11/09/2019: A Tale of Two Cities

  • Spending review criticised over lack of climate actions
  • Scotland launches 14 bills and £3bn green support programme
  • Ofgem hones-in on change options for electricity network access charges
  • Regulator calls for industry coordination on flexibility
  • Bioenergy needs to double energy mix share: REA
  • Smarter Norwich continues to prepare for October start

The sector last week returned to a more or less usual drumbeat, with a fair bit going on. The two cities in question are of course London and Edinburgh, with attention centring on two very different policy pronouncements on measures to support action against climate change.

The London pronouncement, which followed the Scottish one, saw Chancellor Sajid Javid deliver 2019’s Spending Review to Parliament on Wednesday. In it, BEIS is to receive a very modest 2.1% increase in its budget for 2020-21, excluding yet more additional costs separately earmarked for the Nuclear Decommissioning Authority (why is no one asking what this is for?).

There were two standouts for us for BEIS. £30mn will go towards accelerating progress on developing decarbonisation schemes that support the UK in meeting its 2050 net zero target. Furthermore, up to £250mn will also be delivered to the international climate and environment funds, including the Green Climate Fund, which is tasked with helping to meet the Paris Agreement.

DEFRA, meanwhile, was given a 3.3% increase in its budget, with Javid stating the extra funds would task the department with ensuring the country has “world leading environment standards” after Brexit.

Despite a largely negative stakeholder reaction to the figures, Chief Executive of the Committee on Climate Change Chris Stark insisted on social media that there were causes for optimism – noting the £30mn figure was programme expenditure, meaning there could be a “potentially huge increase” in staffing on net zero. He noted that this had merely been a review of the government’s resource spend – rather than something intended to move major capital programmes.

The Treasury is of course also preparing to do a review on how the costs of net zero are being managed, and Stark said this was “essential”. This review will then feed into next year’s Comprehensive Spending Review, weeks before the UK hosts COP26 in Glasgow (since confirmed – hurrah!). He concluded: “Those are as good a set of conditions as I can think of to move policy up a gear over the next 12 months.” I am inclined to agree, but there remains a lot of hard work to do.

Despite this very different context, the Javid announcement was inevitably contrasted with the statement the previous day in which First Minister Nicola Sturgeon had set out the Scottish Government’s next steps for tackling climate change in its Programme for Government 2019-20. And what an impressive package it was.

The programme will introduce 14 bills that “aim to promote fairness and well-being in Scotland’s communities” and address the global climate emergency. This includes a Green

New Deal, “one that will harness the power of the Scottish National Investment Bank” and create a £3bn package of investments to attract green finance to Scotland, plans to develop regulations so that new homes from 2024 must use renewable or low-carbon heat, and a target of at least £30mn support for renewable heat projects.

There is also to be a ban on fossil fuel heating in new build houses by 2024, the rewriting of building standards by 2021 to reduce energy demand, a further £17mn for zero interest loans to support the purchase of ultra‐low emission vehicles, and public sector vehicles to be decarbonised by 2025 and net zero carbon standards to be introduced for all new public buildings. Scotland will also aim to make the Highlands and Islands the world’s first net zero emission aviation region by 2040, while plans to decarbonise the country’s railways by 2035 will be outlined in early 2020.

The package as a whole is multi-faceted and ambitious, and it should be looked at closely as officials south of the border rework and upgrade our own Clean Growth Strategy and Industrial Strategy in the light of the new target. But the remarkable thing is how quickly downwind of resetting the target the Scottish Government has developed such a comprehensive suite of proposals.

Meanwhile over at Canary Wharf, Ofgem moved forward on two related network charging initiatives last week and also published an interesting Insight paper on flexibility platforms.

First it is seeking views on its “refined” proposals for reform of residual electricity distribution charges as part of the Targeted Charging Review: Significant Code Review. Second Ofgem released its Access Significant Code Review working paper “outlining our initial thinking on key options for access and forward-looking charging reform”, which includes options for improving the locational accuracy of distribution charges.

Both publications take a lot of digesting but seem to be signalling strongly “charge disturbance”. Removal of distortions is the first listed objective above fairness, and there seems to be little in either document to explain charging impacts for individual consumers. It is still hard to know where this and related work-streams will land, which at a time when operators and investors are begging for certainty is very worrying.

In its paper on flexibility platforms, it argued that companies need to stop duplicating their efforts and work together if they are to harness the benefits of flexibility. The energy regulator also warned against a single participant – such as a local distribution network operator – being given a monopoly over flexibility procurement because such a move could pose a risk to consumers. Instead, the watchdog wants to see better use of flexibility platforms to harness the benefits of flexible generation and demand. New standards are also needed for data and processes, it added.

We couldn’t agree more. For a while we have been flagging concerns about network companies foreclosing the market for flexibility and defining different products. And this is ahead of suppliers and customers being able to participate because half hourly settlement is not yet a credible scale option for suppliers. But the paper is nevertheless crammed with very useful and useable information.

The stand-out for us on the new energy front was the publication of the third and final piece of the Renewable Energy Association’s bioenergy strategy. The Association called for 16% of the UK’s primary energy supply to come from bioenergy by 2032. The extra capacity – just over double the current 7.4% share – is needed to fill the gap left by nuclear decommissioning, and meet rising demand when the heat and transport sectors are decarbonised, the paper said.

Recommended actions in the report include: an obligation on gas suppliers to blend in a minimum amount of renewable gas following commitments made in the government’s spring statement; renewing support for the Renewable Heat Incentive once it comes to an end; and an auction mechanism to kick-start the market for capturing and storing carbon.

The report itself is sensible enough, but it reminds me that with a steady flow of technology assessments and policy recommendations issuing post net zero I need to start up a resources section at https://newangliaenergy.co.uk. This should also act as a route-map to some of the news we have been posting.

Finally we continue to make progress with our Smarter Norwich project. The order for the first 50 Verv Energy smart intelligent assistant devices has now been placed, and we are populating the second engagement group that will be comprised of prosumers (in contrast to the first group, which will be more up of traditional consumers). The aim remains to start installing devices for the first group in October.

As I load this, @newangliaenergy is within touching distance of 750 followers on twitter. Please follow if you don’t already.