184.National Grid reported in 2018 that “the three drivers of decarbonisation, decentralisation and digitalisation are transforming the energy landscape”. Although this Report has focused on decarbonisation, decentralisation (the increasing use of smaller scale power generation, storage or management technologies, often situated close to consumers) and digitalisation (the increasing use of digital technologies to monitor and manage energy use) are important trends that will impact upon, and potentially facilitate, the decarbonisation of the UK’s energy system. An additional trend highlighted during our inquiry was the increasing interdependence of previously distinct sectors such as power generation, transport and heat. This Chapter examines some of these trends, as well as discussing the roles of different stakeholders in the UK energy system.
185.The UK energy system has historically been ‘centralised’, with electricity being generated by a small number of large power stations and supplied to consumers via transmission and distribution networks. These power stations have mostly used fossil fuels and have been able to vary their output to match demand. As the power sector decarbonises, renewable technologies such as wind and solar power (which we discussed in Chapter 4) are increasingly being deployed. The output from these renewable sources is typically weather- and time-dependent, with far less scope for control. Furthermore, these new sources of power are being deployed in smaller units and closer to consumers than traditional power stations. This increases the complexity of power flows around the distribution networks. Ofgem, the energy markets regulator, told us that the reduced control of power generation output combined with the decentralisation of power supply “poses new challenges in making sure the electricity system efficiently balances supply and demand and manages network constraints”.
186.In response to these trends, the Government and Ofgem together published a ‘Smart Systems and Flexibility Plan’ in 2017. The Plan set out 29 proposed actions, including:
Duncan Burt, Director of Operations for National Grid System Operator, told us that the plan was “the right measure at the right time”. Randolph Brazier, Head of Innovation and Development at the Energy Networks Association, similarly told us that the Association “very much supports the smart systems and flexibility plan”.
187.In a 2018 ‘progress update’, the Government listed 15 of the actions in the plan as “in progress” and 15 as “implemented” (one new action was added to the original 29). Reviewing the progress of the plan in 2019, the National Infrastructure Commission reported that the Government “has been supportive of smart power and has made good progress in many areas”. Randolph Brazier, representing the Energy Networks Association, similarly told us that his organisation believed the plan was “making good progress”. Nevertheless, the National Infrastructure Commission report identified a few areas for further attention including three “priorities for 2019”:
188.Dr Jonathan Radcliffe, of the University of Birmingham (and Specialist Adviser for this inquiry), noted that “the transition to a decarbonised economy presents challenges to energy systems by reducing their flexibility as an increased proportion of energy comes from variable renewable energy sources”. Many other submissions, including from National Grid and Ofgem, similarly highlighted the growing proportion of power provided by intermittent sources, and the consequential need for flexibility. Dr Radcliffe told us that “energy storage technologies are one option for adding flexibility back into an energy system and analysis has shown that they have the potential to be part of a cost-effective transition to a low carbon and secure energy system”, clarifying that different storage capabilities would be needed to manage:
Dr Radcliffe said that his team’s “analysis of the energy system through the 2020s suggests that technologies that can store large quantities of energy […] will be important”. Randolph Brazier, Head of Innovation and Development at the Energy Networks Association, and Professor Nick Eyre, Director of the Centre for Research into Energy Demand Solutions, similarly said that deployment of sufficient long-term inter-seasonal energy storage would be the greatest challenge (see also paragraph 140).
189.Several witnesses argued that the Government should aim to support the development of long-term energy storage technologies. For example, the Durham Energy Institute told us that “significant intervention at the state level and investment is needed to reach the scale of storage required to make our energy system truly resilient and low-carbon”. The Institute said that this “could be achieved through direct investment in research and development, subsidies or by indirect market mechanisms such as requiring energy suppliers to implement a certain level of storage and tax breaks for companies who introduce storage”. Dr Jonathan Radcliffe similarly told us:
Our review of international energy storage policies […] suggests that direct technology support for energy storage has been effective at increasing deployment in a number of markets. Such support has taken a number of forms including direct support for capital investment in energy storage devices, mandated targets, and co-subsidies for renewables with energy storage; forms of which have been seen in Germany, Japan, and states in the US.
He highlighted the ARPA-E GRIDS programme in the USA, which recently launched to support the development of “storage technologies that can store renewable energy for use at any location on the grid at an investment cost less than $100 per kilowatt hour”. Randolph Brazier clarified that long-term energy storage technologies existed, but that “they have not been tested at scale”.
190.Dr Radcliffe told us that although “large-scale energy storage of electricity and heat could be a key component of the future energy system […] policy/market signals that would encourage investment are lacking”. In keeping with the National Infrastructure Commission’s recommendations, Eaton, a global power management company, told us that “there is currently no statutory definition for storage, which has significant detrimental impact on the technology’s bankability”:
The Government’s current plan to classify storage as a subset of generation provides short-term certainty, but is sub-optimal in the long term. In order to unlock the full potential value of storage, it needs to be defined in law as a separate asset class from generation systems which have completely different economics.
191.The lack of a suitable legal definition for storage was also identified to us as a major barrier to the deployment of energy storage technologies by the Solar Trade Association and Highview Power. The view that storage should not be defined as a subset of generation is reportedly widespread, given the additional roles it can play in the energy system. Although the Government acknowledged the need for electricity storage to be defined in primary legislation in its ‘Smart Systems and Flexibility Plan’, Tim Lord, Director of Clean Growth at the Department for Business, Energy and Industrial Strategy, told us that the Government had “already taken a range of steps to enable storage to participate more fairly in the market” and that he was “not sure about any specifics on further legislation that people are seeking or require”.
192.The development and deployment of energy storage technologies will be critical to the UK’s transition towards a flexible, low-carbon energy system. It is disappointing that the Government has not made the Parliamentary time available to define energy storage in primary legislation. The Government must ensure sufficient support for the development and deployment of energy storage technologies. Large-scale, inter-seasonal storage currently appears to pose the greatest technical challenges, and should be supported through demonstration projects, including in future large-scale trials of low-carbon heating. The Government should provide a dedicated legal definition of energy storage in primary legislation as soon as possible. Such a commitment should be included in the next Queen’s Speech, if Parliamentary time is not found for such legislation before then.
