DAYS after the government published both its Clean Growth Plan and draft legislation paving the way for an energy price cap, figures from across Britain’s energy industry gathered with plenty on their minds.
More than 200 people representing suppliers, generators, the distribution network and various support services packed London’s QEII Conference Centre to discuss Transitioning and Transforming our Energy Industry.
And while everyone was united around lowering emissions, there was plenty of debate around how best to reach a lower-carbon future.
The first part of our round-up highlights six areas of debate:
There’s some industry support for price cap legislation
Steve Harris, of the UK’s fastest-growing supplier, Bristol-based OVO Energy, said: “It’s too easy for suppliers to make profits from customers who don’t switch and the price cap makes that more difficult, and that’s a good thing. Efficient suppliers can still make reasonable profits. Inefficient suppliers would need to look at their cost base and no longer rely on overcharging.”
Alongside him on the “Last Chance Saloon” panel on pricing, policy and regulation was Micheal Lewis, chief executive of Big Six giant E.ON, who had previously criticised the planned cap. He refused to be drawn on whether the industry might mount a legal challenge to the cap, and repeated his argument that the real problem was a lack of consumer engagement – customers failing to seek out the best deals – rather than price.
Lewis defended the incumbents, saying competition was already strong. And he said his company would take customers off the much-criticised standard variable tariffs and use the installation of smart meters as a way of engaging with customers to help them find the best rates.
But could it represent bad news for small businesses?
Martyn Young, of the Federation of Small Businesses, asked the panel: “With the energy customers getting protection from the price cap, are we going to see small and medium-sized businesses as the sacrificial lamb?”
Lewis replied: “We would certainly not seek to increase our profit in one sector but… as soon as you start to arbitrarily intervene in one market there are unintended consequences.”
And David Bird, of Warwickshire’s Co-operative Energy, said SMEs are often already be losing out, particularly if they were getting a bad deal from brokers. “When you look at the pricing ladder in SME markets, there’s more variance than in domestic market so you could argue there’s a lot of issues,” he said.
The Clean Growth Plan was broadly welcomed
Energy UK’s chief executive Lawrence Slade said industry would work with government to deliver key goals. In particular, he said the commitment to 2028 of the Energy Company Obligation – which requires large suppliers to work with installation firms to fund home efficiency improvements – would “give a long-term horizon to energy efficiency supply chain”.
“That should encourage innovation, that should encourage investment and help bring prices down which means we can insulate many more houses at lower cost,” he said.
But not everyone was happy
Felix Lerch, UK chairman of flexible gas storage provider Uniper, saw gas continuing to play an important role. “Gas-fired power stations have an important role to play in supporting energy generation by renewables,” he said. “They are capable of smoothing out the peaks and troughs and help keep the grid stable.”
However, Rachel Ruffle, managing director of Renewable Energy Systems, argued the traditional view of a ‘trilemma’ of balancing energy security, accessibility and affordability, and environmental sustainability was no longer valid. “There’s no trilemma but a choice between smart, flexible grid plus storage and renewables or continue with the mish-mash we have at the moment,” she said.
“Continuing to invest in large inflexible plant risks that plant becoming a hindrance in the future,” she said, arguing that such power stations would not be compatible with local balancing, where the grid draws from neighbourhood sources such as batteries, household solar or potentially hydrogen storage to meet fluctuating demand.
“The Clean Growth Plan could have done with some honest subtitles,” she complained, adding that she was disappointed at the lack of importance placed on onshore wind.
And confusion reigns over central heating
Colin Calder, chief executive of PassivSystems which uses smart tech to manage solar panels and district heating systems, said: “It’s interesting that in the Clean Growth Plan it says decarbonising heat is our most difficult policy… yet if you then look at the money that’s dedicated to solving it, you get £184m.” By way of contrast, some £460m was set aside to support work around nuclear fuels.
Amid complaints about a lack of clarity over how are homes will be heated (and cooled) in future, Calder argued: “You can’t go on telling consumers that you can keep buying gas condensing boilers.” The government has set a target to effectively eradicate gas boilers in favour of low-carbon alternatives by 2050 and the panel debated whether it was the job of ministers or industry to work out whether the best solutions involved technology like heat pumps, which take advantage of thermal energy, or hydrogen storage.
“We owe it to consumers to be able to tell them what they do in the next couple of boiler replacements,” Calder said. One answer might be for energy companies to retain ownership of expensive replacement heat-pump or hydrogen boilers and deliver a contract to provide a set number of hours of hot water or heating at a certain temperature each day. “It’s a radically different model but one that we as an industry must discuss,” he added.
Philip New, of the government’s Energy Systems Catapult, said gas might continue to play a role in covering peak demand as part of a hybrid system providing central heating. But he added: “We believe individual localities in places will move towards their own solutions or portfolios of solutions.”
Are we missing opportunities?
Rowena McCappin, of electric boiler maker Glen Dimplex, said the UK’s 2.4m households heated by electricity – 1.8m through storage heaters – were often overlooked. And she pointed out that not only were storage heaters designed to take from the grid at times of low demand, when electricity is cheaper, but that smart tech could allow for demand-side response which would allow them to take advantage when renewable power was plentiful and cheap and turn down when wind and solar power was scarce.
“Of those 1.8m storage heater homes, there’s a large proportion of them getting ripped out and only 40% of those are getting replaced with storage systems, which means that the UK is losing that capacity,” she said.
Read the second part of the Tribune’s round-up next week.