Build Back Better: A missed opportunity for institutional change?

Could the upheaval of the coronavirus pandemic present the ideal platform to create a new independent entity to navigate the path to net-zero – or has the crucial momentum for such change already been lost? Jane Gray discusses.

In recent years there has been a growing view across the energy sector that delivering deep decarbonisation at lowest cost to the consumer is a task which the current institutional architecture of the industry is ill-equipped for.

The challenges involved are beyond the remit of the regulator and beyond the ken of policy makers, say the swelling ranks of those who advocate reform. Instead, we need to create a new independent entity which can combine big brains and political disinterest with a lot of authority to come up with a framework and set of mechanisms to encourage the best and most economically viable technologies for whole system decarbonisation to come to the fore, and at pace.

Ideas vary on exactly what such a new entity would look like, how far its powers should extend and how it would be made accountable for the delivery of national net-zero ambitions. But there is no shortage of individuals and institutions with suggestions on the topic, from outspoken academics like Professors Dieter Helm and Catherine Mitchell, to respected bodies such as the Energy Systems Catapult (ESC) and the Institution of Engineering and Technology (IET).

Of course, the idea of a substantial institutional shakeup as a precondition for achieving decarbonisation doesn’t chime with all. In a generally conservative and risk averse utilities sector, there has been a tendency to dismiss such suggestions as too radical and to shy away from anything which smacks of central planning.

When the IET and ESC published the first iteration of their joint work on Future Power System Architecture (FPSA) back in 2016 for example, they found leaders in the sector were highly sensitive to the term “system architect” as a descriptor for a potential coordinating entity for overseeing a smooth transition to a decentralised, flexile and renewables-reliant grid.

Since that time however, the continued rapid rise of low-carbon technologies and a more widespread (though still not universal) awakening to the magnitude of climate change threats, have forced more industry leaders and influencers to get increasingly comfortable with the idea of institutional change as a positive enabler for decarbonisation.

According to one ESC leader close to the FPSA, the concept of a new system architect was even recently bandied about in the usually hidebound environment of an energy codes review meeting. Meanwhile, it’s become fairly common place to hear industry leaders say they would like to see the system operator role fully separated from National Grid with many also arguing that a new independent system operator could also be given a remit to oversee “whole system” decarbonisation and stability interests, as well as just power system security. Utility Week hears this is a move Energy Secretary Kwasi Kwarteng has expressed some interest in during private meetings.

Emergency mentality

When coronavirus arrived in the UK, sparking a spirit of “can do” expediency, some hoped that the time had finally come for institutional change. As red tape and bureaucracy were slashed in order to accelerate actions in the interest of the greater good which would normally have taken months or even years to implement, there was a feeling that anything was possible.

Indeed, as the UK looks to trigger a green economic recovery from coronavirus, there are strong arguments to say that the need for a new “net zero agency” or authority is more pressing than ever.

The energy system must deliver big new steps towards total decarbonisation with the next decade so that other energy-dependent sectors can follow suit closer to the 2050 deadline. The focus of green recovery should logically therefore be on triggering investment in big low-carbon infrastructure – such as an offshore grid and the foundations for a hydrogen economy – as well as more end-user focussed programmes, such as enabling flexibility markets and energy efficiency measures which will reduce the overall price tag of decarbonisation for consumers and protect those more at risk of fuel poverty.

Responsibility for creating an environment which can support this surge of investment in a coordinated and complementary way, currently sits with the Department for Business, Energy and Industrial Strategy (BEIS), and some – including the revered infrastructure strategist Sir John Armitt – believes that’s where the responsibility should stay.

But, with Whitehall still bogged down in responding to the immediate challenges posed by the pandemic for individuals and businesses – not to mention the background churn of Brexit negotiations – many others have given up hope of BEIS freeing up the “bandwidth” for the kind of detailed and complex thinking involved in creating a set of interlocking investment incentives and market mechanisms for enabling a least cost decarbonisation of both power and gas. The fact that we are still awaiting the Energy White Paper almost two years after it was promised, as well as the announcement of a National Infrastructure Strategy bear strong testament to this.

A new independent authority which is accountable to government, therefore seems like a sensible option for avoiding a sluggish and poorly coordinated energy transition. And given the recent political rediscovery of “experts” as useful tools for navigating tricky situations, it might even be one that government would be open to. One influential energy system thinker – a key actor in the rollout of EMR – suggests a model based on Transport for London’s accountability to the London major could provide a starting point for imagining the nature of the new agency in terms political and industry leaders can get comfortable with.

But, just as hopes rose at the start of lockdown that there was a moment to be seized for institutional changes, they are now beginning to fade. The emergency mentality has already receded and although local lockdowns continue, one despondent would-be reformer comments that the reality of the “new normal seems increasingly to be taking on tones of the old”, including the same creaking institutional architecture of the energy system.

The sector’s role in supporting decarbonisation is at the heart of our Build Back Better campaign, leading up to the Build Back Better Forum October 20-21