Policy direction and pricing: How do we get all UK businesses to 100% clean electricity?
Poor policy direction, a lack of public awareness and financial challenges must all be overcome for the UK's private sector to deliver on the COP26 aim on clean energy, an expert panel has agreed.
The question around why the UK’s private sector has not yet reached 100% renewable and nuclear electricity, when prices are now lower than those of fossil fuels and still falling, was raised for members of edie’s Countdown to COP26 panel on clean energy and transport this morning (20 May).
Sitting on that panel were experts from National Grid, Green Alliance, ClientEarth, the Climate Group and Centrica Business Solutions. It was chaired by edie’s content director Luke Nicholls and attended virtually by more than 300 business and climate leaders.
Responding to the question, ClientEarth senior lawyer Charlotte Hanson said: “A major problem we see… is around the power of incumbency. We’re dealing with a situation where the odds are massively stacked against new players – particularly smaller companies.
“It’s very difficult to revolutionise a part of the economy without significant government support. If anything, generally, when we look across different countries, we’re seeing more subsidisation of the incumbents than the emerging actors. This creates a really distorted regulatory environment that absolutely needs to be addressed for us to get on track for 1.5C.”
Regarding the UK policy landscape specifically, Hanson added: “Ofgem is the regulator of the UK’s second-most emitting sector and the Department for Business, Energy and Industrial Strategy (BEIS) is what sits above it. At the moment, there’s no formal policy direction coming from BEIS to Ofgem in terms of the decarbonisation of the electricity and gas markets. The Government has indicated intent to address that, as part of the Energy White Paper last year, but this hasn’t happened yet.
“What we really need to see is a passing down of targets through implementing legislation…. Both BEIS and Ofgem need a binding obligation to ensure that they carry out their function in accordance with the UK’s climate goals.
National Grid’s director for COP26 Duncan Burt agreed that there is a “huge regulatory framework and market lag” which Ofgem and BEIS have not yet collaborated significantly to address. Burt said his personal view is that legally binding targets are not necessary in all cases but, in this case, may be necessary to sway Ofgem.
Burt also cited public awareness, and awareness in businesses, of the size of the UK’s renewable energy sector as a potential hurdle. Previous YouGov surveys have shown that most people do not understand the term net-zero and overestimate the size of the coal sector while underestimating offshore wind.
The discussion came shortly after the trade bodies for the UK’s renewable and nuclear energy sector collectively urged the Government to set 2030 targets on increasing generation capacity. At present, only offshore wind has such a target. It also comes hot off the heels of the International Energy Agency’s (IEA) first global roadmap to net-zero across power, heat and transport.
Another challenge flagged to the panel by audience members is the fact that some businesses are not sure which technologies they should invest in, and when. For example, some are weighing onsite generation versus clean energy tariffs versus power purchase agreements (PPAs) – and the pathway for heat seems even less clear than for electricity.
The UK Government is intending to publish a net-zero roadmap ahead of COP26 but has not yet provided an exact date. Many key policy pieces which will be summarised in this roadmap, including the Hydrogen Strategy, Transport Strategy and Heat and Buildings Strategy, have been delayed by Covid-19 and have still not been published.
Panellists agreed that a patchwork of solutions are needed and that it is not always clear how big a role each solution will play.
Green Alliance executive director Shaun Spiers argued that it may be better for businesses to act sooner rather than later – but that further clarity on policy trajectories will likely be needed for most organisations. He said: “We can either transition quickly and get ahead of the curve and get, in some senses, first-mover advantages, or we can do it slowly and probably pay more.
“At the moment, my sense is that the Treasury is undecided on which way in wants to go and, in some senses, is holding back the investment we need to say. The reasons are understandable – Covid-19 is a big crisis to deal with, but this is such a huge mission that we need the entire government behind it.”
Centrica Business Solutions’ policy manager for UK regulation Abdul Kamara added: “Decarbonisation is going to require a mixture of technologies, so I think it’s a matter of figuring out how your strategy links up with the national strategy.”
Panellists agreed that the nature of the transition is, at present, clearer for renewable electricity than for heat and for clean transport, in the absence of the Heat and Buildings Strategy and clarity on electric vehicles (EVs) beyond the 2030 phase out of new petrol and diesel cars and funding detailed in the Ten Point Plan.
But speakers also concurred that businesses can and should collaborate to send clear messages to BEIS and the Treasury, and can seek to alter markets using purchasing power – as has happened with the Climate Group’s EV100 initiative.
Countdown to COP26 Festival
If you missed your chance to attend edie's flagship Countdown to COP26 event on 20 May - or if you attended and are keen to keep the conversation going - edie will be hosting a six-month Festival in the run-up to the talks.
Supported by headline partner O2, the Countdown to COP26 Festival will be built around the five official themes of the COP26 talks: Clean Energy, Climate-based Finance, Clean Transport, Nature-Based Solutions, and Adaptation & Resilience.