193.Energy storage is not the only option for increasing flexibility and managing increased levels of intermittent renewable power generation in the energy system. One alternative is to better match demand to supply so that power is used when it is available and is not required when it is not available, an approach known as ‘demand-side management’. Duncan Burt, Director of Operations for National Grid System Operator, told us that one “fundamental” element of a smart energy system that could provide such demand-side management was the replacement of traditional electricity and gas meters with smart meters. Smart meters measure a property’s electricity or gas consumption (or electricity generation, where applicable) in real-time and can periodically relay this information to the energy supplier. Although consumers are expected to benefit immediately from the installation of a smart meter on their property by:
the main benefits of smart meters are expected to accrue to consumers and to the wider system by enabling demand-side management. In order for consumers to use electricity when it is most abundant, and to be rewarded for doing so (with lower energy costs, for example), their appliances must be able to respond to information about the current availability of electricity and suppliers need to know exactly when energy was consumed—this requires smart metering.
194.The improved information on, and control over, energy consumption might also allow for greater innovation in the energy system. For example, companies may start offering ‘heat as a service’, where consumers pay for a pre-agreed level of comfort rather than for each unit of energy that they consume to heat their homes (such contracts would incentivise energy suppliers to provide the energy for heating as efficiently as possible). By supporting energy supply contracts that encourage consumers to use energy when it is cheapest, smart meters may also help to reduce the peak demand for energy. This would reduce the need for power generation capacity and grid reinforcement. A 2016 study conducted by Imperial College London and the Carbon Trust estimated that flexibility could yield net savings for the UK energy system of £17–40bn by 2050.
195.The Government has said that it is “committed to all homes and small businesses being offered smart meters by the end of 2020”. As part of their licence to operate, energy suppliers in Great Britain must “take all reasonable steps to have installed a smart meter” by the end of 2020. However, as of December 2018, 12.7m smart meters were in operation in domestic properties across Great Britain, compared to 37.1m traditional meters. The National Audit Office has said that “there is no realistic prospect of installing smart meters in all eligible premises covered by the rollout obligation by 2020”. Energy suppliers have said that they are aiming for 70–75% of households to have a smart meter by the end of 2020, which Claire Perry MP told the Business, Energy and Industrial Strategy Committee in January 2019 was “achievable”. However, in 2018, 4.9m smart meters were installed and if this rate were sustained, the roll-out would achieve around only 46% coverage by the end of 2020. Further, installations rates have fallen since peaking at the end of 2017.
196.Duncan Burt, Director of Operations for National Grid System Operator, told us that although the roll-out was “taking time”, National Grid System Operator believed that the “strategy will deliver”. Professor Nick Eyre, Director of the Centre for Research into Energy Demand Solutions, told us that he thought it was “much more important to do the smart meter roll-out well than to do it quickly”. Dhara Vyas, Head of Future Energy Services at Citizens Advice, expressed a similar opinion in oral evidence to the Business, Energy and Industrial Strategy Committee in January 2019.
197.Although energy suppliers should make all reasonable efforts to install a smart meter, households and businesses are not required to accept one. Indeed, the National Audit Office has reported that “consumer behaviour has proven to be more of a barrier to mass uptake of smart meters than the [Government] anticipated”. Under half of households offered a smart meter reportedly accepted one in 2017, although the Centre on Innovation and Energy Demand noted that there was “very little data available about acceptance rates”. It recommended that energy suppliers collect and publish data on acceptance rates and the reasons for consumer rejection, in order to identify options for increasing consumer acceptance. Professor Eyre told us that the smart meter roll-out should be treated “not just as a technology problem but recognising that people’s trust in this technology and their ability to use it effectively to reduce their costs is absolutely critical”. One problem has been the functionality of the smart meters, with the first models ceasing to operate smartly if the consumer changed energy suppliers. A new generation of smart meters unaffected by this fault has now been developed, however, and the old meters are starting to be updated remotely to overcome the problem.
198.In order for large numbers of consumers with smart meters to adjust their energy consumption to better match supply, it is likely that they will need to be financially rewarded for doing so. Although some energy suppliers currently offer tariffs that charge consumers according to when they consume energy, these are uncommon. One barrier is the current settlement framework for network charges, under which consumers’ consumption is typically estimated rather than measured. Since their suppliers pay the estimated charges, based on average consumer profiles rather than actual usage, the suppliers are then not exposed to the true network usage cost of supplying that consumer, which provides no incentive for the supplier to offer tariffs rewarding consumers for using electricity when it is abundant and cheap. Ofgem told us that it was currently considering the case for market-wide ‘half-hourly’ settlement, under which all suppliers would be charged according to the actual use of their consumers over every half-hour period. Ofgem said that it would be making its final decision on market-wide settlement reform in the second half of 2019, but warned that “the implementation of market-wide half-hourly settlement depends on the rollout of smart meters”:
A critical mass of smart meters will be needed to realise the full benefits of market-wide half-hourly settlement. To manage consumers without a smart meter when market-wide half-hourly settlement is implemented, a proportion of the energy market may need to continue to operate through some form of profiled data. In these circumstances, there may be costs to maintain the non-half hourly arrangements, which constrains the potential benefits of half-hourly settlement.
199.The roll-out of smart meters is one important enabling component of a flexible energy system that can match demand to supply, allowing increased deployment of intermittent renewable power generation. However, the Government’s roll-out is severely behind schedule, in part because the original scheme had fundamental design faults, as highlighted by our predecessor Committee and the then Energy and Climate Change Committee. The Government must ensure that it takes all reasonable steps to achieve a national roll-out of smart meters as soon as possible. In order to reduce consumer resistance to smart meters, the Government should run public engagement initiatives to raise public awareness that by having a smart meter installed, consumers can contribute to long-term reductions in the UK’s greenhouse gas emissions. Ofgem should require energy suppliers to collect and publish data on consumer acceptance rates for smart meter installation, and the reasons given by consumers for rejecting a smart meter. The Government should then be ready to act on this information to drive greater installation rates of smart meters, for example by introducing a consumer incentive mechanism. It should also require installation of a smart meter in properties without one whenever the owner or renter changes.
