Energy cost review could form basis for industrial strategy, says SSE chief

Alistair Phillips-Davies positive over Helm review but warns it must deliver on investment, the low-carbon agenda and sustainability

The government’s energy cost review could form the basis for the UK’s entire industrial strategy, according to SSE chief executive Alistair Phillips-Davies.

However, in an open letter, Phillips-Davies said that the Professor Dieter Helm-led review, intended to set the UK on a path to achieving the lowest prices in Europe, must perform well against three criteria.

These are: supporting investment in energy infrastructure; continuing the low-carbon transformation; and supporting sustainable investment. 

Addressing the first criteria, Phillips-Davies cited SSE’s own £1.5bn annual spend on energy infrastructure, adding that this was “generally more than we make in profit”. He also said that Barclays’ recent estimate that the country needs £210bn of investment by 2030 “illustrates the scale of the investment challenge”.

“This investment is largely in renewable energy and upgrading our electricity networks and has to be sustained as the UK replaces ageing, higher carbon assets,” he added.

On the low-carbon transformation, the SSE chief executive called the progress on cleaner energy since 2010 “astounding” but said we had “more to do”.

He continued: “Taking these two points together, there is a lot of low carbon investment to deliver. By 2020 the UK’s energy networks will have delivered £80bn of investment since 1990, whilst reducing networks costs to the customer by 17%. What’s more, the costs of renewables are coming down significantly (unlike for nuclear, it seems). This investment cannot come for free and needs strong foundations.

“The government, system operator and regulator have spent the last few years creating bankable mechanisms to price carbon emissions, attract investment in the electricity networks, deliver low carbon electricity generation and to ensure security of supply. After a period of major upheaval, I hope that any recommendations complement and build on these world-leading mechanisms.”

On sustainability, Phillips-Davies pointed out that while “there is no place for unfettered profits” in the energy market, it still “must deliver some form of return on investment to attract the necessary capital”. 

He added: “The market frameworks must allow a fair and transparent return and, in turn, the market participants must act responsibly.”

Phillips-Davies said he was “optimistic that we will deliver a low carbon electricity system”, and that the review “could form the basis of the next phase of change to both the UK’s electricity system and the country’s emerging industrial strategy”.