UK Energy Policy in 2020

Following the results of the UK General Election, it will be the Conservative Party responsible for delivering the net zero target and a green economy. The Conservatives made positive pledges to invest in green jobs, low carbon infrastructure and investment in energy efficiency.

Their Manifesto promised that the first Budget in 2020 will prioritise the environment and contain investment in research & development, decarbonisation schemes, new flood defences, electric vehicle infrastructure and clean energy. The Budget date is to be confirmed, but will likely take place in early Spring.

White Paper

The Department for Business, Energy and Industrial Strategy (BEIS) intend to release an Energy White Paper, which is expected in Q1 2020. It will detail the country’s strategy to achieving net zero emissions by 2050.

Energy Secretary, Andrea Leadsom, has said that BEIS are currently evaluating a number of different approaches. This will include decisions on renewables, nuclear levels and the role of carbon capture, usage and storage.

The White Paper is expected to yield further policy indications on a range of energy and environmental issues that are currently unclear.

COP26

The 26th session of the Conference of the Parties (COP26) to the United Nations Framework Convention on Climate Change (UNFCCC) is scheduled to take place 9-19 November 2020 in Glasgow.

The UK will host the main COP summit, which will enable world leaders to discuss actions to tackle climate change and serve as a spotlight on how far the government’s climate policy decisions have come. Claire Perry, the previous Minister of State for Energy and Clean Growth, will preside as the UK nominated president for the event.

Second Balancing Services Charges Taskforce

Ofgem formed the first Balancing Services Charges Taskforce, in collaboration with the Electricity System Operator, back in November 2018. The main goal of the Taskforce was to investigate the future direction of Balancing Services Use of System (BSUoS) charges.

The Taskforce found that the BSUoS charge does not currently provide any useful forward-looking signal. This makes the charges hard to forecast, reducing the influence of the charge on user behaviour.

With this information, the Taskforce assessed whether individual elements of BSUoS have the potential for being charged more cost-effectively and hence could provide a forward-looking signal. However, whilst it was concluded there were theoretical advantages to options suggested, it remained that the implementation would not or could not provide a cost-reflective and forward-looking signal that would drive efficient and effective market behaviour.

The first Taskforce concluded that it was not feasible to charge any of the BSUoS components in a more cost-reflective and forward-looking manner that would effectively influence behaviour to help the system and/or lower costs to customers. The group recommended that all costs included with BSUoS should be treated on a cost-recover basis.

Taskforce key deliverables

The new Taskforce will aim to assess who should pay BSUoS charges, how these charges should be recovered and how principles from the Targeted Charging Review can be applied. In order to achieve this the Taskforce has compiled five deliverables:

  1. Consideration and assessment based recommendation as to who should pay balancing services charges
  2. Investigation and recommendation for recovering balancing services charges, including collection methodology and frequency
  3. Produce interim report providing detailed reasoning and any relevant analysis behind the initial conclusions
  4. Consult on the interim report providing opportunity for stakeholder comment
  5. Issue a final report including consideration of stakeholder consultation responses providing a final recommendation on who should pay, the design of balancing services charges and potential timescales for implementation

The final report, containing the recommendations to Ofgem, is scheduled to be published in June 2020.

Electric Vehicle Smart Charging consultation response

On 15 July 2019 the Government published a consultation on Electric Vehicle Smart Charging. This was to seek views on the outline of the current approach and objectives for the implementation of smart charging systems for electric vehicles (EVs).

The Government believes that the encouragement of consumer uptake and innovation is necessary to meet future targets. To this effect, Government’s overall aim is to maximise the use of smart charging technologies to benefit both consumers and the electricity system, whilst supporting the transition to EVs.

The consultation states that without government intervention, it is unlikely that smart charging will be taken up at the rate required to achieve the full potential benefits. This could lead to the risk of varying standards and inadequate protections for the grid and consumers.

The long and short-term plans for smart charging

The Government provided detail on both short and long-term plans for smart charging. The approach for Phase One of the project would see new non-public charge points required to have smart functionality, compliant with the British Standards Institution.