200.Market-wide half-hourly settlement of energy consumption costs will incentivise energy suppliers to offer tariffs that reward consumers for using energy when it is abundant, helping to enable higher levels of intermittent renewable power generation. However, Ofgem has highlighted the dependence of market-wide half-hourly settlement on widespread smart meter deployment. Given the low current uptake of smart meters, this indicates that there could be very significant delays in the introduction of market-wide half-hourly settlement and the benefits of widespread ‘smart’ tariff adoption. Ofgem should clarify what it determines to be the critical mass of smart meters required for market-wide half-hourly settlement. Since the introduction of market-wide half-hourly settlement will help to catalyse smart meter take-up, Ofgem should not set an overly stringent critical mass, and should be prepared to recover the costs of incomplete smart meter deployment from the suppliers of those consumers who do not have smart meters (in a way that protects vulnerable consumers).
201.The Capacity Market was established by the then Government in 2013, to address its concerns that falling power generation capacity combined with increasing levels of intermittent renewable generation could weaken the reliability of the electricity network. Under the Capacity Market framework, National Grid estimates future peak electricity demand and determines a corresponding quantity of ‘back-up’ capacity required to ensure sufficient supply. It then holds a lowest-cost auction for those willing to offer capacity. Successful bidders commit to provide electricity when needed in return for steady capacity payments. Two auctions are held each year, one to source capacity for four years’ time (the T4 auction) and one to source additional capacity for one years’ time (the T1 auction). All T1 contracts last one year, but T4 contracts are available for up to 15 years for new facilities, for up to three years for refurbished facilities and for one year for existing facilities. If contracted capacity providers cannot deliver electricity when required, they face financial penalties. The cost of the Capacity Market is shared among electricity suppliers.
202.Generation (i.e. back-up power generation plants) and non-generation (e.g. voluntary demand reduction schemes) approaches are eligible to apply to supply capacity in the Capacity Market. However, non-generation suppliers may only apply for year-long contracts. The first T4 auction took place in 2014 for delivery in 2018/19. Although the majority of capacity was contracted to existing gas-powered plants as expected, the auction also supported a significant increase in small-scale diesel generators. Highview Power, a ‘liquid air’ energy storage company, told us that this effective support for diesel generators does “not align with the decarbonisation agenda”. Tim Lord, Director of Clean Growth at the Department for Business, Energy and Industrial Strategy, highlighted however that capacity contracted through the Capacity Market might be used relatively infrequently—only at specific periods of low supply or high demand—and argued that the Capacity Market’s support for fossil fuel technologies was therefore “not necessarily quite as problematic” as a scenario in which such technologies were being operated continuously. Nevertheless, the results of the first T-4 auction will lead to around £1.2bn being provided to fossil-fuel generators over the course of the contracts agreed.
203.Duncan Burt, Director of Operations for National Grid System Operator (which administers the Capacity Market), suggested that there was no technical reason why the Capacity Market could not make greater use of technologies such as batteries, interconnectors and demand-side response systems, without the need for diesel-powered generators. Professor Nick Eyre, Director of the Centre for Research into Energy Demand Solutions, told us, however, that “it is clear that the Capacity Market has not been constructed to be a level playing field” for all technologies. Although the Capacity Market is open to generation and non-generation technologies, non-generation suppliers may only apply for year-long contracts. Professor Eyre argued that “it would be sensible for a demand-side response to be able to get the same contract lengths […] as supply-side technologies” and noted that “there is also no allowance for energy efficiency and energy demand reduction” even though “it is done in a number of American markets”. Highview Power advocated “the introduction of a carbon emissions intensity limit” to the Capacity Market, as well as longer contract durations.
204.In 2014, Tempus, a company that manages voluntary demand reduction projects to provide capacity, took the European Commission to court, claiming that it did not sufficiently consider the compatibility of the Capacity Market with internal market and State Aid rules. The General Court of the European Union ruled in November 2018 that the European Commission did not examine with sufficient thoroughness the compatibility of the Capacity Market with State Aid rules. This has put the Capacity Market into a standstill, with no new auctions or payments under existing contracts permitted. The European Commission must now re-evaluate the compliance of the Capacity Market with State Aid rules, from which the Government has said it expects an Opening Decision “early this year”, with the final decision “following later in the year” (neither decision has yet been made). The Government has stated that “the General Court judgment ruled on procedural grounds and did not challenge the fundamental nature of the Capacity Market”, and that the ruling “does not change the Government’s view that the Capacity Market is the right mechanism to deliver secure electricity supply at least cost”. The Energy and Clean Growth Minister, Claire Perry MP, told the Business, Energy and Industrial Strategy Committee in January 2019 that the Government was “working closely with the European Commission to ensure that the Capacity Market can be reinstated swiftly”.
205.In line with requirements under the Energy Act 2013, the Minister has said separately that the Government would review the Capacity Market and its first five years of operation. It launched a consultation on this in August 2018 and published a summary of responses in March 2019. The Government’s summary of the responses concluded that “the Capacity Market was working as intended” although “there was scope to improve its design in some respects”, in particular to ensure that the technology mix acquired through the market minimised costs and achieved “a range of energy objectives” rather than security of supply alone. The summary did not provide detail on specific proposals, but noted that the Government’s formal response would be published in summer 2019. The Government’s response to a separate consultation has also signalled its intention to allow certain renewable power generation technologies (solar and wind power) to compete in Capacity Market auctions from 2020 onwards.
