibility of the proposed 90% emissions target for 2050 – if Scotland fails to lay the groundwork through to 2030.
Industry 1 | Energy efficiency sector sees confidence remain relatively high
The latest EEVS Energy Efficiency Trends survey has found that during Q2 2017 non-domestic energy efficiency supplier confidence in the industry remained steady, following a year of incremental rises.
The report found that the confidence indicator continued to sit well above neutral, having been negative in the same quarter in 2016. It was also found that the sector expects a return to an upward trajectory in the next three months.
This flattening in sentiment over the last quarter reflects a quiet period from a supplier perspective, with few material changes. National orders remained positive, with seven in ten suppliers continuing to see consistent or increasing order numbers. International business continued to make little impact and sales prices remained flat.
The principal concern for the sector remained customer demand (18%). Also, with possible risks from Brexit, policy uncertainty saw a notable increase in Q2 2017, with 14% of respondents citing this as their main concern. Other areas of concern were national competition (11%), raising finance (7%), pressure to reduce costs (7%) and regulation (2%).
The overall sector’s view on government also remained negative, with six in ten suppliers saying they now consider energy efficiency policy to be ineffective. There was a notable increase in the number of suppliers who found government policy to be very ineffective, however there was also an increase in the number who found it very effective.
On the consumer side Q2 2017 saw a notable uptake in the commissioning of energy efficiency projects. Almost 70% reported installing energy efficiency measures, with lighting projects accounting for more than double the next most popular technology (lighting controls). Conversely, many of the other leading technology choices saw a dip in purchases over the past three months, with the notable exception of boiler replacement and boiler controls.
The quarter also saw a tightening of consumer spending with a dip in the uptake of very large and very small projects. The survey found that the balance of projects had shifted towards the £50-£100k spending bracket. Overall, six in 10 energy efficiency projects were within the £50k to £500k bracket.
Finance for the majority of these projects was found to have come from in-house sources, with no material uptake of externally-sourced finance. Almost 80% of consumers expect their investment to achieve payback within five years.
The most commonly cited reason for not undertaking energy efficiency measures was that businesses having higher priorities elsewhere. This was followed by businesses having already undertaken projects, or having future projects planned. Other reasons included a lack of resources, uncertainty over the financial benefits, lack of trust in the industry and lack of affordable finance.
Industry 2 | UK’s first subsidy-free solar farm to open
Developer Anesco has announced that on Tuesday, 26 September it officially opened the first subsidy-free solar farm in the UK.
The 10MW Clayhill site is located near Flitwick in Bedfordshire and will also incorporate 6MW of battery storage. Steve Shine, Executive Chairman of Anesco, said: “For the solar industry, Clayhill is a landmark development and paves the way for a sustainable future, where subsidies are no longer needed or relied upon. Importantly, it proves that the government’s decision to withdraw subsidies doesn’t have to signal the end of solar as a commercially viable technology.”
Claire Perry, Minister for Climate Change and Industry, added: “The cost of solar panels and batteries has fallen dramatically over the past few years, and this first subsidy-free development at Clayhill is a significant moment for clean energy in the UK.”
The announcement was also welcomed by Lord Adonis, Chairman of the National Infrastructure Commission, who described it as a “welcome step” towards cheaper renewable energy sources. He added: “This, and the fall in the cost of offshore wind energy, demonstrate how low-carbon energy sources are becoming increasingly competitive – and underlines the case we’ve made for the government to outline how it plans to support renewable sources over the next decade.”
Industry 3 | Audit finds north of England and Scotland vital for offshore renewables
An audit of the offshore renewable energy industry in the north of England and Scotland has demonstrated the strong contribution the region makes to the UK’s position as a global leader in innovation in offshore renewable energy.
The Offshore Renewable Energy Science and Innovation Audit (SIA), led by Newcastle University, highlighted the area’s world-class research in offshore renewables, the strong supply chain, and the many innovation programmes and strong collaborations between industry and academia. It also found the number of people directly employed in offshore wind in the UK could double between 2017 and 2032.
The audit looked at the offshore renewable energy sector at major ports in the North East, Tees Valley, Humber and Liverpool local enterprise partnership areas and Scotland. It focused on the international competitiveness of the research and innovation activities in the regions in offshore renewables, the future needs in innovation and the skilled workforce in the sector.
Professor Nick Wright, Pro-Vice-Chancellor of Innovation and Business at Newcastle University, said: “The SIA on offshore energy has confirmed that the North of England and Scotland together constitute a world-class cluster of activities in thus crucial field. […] The report highlights some major opportunities for the cluster in terms of new technologies and we look forward to working with the Government to drive those forward.”