Energy Bill [HL]

Written evidence submitted by Professor Maria Sharmina , Dr Tim Braunholtz -Speight, and Dr Edward Manderson , The University of Manchester (EB26)

Part 14

Clause 271 Climate change

This clause gives GEMA a general duty of meeting the targets set out in the Climate Change Act 2008.

Commentary and policy recommendations

We agree that GEMA should be given a responsibility to comply with a binding net zero target. This should go some way towards introducing long-term and systems thinking into the regulator’s duties, in addition to its current focus on short-term reliability of networks (POST, 2022). We would like to add that the regulator should be encouraged to aim for a smaller energy system by incentivising permanent reductions in demand for energy. Reductions in energy demand, particularly through societal changes, provide the most reliable, affordable, and secure way towards net zero (Larkin et al., 2017; Bermingham et al., 2023).

Clause 272 and 273 - Community and smaller scale renewable electricity export arrangements

Clause 272 changes the existing Smart Export Guarantee arrangements, by instructing Ofgem to set a price for community and small-scale renewables exports, instead of letting the suppliers set their own prices. Clause 273 then requires suppliers to sell this electricity at a reduced price to local customers – so ensuring that the higher price for generators doesn’t result in higher prices for consumers.

Commentary and policy recommendations

Community renewable electricity generation has the potential to play a significant role in the transition to a low carbon and largely electric energy system.

The clauses in the Bill are to be welcomed as strengthening the position of community and small-scale renewable electricity generators in the market, whilst at the same time enhancing the market offer to electricity consumers.

Clause 272 implicitly recognises that, under the existing Smart Export Guarantee, many energy utilities have offered very low prices for electricity exported by smaller scale generators.

Clause 273 prevents these higher prices from simply being passed on to consumers. Instead, it could potentially reduce fuel poverty in areas local to community renewables developments. Through linking renewable electricity with lower consumer prices, it also promises to increase support for renewable electricity. While renewable electricity is already popular where it is locally and collectively owned (e.g. Warren and McFadyen 2010), maintaining public support for renewables is important given the need to develop more low carbon electricity in the years to come.

Further, these two clauses achieve their goals in a fairly light touch way that is likely to be effective in the short term. There are longstanding debates about the regulation of local energy companies and the difficulty for community energy companies to directly supply local customers (which does happen in many European countries). Rewriting these regulations would be a lengthy process; these clauses go at least some way to enabling ‘local supply’ in a way that requires little new legislation or regulation.

Some energy suppliers may be concerned that, taken together, Clauses 272 and 273 effectively reduce their margins, likely requiring them to buy electricity at slightly higher prices, and sell it at lower prices, than they have been doing to date. However, we suggest there is little cause for concern. As only small-scale generators are included in these measures; and as small-scale generators, and community renewables in particular, account for only a small proportion of the total electricity market (Braunholtz-Speight et al., 2022), we believe that the Clauses will not have a large-scale impact on supplier margins.

We further note that no definition of ‘community energy’ or ‘local’ is given in the Bill. Definitions of both terms will be needed for the purposes of implementing these measures. We suggest that as regards ‘local’, there should be some flexibility in the definition to give regard to the different spatial impacts of different technologies - for example onshore wind turbines that may be visible for some distance, compared to rooftop solar PV and differences in perceptions of ‘local’ from one locality to another (Braunholtz-Speight et al 2022).

About the Authors

Maria Sharmina is Professor in Energy and Sustainability at the Tyndall Centre for Climate Change Research in the School of Engineering, University of Manchester. She is a Co-Director at Policy@Manchester, the University's sector-leading policy engagement institute. She served as Senior Academic Advisor with the Government Office for Science and Department for Business, Energy & Industrial Strategy (BEIS), working on the Net Zero Foresight project in 2021-2023.

Dr Tim Braunholtz-Speight is a Lecturer and Research Fellow based in the Tyndall Centre for Climate Change Research. He is currently researching city-level action to mitigate climate change, as a member of the CAST Centre. His other recent work includes a study of local energy business models and smart energy crowdfunding as part of the EnergyREV consortium, the UKERC Financing Community Energy research project, and a study of community infrastructure businesses funded by Power to Change . His previous experience includes studies of alternative finance in the UK, and community ownership and land reform in Scotland. Prior to joining the Tyndall Centre, he has held research posts at the University of Leeds, the Overseas Development Institute, the University of the Highlands and Islands, and Leeds Beckett University.

Dr Ed Manderson is a Lecturer in Economics in the Department of Economics at the University of Manchester. His research interests are in applied energy and environmental economics, including analysis of firm-environment interactions, adaptation to climate change, and energy policy and energy development. His work has been funded by the UK Energy Research Centre and the Economic and Social Research Council. He also works as a consultant for the World Bank on the linkages between trade and the environment.

References

Bermingham, R., Snape, J., Wells, T., Ballard, H., Blackbourn, H., Grassmann, N., Nicol, C., Sharmina, M., Taylor, M. and White, E. (2023) Net zero society: scenarios and pathways: How could societal changes affect the path to net zero? Government Office for Science, Foresight report.

Big Solar Co-op (2023) Ethical sourcing of PV panels. 30th January 2023. Available at: https://bigsolar.coop/2023/01/30/ethical-sourcing-of-pv-panels/

Braunholtz-Speight, T., Sharmina, M., Manderson, E., McLachlan, C., Hannon, M., Hardy, J., and Mander, S. (2020) Business Models and Financial Characteristics of Community Energy in the UK. Nature Energy vol 5 no 2, https://doi.org/10.1038/s41560-019-0546-4 .

Braunholtz-Speight, T., McLachlan, C., Mander, S., Hannon, M., Hardy, J., Cairns, I., Sharmina, M., and Manderson, E. (2021) The long term future for community energy in Great Britain: A co-created vision of a thriving sector and steps towards realising it. Energy Research and Social Science vol 78. https://doi.org/10.1016/j.erss.2021.102044

Braunholtz-Speight, T., Sharmina, M., Pappas, D., Webb, J., Hannon, M. and Fuentes González, F. (2022). Beyond the pilots: Current local energy systems in the UK. Energy Revolution Research Centre, Strathclyde, UK. University of Strathclyde Publishing. ISBN: 978-1-914241-08-6

June 2023

 

Prepared 22nd June 2023