206.Energy capacity secured through the Capacity Market supplies energy to the grid relatively infrequently throughout the year, and supports the co-deployment of increasing levels of intermittent renewable power generation. Nevertheless, contracts awarded through the Capacity Market provide funding for energy capacity technologies. So far, this has mostly supported technologies such as gas-fired and diesel generators, which are not in line with the UK’s ambition to reach net-zero emissions. In keeping with the UK’s ambition to move towards net-zero emissions, the Government should ensure that the Capacity Market supports low-carbon technologies as far as possible without detriment to the wider deployment of renewable power generation. As it reviews the success of the Capacity Market to date, the Government should consider introducing a minimum proportion of Capacity Market funding that must be awarded to low-carbon technologies.
208.The market regulator, Ofgem, sets what costs energy network operators can recover from consumers’ energy bills through its ‘RIIO’ (‘Revenues using Incentives to deliver Innovation and Outputs’) framework. Ofgem explained to us that “the RIIO model of price regulation encourages innovation by incentivising network operators to behave in particular ways, for example reducing the number of times electricity consumers experience power cuts”. Ofgem is currently reviewing this framework, ready to operate RIIO-2 from 2021 for gas distribution and gas and electricity transmission networks, and from 2023 for electricity distribution networks. It has said that it will “retain an innovation stimulus package, limited to innovation projects that might not otherwise be delivered under the core RIIO-2 framework”.
209.The Energy Networks Association told us that the first RIIO framework had had “significant success in encouraging network companies to bring forward innovative projects and embed a culture of innovation within their organisations”. It said that it was “vital, therefore, that innovation in networks continues to be strongly incentivised under future price controls, as the networks deliver their crucial role in developing the complex future energy system”. SGN, a gas distribution company, similarly told us that “sufficient funding for innovation […] as part of the [RIIO-2 gas distribution] network price control period […] will be crucial to enable timely future heat policy decisions from Government”, while Sam French, representing the Decarbonised Gas Alliance, agreed that “RIIO-2 is going to be really important” for the decarbonisation of gas. However, following publication of Ofgem’s proposals for RIIO-2, Randolph Brazier, Head of Innovation and Development at the Energy Networks Association, told us that the Association advocated “more support for innovation in RIIO-2 [than what was in Ofgem’s proposals], along the lines of what we have in RIIO-1”. SSE, a gas and electricity distribution network operator, has also warned that “the proposals put forward by Ofgem in developing the RIIO-2 model now put [the first price control framework’s] success at risk”. It suggested a series of technical amendments to Ofgem’s proposed framework, including the retainment of the Network Innovation Allowance and the Network Innovation Competition from the first framework. These two elements were recently highlighted by a cross-sector strategy as having been “key to driving success forward”.
210.In addition to some witnesses expressing their hope for the new price control framework to continue the success of the first, we also heard from stakeholders advocating greater change. For example, Ovo Energy, an energy technology company and supplier, told us that “current incentive structures ought to do much more to accelerate change in the energy system” and should encourage companies to incorporate innovation into business-as-usual, “rather than simply conduct pilot projects with no follow-on”. It made specific recommendations for the new framework, including:
Ovo Energy has highlighted the last point in particular, arguing that the current price control framework “fail[s] to recognise and prioritise the procurement of flexibility services over alternative options such as investment in new network infrastructure”, and advocating with other stakeholders that network operators be “obligated to tackle network constraints by procuring flexibility services as a first measure, rather than by building expensive new network infrastructure”.
211.The Energy Networks Association, representing Great Britain’s energy distribution network operators, said that it “welcome[d] the recognition [that Ovo Energy’s campaign] gives to the important and exciting role that energy networks have to play in delivering a smarter, cleaner energy system”, and argued that “energy networks are already delivering [flexibility services] across the country”. In 2018, the Association made a ‘flexibility commitment’, with the six distribution operators in Great Britain committing to:
The Energy Networks Association has since published six principles that the network operators will adhere to in order to fulfil their commitment, and included case studies of how operators have acted upon this so far.
212.Regulation of UK energy markets will play a key part in the development of a smart and flexible energy system. The RIIO price control framework has helped to support innovation in the gas and electricity networks, but it is vital that the second price control framework promotes even greater levels of innovation as the energy networks undergo a period of significant change. Ofgem must ensure that its second price control framework does not dilute its support for innovation and that the framework should further enable and incentivise network operators to innovate as part of their core business, rather than through standalone projects. Ofgem should work with network operators, energy suppliers and flexibility services providers to ensure that flexibility systems are always considered and deployed ahead of infrastructure construction, where possible and affordable.
213.As discussed in the previous section (see paragraphs 208 to 212), the energy markets regulator has a key role to play in the decarbonisation of the UK energy system. The powers and duties of the regulator are provided for by a variety of UK and EU legislation, but its “principal objective” is to “protect the interests of existing and future consumers in relation to gas conveyed through pipes and electricity conveyed by distribution or transmission systems”. These interests are defined to be “taken as a whole” and explicitly include consumers’ interests in the reduction of gas- and electricity-supply emissions of targeted greenhouse gases. Ofgem told us that its role was to “to design and regulate markets and networks which incentivise the lowest cost transition to a low carbon energy system whilst remaining technology neutral”.
214.Despite this responsibility to consider consumers’ interests in the reduction of gas- and electricity-supply emissions of targeted greenhouse gases, we heard concerns expressed that Ofgem’s focus lay too strongly on lowering costs for current consumers. For example, Zenobe Energy, a battery storage operator, noted that the impact assessment for Ofgem’s proposed network charging reforms did not include criteria relevant to the UK’s emissions reductions targets. Indeed, Zenobe Energy told us that it thought that the proposed reforms would “undermine the UK’s position as a global leader in the development and deployment of storage and renewable technologies”. SSE, a gas and electricity distribution network operator, has similarly argued that Ofgem’s proposals for the next price framework “put too much emphasis […] on the short-term aspiration to exert downward pressure on customer bills” relative to the longer-term need for, and costs of, decarbonisation. These concerns about Ofgem’s proposed network charging reforms aligned with other evidence to our inquiry (see paragraphs 77 to 79).
