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Tue, 22 September 2020

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The Big Energy Debate

The Big Energy Debate

Institution of Engineering and Technology | Institution of Engineering and Technology

8 min read Partner content

A panel of energy experts, including representatives from the IET and the NIA urged a future government to ensure there was policy stability around energy so that investors felt confident, and to engage with the public to change attitudes to energy providers, at a fringe event hosted by the Guardian.

Damian Carrington, head of environment at the Guardian, opened the debate by asking the panel what they would like to see in the Conservative manifesto for the next general election.

Baroness Verma, Parliamentary Under-Secretary for the Department of Energy and Climate Change, began by saying when the government came into power in 2010 it inherited an underinvestment within the energy sector.

She said energy security and cost were real issues, but through the Climate Change Act 2008 there was a mandatory need to reduce carbon emissions. Verma said the Government wanted to see long-term planning and security for investors.

She said new initiatives the Government had introduced needed to bed-in, such as smart meters from 2015 – this would take five years. She said Electricity Market Reform (EMR) had enabled investors to know there was long-term thinking in the UK.

She highlighted the importance of making sure the British public understood the complex debate, and said “silly headlines”, such as the suggestion from Labour in 2013 that it would freeze energy bills, were unhelpful because they had shaken the investor community.

Finally, she said the Conservative Party would continue doing what it was already doing when it got into government in 2015, and it would “do it better”.

Huub de Rooijen, head of offshore wind for the Crown Estate, began by saying energy was invisible until it went wrong, and that it was taken for granted. He said Crown Estate managed the sea beds around the UK and had huge resources.

The country needed to strive towards a diverse energy supply, because it needed robustness, and one that was low-carbon, he said. Offshore wind power represented a genuine opportunity for growth, and this resource around the shores of the UK was already powering four per cent of the total power in the country. He added that with current investment promised by the Government, that level was set to grow to ten percent by 2020.

Phil Jones, chief executive of Northern Powergrid, said if there was a perceived shortage of market activity, the government had to “get in, do what it needs to do, and then get back out again”. He added that there had been too much tinkering from the Government.

His second want was a commitment to independent regulation. Thirdly he said the most important issue with energy was security. He said this mattered above everything else: “If that’s green, great, if not we should go to something secure and then go to green over time”.

Finally, Jones suggested if there was a cost for helping the most vulnerable in society to access energy, it was regressive for that to be paid through energy bills, and the government could consider covering that cost through taxation.

Matthew Knight, head of business development at Siemens UK Energy, said cost was really important. He said with 13 manufacturing sites in the UK the company needed to be competitive with other countries. He said the best way to keep costs down was by setting a clear policy that was stuck to.

He said there were many elderly power stations in the UK that needed to be replaced. He said whatever they were replaced with they would not be replaced at the market price of £40 per megawatt-hour (MWh) but rather at a cost of £80 per MWh.

He gave the example of Hinkley Point nuclear power station, which he said was an £18bn investment, and of that £8bn was the cost of borrowing money at a higher rate than if the government was borrowing. He said about a third of the cost of offshore wind was the cost of finance. He said if there was a clear direction of travel from the next government, it would allow the sector to raise the money it needed to invest.

Janine Freeman, head of UK & EU public affairs at National Grid, began by explaining that National Grid’s role was to connect people to the energy generators, but it did not generate power itself. She said the company was set to invest £20bn over the next eight years in that infrastructure.

She said keeping the cost of capital down was one of the biggest challenges in the industry and added that creating a stable policy backdrop and giving investors certainty helped.

In terms of priorities she said one was keeping EMR. To underpin that, she wanted politicians to achieve public support on the direction of energy policy, saying it was important to engage the public on this very technical debate.

Question and answer session

Carringon asked the panel about the £50 that had been taken off bills. He asked what the Government could do better under Eco and the Green Deal.

Verma said Eco had been extended to 2017 and 600,000 more homes would have access to Eco. She said the fact the Green Deal was a long-term programme, and everyone who had had an assessment had taken up at least one measure, suggested the programme had not failed.

She added that it was important not to do quick-fixes, and that the UK had some of the least energy efficient homes in Europe. She said some measures were costly and took a long time.

The chair asked Verma how many homes will have been adapted by the time of the election. She said the issue was not about numbers, but rather the measures and how they were impacting local communities.

Carrington next asked if there was a way the Government could reduce the cost of capital, potentially by underwriting.

Rooijen said stability in the market was affected by external drivers, such as technology, which was changing rapidly. He said the political environment was also changing rapidly internationally. But giving credit to the Government, he said EMR had only been in place for a short period and needed to be given time to deliver what it was set out to do.

Carrington questioned how expensive wind power was. Rooijen replied by saying “I’m not going to debate that offshore wind is a heck of a lot more expensive that what you get out of an old coal plant”. However, he argued, energy prices were not rising because of green subsidies. He said the technology was improving and prices were in fact falling.

Carrington asked Verma if levies placed on bills were regressive. She replied by saying the Prime Minister had taken action because people were struggling. Next she said collectively, all the measures the Government was taking would help lower bills.

She said the debate around the energy sector had been slanted around the cost of energy going up. But she argued global prices were something no government could control and said most of the increase in price was because of growing international rates.

Knight responded that energy was complicated and did not fit into natural political instincts. He said there was no natural political response to energy and the political debate around it was badly informed.

“Most of what you think about energy is wrong,” he said and added that at conference he had heard some “myths”.

On the cost of supporting wind turbines, he said they cost the average tax payer £20 through subsidies. He said the average energy bill had risen by £500 over the last six years and of that increase, about £450 was down to the international price of gas.

He commented that many people suggested solutions such as fracking could dramatically reduce costs. He said this was not the case.

Freeman said energy efficiency was often lost in this debate. She said she saw energy evolving in a way by which supply would react to demand by rising or falling at different times of the day.

Howard Ward, Auditel's energy services director, suggested the energy companies should break down energy bills to show customers where costs were coming from, such as a green levy.

Jones said his organisation did not send bills to customers, which made the idea impossible. Freeman said this was a good way to engage the public and something National Grid would be able to do.

An audience member asked the panel what they thought of plans to install interconnectors between Norway and the UK to import its excess energy.

Rooijen replied that interconnectors were a good idea, and the Crown Estate was actively working in the market to encourage the deployment of interconnectors, and added they could help to balance out any fluctuations of power, such as wind power in the UK, by supplementing it with hydro from Norway.

Knight said there was enormous potential in Norway. He added that Siemens built interconnectors and this was an idea the company was keen on. He said a wider European network reduced the effects of weather on energy generation, and the more counties that came together, the better.

Verma said the Government supported interconnectors.

The panel was asked whether they thought solar power would be a big disrupter to the energy market and render their companies irrelevant.

Rooijen said the UK had just entered the ‘big six’ in terms of solar PV insulations as it now surpassed the threshold of 5gw solar PV. He said Germany could generate 30gw of power into the grid, which was disruptive. He said this was a reality in a changing energy system.

Read the most recent article written by Institution of Engineering and Technology - IET Responds to Lord Foulkes on Climate Change

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