Phase Two is a work in progress, as the Government seeks views on what the long-term approach for operational requirements should be, with some potential options. The consultation proposes that a decision should be made between 2020 and 2022.

A potential response to the consultation is expected in 2020 and would dictate the rate and method of rollout of new EV infrastructure across the country in the future.

Review of Default Tariff Cap

The initial default tariff cap came in effect on 1 January 2019. It was designed as a temporary cap on standard variable tariffs and fixed term default tariffs. In accordance with the licence requirements, Ofgem run an update progress twice a year. This is so the default tariff cap reflects changes in the cost of supplying energy.

On 7 August 2019, Ofgem updated the cap levels to come into effect for the third charge restriction from 1 October 2019 to 31 March 2020. A fall in wholesale costs saw the level of the cap reduce from £1,254 to £1,179 for this period.

The default tariff cap is intended to be a temporary measure, with an upcoming review next year on whether it is still fit for purpose. The cap will remain in place until at least the end of 2020. The government will be able to choose whether to extend the cap beyond this, up to a maximum of 2023.

Dermot Nolan, Chief Executive of Ofgem, said, “The price cap requires suppliers to pass on any savings to customers when their cost to supply electricity and gas falls.

He added, “This means the energy bills of around 15 million customers on default deals or pre-payment meters will fall this winter to reflect the reduction in cost of the wholesale energy. Households can cut their bills further in time for winter, and we would encourage all customers to shop around to get themselves the best deal possible for their energy.”

CCC to publish Sixth Carbon Budget

The Committee on Climate Change (CCC) is scheduled to publish its recommendation on the level of the Sixth Carbon Budget in September 2020.

The Sixth Carbon Budget, required under the Climate Change Act, will provide ministers with advice on the volume of greenhouse gases the UK can emit during the period 2033-2037. The Budget will set the path to the UK’s net-zero emissions target in 2050, as the first carbon budget to be set into law following that commitment.

CCC Chairman, Lord Deben, advised the Government of the Committee’s intention in a letter to the Exchequer Secretary to the Treasury, Simon Clarke MP.

The letter sets out the Committee’s expectations for the Treasury’s planned review of how the costs of the transition to a net-zero economy by 2050 can be funded and distributed fairly.

The Committee called on the Treasury to conduct the review in its May 2019 advice to Government on setting a net-zero target for the UK. The Committee sees the review as crucial in ensuring a successful transition and recommend that the review is a key input to next year’s spending review and budget, and longer-term policy direction.

Lord Deben’s letter also recommends that the Treasury review develops a plan for funding decarbonisation and examines the distribution of costs for businesses, households and the Exchequer.

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General Election 2019 – A focus on energy and climate change

As the date of the General Election nears, there is little doubt that the focus is how the results will affect Brexit. However, as shown by polling carried out by YouGov, electoral concern for the environment is at an all-time high. 25% of voters place it as one of their top three issues facing the country today. This is up from 8% before the 2017 general election. A separate poll by Ipsos found 71% of people believe protecting the environment should be a priority, even if it slows economic growth.

This trend has been reflected in the released manifestos. Each party recognises the climate emergency and is dedicating space to energy and the environment.

Conservatives

The Conservative Manifesto

The Conservative party would maintain their current energy tariff cap policy. It also intends to introduce measures to lower energy bills further. In this effect, there would be a £9.2 billion investment in improving the energy efficiency of homes, schools and hospitals. The party would also support the creation of more environmentally friendly homes.

They state that their first Budget would prioritise the environment with investment in decarbonisation schemes, electric vehicle infrastructure and clean energy. They would also consult on the earliest date they believe appropriate to begin phasing out sales of new petrol and diesel cars.

There are aims to increase the capacity of the offshore wind industry from it’s current 8.5GW to 40GW by 2030. They would also help introduce new floating wind farms. Alongside development of renewables, the Conservatives would also support gas for hydrogen production and nuclear energy.