215.At the request of the Government, the National Infrastructure Commission has launched an inquiry into the regulation of the energy, telecommunications and water markets, examining “what changes might be necessary to the existing regulatory framework to facilitate future investment needs […] while promoting competition and innovation and meeting the needs of both current and future consumers”. This is due to report in autumn 2019.
216.The energy markets regulator has an explicit duty to protect consumers’ interests in the reduction of gas- and electricity-supply emissions of targeted greenhouse gases, alongside other considerations such as minimising costs. However, there is no specific link between the regulator’s objectives and the UK’s emissions reduction targets. In addition, some have expressed concerns that the regulator focuses too heavily on reducing costs for current consumers, at the expense of contributing to the UK’s decarbonisation. When the Government reviews the upcoming recommendations from the National Infrastructure Commission on the future regulation of the energy market, it should consider the case for amending the energy market regulator’s principal objective so that it explicitly includes ensuring that regulations align with the emissions reduction targets set out in the Climate Change Act 2008.
217.Dr Jonathan Radcliffe, who leads the Energy Systems and Policy Analysis Group at the University of Birmingham and acted as a Specialist Adviser for our inquiry, told us that the trend for decentralisation in the energy system would “increase the importance of policy and regulation at a local level”. This is apparent from the range of issues relevant to local authorities discussed in this Report, including:
218.Dr Radcliffe told us that “a number of cities/regions are implementing their own energy innovation initiatives”, pointing to examples in the West Midlands, Aberdeen and the Humber, but argued that “there has been little consideration of the governance framework through which a more decentralised system can be coordinated”. Although Professor Nick Eyre, Director of the Centre for Research into Energy Demand Solutions, noted that there were “some excellent initiatives coming out of local government”, he indicated that this was far from universal. The Town and Country Planning Association concluded in 2016 that “local plans in England are not dealing with carbon dioxide emissions reduction effectively” and that “since 2012 climate change has been de-prioritised as a policy objective in the spatial planning system”.
219.Local authorities have a duty to include policies designed to mitigate climate change in local development plans, with 2019 guidance from the Government for English local authorities stating that their planning systems must aim to support “moving to a low carbon economy” alongside achieving “economic” and “social” objectives. However, this guidance was arguably weakened in 2018, with guidance requiring local authorities to “recognise the responsibility on all communities to contribute to energy generation from renewable or low carbon sources” removed and guidance on “building a strong, competitive economy” no longer referencing decarbonisation. Regen, a not-for-profit sustainable energy consultant, summarised:
Overall, there are suggestions that local planning authorities should have positive strategies in place and consider energy in relation to new developments, but there is little to require a more proactive approach. As a result, only authorities with the capacity and political drive to plan positively for low carbon will do so.
220.The Energy Systems Catapult has further argued that the new requirements were “primarily focused on enabling low carbon energy-related developments in spatial planning in which the focus is to balance demands for land use”, which it said was “conceptually different from local area energy planning, in which the focus is on achieving a balanced energy system while meeting social, economic and environmental objectives”. In contrast, Scottish local authorities are explicitly required to act “in the way best calculated to contribute to delivery of the [emissions reductions] targets” set by Scotland’s 2009 Climate Change Act. Randolph Brazier, Head of Innovation and Development at the Energy Networks Association, noted that Scottish local authorities have started to consider local whole energy system plans more than most English authorities. Highlighting the “vaguer” obligations placed on English local authorities compared to Scottish authorities, Professor Nick Eyre argued that “the role of local authorities in the energy system in England” ought to be made more specific.
221.With 115 councils in the UK, as well as the Local Government Association, having declared a ‘climate emergency’, it is, however, clear that limited local action on decarbonisation is not purely the result of weak obligations dampening ambition. Professor Eyre explained that there was “in many cases, very limited capacity for local government to respond clearly”. UK100, a network of local government leaders who have pledged to work towards “100% clean energy by 2050”, has similarly said that the ambition of local authorities is “stymied by a lack of capacity and capability when it comes to turning that ambition into reality”. With regards to local authorities’ access to finance for developments intended to reduce emissions, the Minister of State for Energy and Clean Growth, Claire Perry MP, highlighted Salix Finance, which offers interest-free loans to local authorities to make energy efficiency improvements, and told us that the Government had committed £10m to local energy hubs. Professor Jim Watson, Director of the UK Energy Research Council, told us, however, that “one problem with many local authorities, even those that are doing quite a lot, is that they are very dependent on specific income streams via specific programmes”:
We had a conversation with the Treasury about the mechanism that allows [local authorities] to build up a general capability in this area, whether it is about giving them obligations, or whatever, and the budget to match. When you talk to local authorities, you find that that is often the struggle—they get offices in place on the back of particular projects and programmes, but that does not necessarily mean that over a long term they will get the capability that enables them to make those sorts of planning decisions, unless they are very entrepreneurial and successful.
The Local Government Association has similarly reported, from a survey of local authorities, that the main barriers to local authorities’ investment in sustainable transport were a lack of revenue and capital funding and a lack of certainty over continued levels of funding.
222.The Energy Systems Catapult told us that, beyond access to finance, “the problem [local authorities] face is how to decide which options are most appropriate for their local area and in what order they should be prioritised”. Tanya Sinclair, Policy Director at ChargePoint, told us that many of the strategies adopted by local authorities were transferable and that there was “a need for greater sharing of information between them”. Identifying similar problems, the UK Energy Research Centre recommended in 2017 that the Government should “consider further the need for support agencies and shared services for local authority energy developments including national or regional energy agencies and specialist procurement organisations”. In an attempt to address both capacity and funding challenges, UK100 recently recommended that the Government launch a ‘Clean Energy Action Partnership’ programme under which local authorities would be invited to apply for competitive funding to support clean energy projects, with successful authorities provided with access to a new, central team of experts in addition to receiving the funding. UK100 said that, if the programme focused on proposals that could later be transferred to other local authorities, the Government could subsequently “ensure that successful approaches are applied at the national scale and supported into export markets where applicable”. This multi-stage approach ties in with the “evolutionary approach” to local area energy planning recommended by the Energy Systems Catapult, which suggested that the Government pursue an “initial emphasis on encouragement, facilitation and supporting funding”, moving towards “an obligatory approach in the mid-2020s” if this works well.
223.Local authorities have a vital role to play in the UK’s decarbonisation. Many local authorities are pursuing emissions reductions projects, but the capacity and capability for decarbonisation at the local level varies. The Government should introduce a statutory duty on local authorities in England and Wales, by Green Week 2020, to develop emissions reduction plans in line with the national targets set by the Climate Change Act 2008, and to report periodically on progress made against these plans. In preparation for this new obligation, the Government should establish centralised support to help local authorities develop decarbonisation strategies and deliver initiatives aimed at reducing greenhouse gas emissions. It should also support local authorities’ access to low-cost, long-term finance in order to enable the delivery of such strategies. The Government should adopt UK100’s proposals for ‘Clean Energy Action Partnerships’.
224.Greenpeace UK pointed out that, so far, “most UK carbon emission reduction has happened in the power sector whilst having little impact on most peoples’ day to day lives”, but that the future impact on consumers would be greater as more consumer-facing sectors such as transport and heating started to decarbonise. The Association for Decentralised Energy has argued that “it is simply not possible to decarbonise the energy system without the customer being central to the transition, because customers own so much of the equipment that causes emissions”. Indeed, the Committee on Climate Change has estimated that while 38% of the emissions reductions required for net-zero emissions by 2050 would likely be purely technological, 53% would require a combination of technological and societal change and 9% would largely entail societal or behavioural changes alone. Many submissions to our inquiry made similar arguments.
225.The most recent of the Government’s periodic surveys on public opinion towards climate change reported that 80% of the population were either “fairly concerned” or “very concerned” about climate change. The Government said that this was “the highest proportion of overall concern since the survey started and is driven by an increase in the proportion very concerned about climate change”. However, public awareness of how to take measures to support the UK’s decarbonisation is not always as great as its apparent concern on the issue. For example, the same Government survey found that 48% of the public had “never heard” of renewable heating systems, with just 6% claiming to “know a lot”. UK Research and Innovation similarly told us that although there was “a relatively high level of public awareness of the need to transition to low carbon alternatives” in some areas, for example regarding the uptake of low-emissions vehicles, “in others such as domestic heat, there is very low awareness and insufficient societal acceptance of the degree of disruption that such a transition will entail”. It told us that it was working with the UK Energy Research Centre and other sector stakeholders to design a programme, called ‘C3T’, that would “help improve public awareness of these challenges”, but stated that the programme:
does not yet have the sufficient momentum or Government awareness to give any certainty that it will make a meaningful difference in addressing current low levels of public awareness, or in ensuring the necessary behavioural changes to deliver this transition to a low-carbon economy.
226.With regard to raising consumer awareness, Graham Hazell, representing the Heat Pump Association, told us that “people would like to see an independent route for advice”. Many sources of information on emissions-reducing actions exist, from publicly-funded as well as private and third-sector organisations. However, David Weatherall, Head of Policy at the Energy Saving Trust, told us that “one of the areas where there have been cuts in England is in that provision of advice and support”. He said that in Scotland, “you can call the Energy Saving Trust acting on behalf of the Scottish Government”, who “would send an expert adviser to look at your home and help you to identify what you can do to take action”, which nearly 4,000 consumers chose to do in Scotland in 2018, of which 85% went on to take some action. These advisers are trained to deliver bespoke and locally-tailored advice on a range of low-carbon measures including energy efficiency, renewable power generation and electric vehicle use, and can act as the initial point of contact for applying for financial support from the Scottish Government for adopting such measures. In contrast, in England, the Government closed the energy saving advice service so that now there is only a website, which offers only generic advice.
227.Emissions reductions in the transport and heating sectors will involve greater impact on, and require greater involvement of, consumers than the decarbonisation of the power generation sector, which is where the UK has achieved the bulk of its emissions reductions so far. Although public support for measures to reduce emissions appears high, this is not always matched with awareness of what actions consumers can take to support decarbonisation. In co-ordination with existing organisations, such as the Energy Saving Trust, who work to raise consumer awareness of available emissions-reduction measures, the Government should publish an easily-accessible, central guide for members of the public explaining what measures individuals and households can take to support the UK’s decarbonisation.
228.The Government should re-introduce a telephone and visiting advice service in England which offers bespoke advice on measures such as residential energy efficiency and low-carbon heating and transport.
229.Researchers from Imperial College London noted that some consumers already used their “spending power” to support ‘ethical’ goods such as organic or fair trade products, and argued that if consumer goods were labelled with clear information regarding the emissions involved in their manufacturing and transport, the market could reward and incentivise lower-emissions products. Addressing the complexity of modern supply chains and hence the potential difficulty of tracking emissions, the research group further added that it had “devised a method to calculate the carbon footprints of all consumer goods” using machine-learning.
230.Product labelling already helps consumers choose products based on qualities such as healthiness, environmental impact and employee or animal welfare. The Government should explore the feasibility and potential benefits of establishing a standard for the emissions associated with the manufacturing and transportation of consumer goods, to enable retailers to label their products with emissions information and to enable consumers to factor this into their purchasing decisions.
231.The Committee on Climate Change has estimated that achieving net-zero emissions could cost around 1–2% of GDP by 2050. Professor Jim Watson, Director of the UK Energy Research Centre, highlighted “the need to implement this [lower-emissions] transition in a way that pays attention to equity, particularly to the fuel poor”, and to “address some of the arguments sometimes made that we are spending too much money and that there is a disproportionate burden on poorer consumers and citizens”. He suggested that this could involve “thinking about things like implementing upgrades to homes and targeting [the fuel poor] first”. Several stakeholders have pointed out that policies that ultimately derived funding from energy bills were more regressive than using general taxation. For example, Energy UK told us that supplier obligations like the Energy Company Obligation were “financially regressive as the costs are distributed among energy consumers regardless of their ability to pay” and said that it “strongly believes that the fairest and most progressive method of funding energy efficiency programmes is through general taxation”.