The moratorium on fracking in England would remain in place. This is unless the Conservatives believe there is scientific evidence that the practice can be carried out safely.

Further investment would include a £1 billion fund to develop “affordable and accessible clean energy”. £800 million to build the first fully-deployed carbon capture storage cluster. There would also be £500 million to help energy-intensive industries transition towards low-carbon technologies.

You can read the full manifesto here

Labour

The Labour Manifesto

The Labour party has committed to a ‘Green New Deal’. The aim is to achieve the majority of required emissions reduction by 2030.

Labour would create a Sustainable Investment Board, involving the oversight of the Chancellor, Business Secretary and Bank of England Governor. They would co-ordinate with trade unions and businesses to deliver investment to necessary areas. The Office of Budget Responsibility would be asked to incorporate climate and environmental impacts into its forecasts so as to properly evaluate decisions made.

They would also seek to bring the energy and water systems into public ownership. They believe this would allow the acceleration and co-ordination needed to upgrade networks at the speed and scale needed to transition to a low-carbon economy.

Labour’s plans would see:

  • A new UK National Energy Agency responsible for the national grid infrastructure and the oversight of the country’s decarbonisation targets.
  • Fourteen new Regional Energy Agencies to replace the existing District Network Operators (DNOs) responsible for decarbonising electricity and heat.
  • The supply arms of the ‘Big Six’ energy companies would be brought into public ownership to continue to supply households while helping consumers reduce their energy demands.

As part of Labour’s ‘National Transformation Fund’ £250 billion would be dedicated to investment in renewable and low-carbon energy and transport, biodiversity and environmental restoration.

Labour aims to deliver nearly 90% of electricity and 50% of heat from renewable and low-carbon sources by 2030. To this effect they would build 7,000 new offshore wind turbines, (this equates to around 52GW) 2,000 new onshore turbines, “enough solar panels to cover 22,000 football pitches” (roughly 157km2) and new nuclear power. Labour would also trial and expand on tidal energy and invest in hydrogen production.

The party will aim to upgrade almost all of the UK’s 27 million homes to the highest energy efficiency standards. They state that this would reduce the average household energy bill by £417 per year by 2030. It also aims to tackle fuel poverty. All new homes would be required to meet a zero-carbon homes standard.

The Labour party would introduce a Climate and Environment Emergency Bill to set out new binding standards for decarbonisation and environmental quality. In addition, they would introduce a new Clean Air Act in line with World Health Organisation (WHO) limits for fine particles and nitrous oxides. The party would aim to end new sales of conventional petrol and diesel vehicles by 2030.

You can read the full manifesto here

Liberal Democrats

The Liberal Democrat Manifesto

If elected, the Liberal Democrats would immediately implement a ten-year emergency programme designed to cut emissions substantially. They would then phase out emissions from remaining hard-to-treat sectors by 2045 at the latest.

The party has identified that their first priorities upon entering government would be:

  • An emergency programme to insulate all Britain’s homes by 2030, cutting emissions and fuel bills and ending fuel poverty.
  • Investing in renewable power so that at least 80 per cent of UK electricity is generated from renewables by 2030 – and banning fracking for good.
  • Protecting nature and the countryside, tackling biodiversity loss and planting 60 million trees a year to absorb carbon, protect wildlife and improve health.
  • Investing in public transport, electrifying Britain’s railways and ensuring that all new cars are electric by 2030.

Specifically, they would aim to accelerate the deployment of renewable power, providing more funding and removing the current government’s restrictions on solar and wind and building more interconnectors to improve security of supply. The party aims to reach at least 80% renewable electricity in the UK by 2030.

The Liberal Democrats would also seek to cut energy bills and reduce fuel poverty by providing retrofits for low-income homes to improve energy efficiency standards. They would introduce a zero-carbon standard to all new homes and non-domestic buildings by 2021. The party would also increase minimum energy efficiency standards for rented properties.

There would be a focus on investment in carbon capture and storage facilities and support to companies on cutting emissions. The party would also pass a new Clean Air Act, based on WHO guidelines.

You can read the full manifesto here

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