232.Professor Watson added that the Government should also consider “the industrial strategy benefits and jobs benefits [of decarbonisation], thinking about the regional economies and spread of those benefits in the way we implement those strategies”, adding that he did not think the Government was doing enough on this front. Menter Môn, a marine energy developer, similarly argued that “supply chain improvements and bringing jobs to the extremities of the UK, where unemployment is higher, and prospects are lower, should be a result of investment in clean growth”. Several submissions highlighted technological opportunities for low-carbon growth that would align with economic regeneration in disadvantaged communities, for example:
The Renewable Energy Association also flagged the “regional nature of both marine and geothermal technologies, which include Cornwall, Wales and Scotland”, and said that this “means they could be essential components of regional sector deals, crucial to growth in these areas”.
233.The decarbonisation of the UK’s economy is critical for the environment and is a legally-binding target for the Government. Although decarbonisation offers opportunity for economic growth, it will inevitably also entail costs. The Committee on Climate Change has estimated that achieving net-zero emissions could cost around 1–2% of GDP by 2050. It is important that these costs are shared fairly among citizens.The Government must ensure that its policies for achieving net-zero emissions consider the economic impacts on individuals. The Government should aim to cover the costs of measures through progressive means rather than through energy bills.
234.In line with the Government’s focus on ‘place’ in its Industrial Strategy, the Government should include the potential for supporting economic growth in disadvantaged regions in its determination of where to locate demonstration projects and other initiatives.
633 National Grid System Operator, ‘’ (2018), p8
634 For example, see: Energy Systems Catapult (); Ofgem (), para 35; Dr Jonathan Radcliffe (), para 19
635 ‘Flexible Electricity Systems’, , Parliamentary Office of Science and Technology, September 2018
636 The output from fossil fuel power plants can be controlled by varying the fuel input, subject to certain constraints. Nuclear power can in principle be controlled in the same manner, but in practice nuclear reactors tend to be run at a continuous rate.
637 Energy Networks Association (), para 13
638 Ofgem (), para 6
639 HM Government and Ofgem, ‘’ (2017)
640 HM Government and Ofgem, ‘’ (2017), pp21–30
643 HM Government and Ofgem, ‘’ (2018), pp25–45
644 National Infrastructure Commission, ‘’ (2019), p26
646 National Infrastructure Commission, ‘’ (2019), p28
647 Dr Jonathan Radcliffe (), para 4
648 For example, see: Cadent (), para 15; National Grid (), para 2.3; EDF Energy (), para 9; Ofgem (), para 6; Highview Power (), section 1
649 Dr Jonathan Radcliffe (), paras 4–5
650 Dr Jonathan Radcliffe (), para 16
652 For example, see: Greenpeace UK (), para 7; Durham Energy Institute (), paras 8 and 29–30; and
653 Durham Energy Institute (), para 29
654 Durham Energy Institute (), para 30
655 Dr Jonathan Radcliffe (), para 17
656 Dr Jonathan Radcliffe (), para 24–see also: ARPA-E, ‘’
658 Dr Jonathan Radcliffe (), para 2
659 Eaton ()
660 Highview Power (), section 4 and Solar Trade Association (), para 14
661 ‘’, Current +/-, 24 May 2018—see also:
662 HM Government and Ofgem, ‘’ (2017), p21
664 National Infrastructure Commission, ‘’ (2016)
665 ‘Flexible Electricity Systems’, , Parliamentary Office of Science and Technology, September 2018
667 Smart Energy GB, ‘’—smart meters can relay the information to suppliers every month, every day or every half-hour, but only provide the total consumption over half-hour periods
668 Smart Energy GB, ‘
669 Delta-EE, ‘’ (2019)
670 Delta-EE, ‘’ (2019)
671 Energy Systems Catapult, ‘’ (2019)
672 Imperial College London and Energy Saving Trust, ‘’ (2016)—this study considered all flexibility options deployed together, not just smart meters
673 Department for Business, Energy and Industrial Strategy, ‘’ (2018)
674 Ofgem, ‘’ (2019)
675 Department for Business, Energy and Industrial Strategy, ‘’ (2019), p11
676 National Audit Office, ‘’ (2018), para 1.36
677 Oral evidence taken before the Business, Energy and Industrial Strategy Committee on 9 January 2019, HC 1851,
678 Department for Business, Energy and Industrial Strategy, ‘’ (2019), p10
679 Department for Business, Energy and Industrial Strategy, ‘’ (2019), p11
682 Oral evidence taken before the Business, Energy and Industrial Strategy Committee on 9 January 2019, HC 1851,
683 ‘’, Ofgem, accessed 3 July 2019
684 National Audit Office, ‘’ (2018), para 1.19
685 ‘’, Daily Telegraph, 26 August 2017
686 Centre on Innovation and Energy Demand, ‘’ (2018)
688 Department for Business, Energy and Industrial Strategy, ‘’ (2018), p12
689 Department for Business, Energy and Industrial Strategy, ‘’ (2018), pp12–13 and ‘’, Data Communications Company, accessed 15 July 2019
690 Imperial College London Energy Futures Lab, ‘’ (2018), p10
691 Imperial College London Energy Futures Lab, ‘’ (2018), p10
692 Ofgem (), paras 28–29
693 Ofgem, ‘’ (2018), para 2.41
694 Energy Act 2013,
695 Department of Energy and Climate Change, ‘’ (2011), p59
696 Department of Energy and Climate Change, ‘’ (2015)—National Grid’s forecasts are subject to independent scrutiny and approval by the Secretary of State
697 The Electricity Capacity Regulations 2014 (), section 2
698 Ofgem, ‘’ (2018), pp25–26
699 The Electricity Capacity Regulations 2014 (), sections 39–41 and schedule 1
700 Department of Energy and Climate Change, ‘’ (2012), para 49
701 Department of Energy and Climate Change, ‘’ (2012), para 49
702 Ofgem, ‘’ (2018), pp25–26
703 Ofgem, ‘’ (2015)
704 Ofgem, ‘’ (2015), p19—see also: Dieter Helm, ‘’ (2017), p93
706 Highview Power (), section 4
708 Ofgem, ‘’ (2015), pp17 and 19
711 Ofgem, ‘’ (2018), pp25–26
713 Highview Power (), section 4.1
714 ‘’, Tempus Energy, accessed 4 July 2019
715 General Court of the European Union, ‘’, 15 November 2018
716 National Grid System Operator, ‘’ (2018), p4
717 from Rt Hon Claire Perry MP to Rachel Reeves MP, 3 January 2019
718 Department for Business, Energy and Industrial Strategy, ‘’ (2019), p4
719 from Rt Hon Claire Perry MP to Rachel Reeves MP, 3 January 2019
720 Department for Business, Energy and Industrial Strategy, ‘’ (2019)
721 Department for Business, Energy and Industrial Strategy, ‘’ (2019), p6
722 Department for Business, Energy and Industrial Strategy, ‘’ (2019), p7
723 Department for Business, Energy and Industrial Strategy, ‘’ (2019), pp16–17
724 Ofgem, ‘’ (2018), p10
725 Ofgem (), para 32
726 Ofgem, ‘’ (2018)
727 Ofgem, ‘’ (2018), p30
728 Energy Networks Association (), para 9
729 Energy Networks Association (), para 9
730 SGN (), para 4
732 Ofgem, ‘’ (2018)
734 SSE, ‘Response to National Infrastructure Commission: Future of Regulation Study call for evidence’ (2019)
735 SSE, ‘Response to National Infrastructure Commission: Future of Regulation Study call for evidence’ (2019)
736 Energy Networks Association, ‘’ (2018), p3
737 Ovo Energy (), paras 2.3 and 6.2
738 Ovo Energy (), para 6.2
739 ‘’, Ovo Energy, accessed 24 June 2019
740 ‘’, Ovo Energy, accessed 24 June 2019
741 ‘’, Current +/-, 17 July 2018
742 Energy Networks Association, ‘’ (2018)
743 Energy Networks Association, ‘’ (2019)
744 In particular, the , the , the , the , the and the Energy Acts of , , and
745 ‘’, Ofgem, accessed 17 May 2019—for more detail, see: the Electricity Act 1989, and the Gas Act 1986,
746 ‘’, Ofgem, accessed 17 May 2019—for more detail, see: the Electricity Act 1989, and the Gas Act 1986,
747 Ofgem (), para 2
748 Zenobe Energy (), para 10
749 Zenobe Energy (), para 9
750 SSE, ‘Response to National Infrastructure Commission: Future of Regulation Study call for evidence’ (2019)
751 National Infrastructure Commission, ‘’ (2019), p3
752 Dr Jonathan Radcliffe (), para 18
754 ‘’, Bristol Live, 13 May 2019
755 ‘’, Energy Capital; ‘’, Aberdeen City Council; and ‘’ Humber Local Enterprise Partnership—all accessed 4 July 2019
756 Dr Jonathan Radcliffe (), paras 18–19
758 Town and Country Planning Association, ‘’ (2016), p2
759 Planning and Compulsory Purchase Act 2004,
760 Ministry of Housing, Communities and Local Government, ‘’ (2019), para 8
761 Ministry of Housing, Communities and Local Government, ‘’ (2018) and Department for Communities and Local Government, ‘’ (2012), paras 18 and 97
762 ‘’, Regen, accessed 21 June 2019—Regen was commenting on the changes to the National Planning Policy Framework made in 2018; although the framework has since been updated again, the relevant sections have not been changed
763 Energy Systems Catapult, ‘’ (2018), p52
764 Climate Change (Scotland) Act 2009,
767 ‘’, Climate Emergency, accessed 9 July 2019 and Local Government Association, ‘’ (2019)
769 UK100, ‘’ (2019), p1
772 Local Government Association, ‘’ (2018), p9
773 Energy Systems Catapult (), para 4
775 UK Energy Research Centre, ‘’ (2017), p3
776 UK100, ‘’ (2019), pp43–53
777 UK100, ‘’ (2019), p50
778 Energy Systems Catapult, ‘’ (2018), p13
779 Greenpeace UK (), para 5
780 Association for Decentralised Energy, ‘’ (2019), p11
781 Committee on Climate Change, ‘’ (2019), p155
782 For example, see: National Grid (), para 3.4; Greenpeace UK (), para 5; Energy UK (), paras 17 and 27–28; Energy Systems Catapult (); Royal Academy of Engineering and allied institutions (), paras 5.1, 6.1, 25 and 46–48; UK Research and Innovation (), para 23; Imperial College London (), para 8
783 Department for Business, Energy and Industrial Strategy, ‘’ (2019), p11
784 Department for Business, Energy and Industrial Strategy, ‘’ (2019), p6
785 Department for Business, Energy and Industrial Strategy, ‘’ (2019), p20
786 UK Research and Innovation (), para 23
787 UK Research and Innovation (), para 23
789 For example, see: ‘’, Energy Saving Trust; ‘’, Ovo Energy; ‘’, Greener Scotland, all accessed 21 June 2019, and Energy Systems Catapult, ‘’ (2019)
792 ‘’, Energy Saving Trust, accessed 9 July 2019
793 —see also: ‘’, accessed 9 July 2019
794 Imperial College London ()
795 Imperial College London (), para 2
796 Committee on Climate Change, ‘’ (2019), pp212–255
797 , paras 15–18 ( )
798 —see also: ‘’, Ofgem, accessed 17 June 2019
799 For example, see: Energy UK (), para 25; UK Energy Research Centre, ‘’ (2018), p7; ‘’, Green Alliance, accessed 4 July 2019
800 Energy UK (), para 25
802 Menter Môn ()
803 Durham Energy Institute (), para 28
804 Johnson Matthey (), para 13
805 Marine Energy Wales (), para 1.6
806 Renewable Energy Association (), para 16
Published: 22 August 2019