Governance for Net Zero: boring, but important

With the general election now less than a week away, Guy Newey, chief executive at the Energy Systems Catapult, highlights the need for new governance arrangements to drive forward and co-ordinate the delivery of Net Zero across government and industry, but without sliding further towards central planning. 

In the late spring of 2020, Dominic Cummings, then Number 10 supremo, got in touch and asked about a blog I had written about taking a systems approach to Net Zero. As a reminder, this was right in the middle of the Covid pandemic, so it was a slightly unexpected appeal. 

As any reader of his famously pithy blogs knows, Cummings is very interested in systems approaches, and lionises the work of the Apollo mission and Xerox Parc. The Energy Systems Catapult team, many of whom are experts in systems thinking, ended up doing a very rapid piece of work looking at what taking such an approach might entail for Net Zero (with some support from external experts). 

As well as looking at some of the tools that would support such an approach, one of the key questions we started to look at was governance (please try and stifle that yawn at the back). How could you organise central government and its many interfaces with industry to deliver at the extraordinary pace and scale required for Net Zero? How can you organise the [whatever-the-collective-noun-for-energy-related-institutions-is] of energy institutions so they are reinforcing rapid delivery, not undermining it?  

Fast forward almost four years and talk of mission-based government is back. Recent reports from the Institute for Government, the Tony Blair Institute and this excellent piece from Ravi Gurumurthy, now of Nesta, but ex of DECC and Social Exclusion Unit have been articulating what is needed to ‘get stuff done’. 

We first waded into this area in the Future Power Systems Architecture Work around 10 years ago, including some work on governance for a clean electricity system. Since doing the work for the Cummings-era Number 10, we have continued to work on the thinking (including making progress on building some of the tools you would need). It was a building block of the more recent Electricity Networks Commissioner work. 

It was worth noting that central government of 2020 was reasonably well organised around Net Zero delivery, at least on paper. It had a cross-government Cabinet committee and an official-level implementation committee. I don’t think either of these committees still exist, or how often they met when they did exist. Like many Cabinet committees, their activities are pretty opaque to those on the outside. 

Level of co-ordination? 

So, how should any new government organise around delivering a task as significant, complex and all-encompassing as the transition to Net Zero? Before you start drawing boxes, you first need to think about the type of problem you are facing and the levels of co-ordination it requires. Some problems will require very little, if any, co-ordination from central government; some will require a lot. This is not about political ideology, but rather a sober assessment of the nature of the problem at hand. Good problem definition and management, basically. 

Note that co-ordination is not the same as central planning. I have a real worry we are drifting, somewhat unthinkingly, towards an overly centrally planned energy system. This could stifle the levels of innovation we need to get to Net Zero, making it more expensive than it needs to be and potentially damaging areas where the UK has a comparative advantage. Instead, we want decisions made at the lowest level possible (including in markets), but within a governance system, which enables decisions to flow top down and bottom up to ensure full alignment and delivery of desired outcomes. To be clear, we absolutely need better strategic and spatial energy planning at local, regional and national levels as the work of the Energy Systems Catapult and others has shown. Establishing the right balance and elegant interactions between planning and markets is a central question for any new government. 

Our assessment was that the characteristics of Net Zero — the many overlapping and integrated parts — mean that it really does need tight central co-ordination. You need to align markets; different government departments with sometimes competing policy priorities; regulatory and code reform; the many different elements of digitalisation and data; planning at local, regional and national levels; the physics of the different parts of the energy system; the future of the gas grid, hydrogen and CO2 infrastructures; innovation investment, skills training et cetera. This is quite a different picture from the post-privatisation energy sector, which required much less central co-ordination, although still had crucial roles for essential co-ordinating institutions, in particular the system operator and Ofgem. Managing Net Zero is much more complex and will require thinking which is able to see across the whole system. 

This potentially bewildering level of complexity is also why comparisons with a well-run taskforce, where the task is more bounded (content and time) and specific, are somewhat overblown, in my opinion. Net Zero is much more multi-faceted and complex.  

So, if you agree that Net Zero’s characteristics mean it is something that requires tight co-ordination, how should central government set itself up to reflect that, if it thinks it is a key priority (and economic opportunity)? 

My other insight from inside government — which I confess is not going to win any awards for originality — is that, in the way our system works, if you have ambitions to tackle a large-scale, politically-difficult issue it will struggle to gain traction if it is not a top five priority for the prime minister. This is the real value of clean energy being a named mission or specified at the front end of the manifesto (as it was for the Conservatives in 2019). 

You need a function within the centre that reinforces that prioritisation. Traditionally, this is a Cabinet sub-committee. Now, there is a cliché among knowing Sir Humphreys that if you want to go slow on an issue, create a Cabinet sub-committee, and there is more than a little truth to that. Too often they are just ministers reading out official-generated briefs by rote, without any proper engagement or decision-making capability. But I am not sure you would always say the same about the National Security Council, which combines senior Cabinet members with expert officials and military personnel. Or any of the Brexit committees created by Johnson/Cummings in 2019. Of course, if the committee hardly ever meets, timidly accepts secretaries of state sending junior ministers, and lacks both the authority and expertise to make decisions, then of course it will be ineffective. 

So, if a proposed Net Zero Cabinet sub-committee (or mission board, or whatever you want to call it) is going to be effective, it needs to be chaired by the PM. It should have the Chancellor, the DESNZ, DfT, Defra and DLUHC secretaries of state on it (as well as perhaps DSIT and DfE), as well as director general/permanent secretary level senior officials and relevant departmental scientific advisers. The function of this group is to, a) give political direction and heft, b) to make serious, timely decisions on big issues that cannot be made elsewhere and, c) cajole (and sometimes command) departments where not enough progress is being made. This should be across Net Zero, not just energy. If it is not PM chaired, it will not work. 

The institutional innovation to support that sub-committee would be a body to take the political direction and turn it into delivery. In my view, this should be focused on energy because that is 75% of the problem, and needs the greatest co-ordination, unlike say agriculture where you can give clear instructions to Defra and let them drive progress. We would recommend creating an Energy System Transformation Office (ETSO). This new institution would be chaired by the DESNZ secretary of state, and should include the relevant, ‘Big Beast’ Cabinet Office minister (in previous governments this was Oliver Letwin, later Michael Gove). It also needs independent non-government institutions such as Ofgem and the National Energy System Operator (NESO) as permanent members, and perhaps the National Infrastructure Commission. This body would be the crucial interface between government and the sector (which is why it cannot simply be hosted by NESO). It should not include industry, in my view, or it becomes too wide, and stakeholder-y. 

The job of this ESTO (sorry) is to take policy direction and translate it into measurable outcomes and delivery, including the creation of a whole-energy-system delivery plan, with key dates and milestones. Both ESTO and the Cabinet committee need to be supported by serious expertise: in engineering, financing, digitalisation, project management et cetera; probably 20 to 30 people drawn from the member organisations. It could be based in the Cabinet Office, or could be in DESNZ, but a relatively small, expert team. If it works well, it will monitor whether the stuff that is being committed to is being delivered. And it will hold to account those failing to deliver, as well as taking corrective actions and removing barriers to progress. 

Clarifying the functions of wider energy-related institutions 

Once the centre of government has been reformed, another crucial step if you are trying to work out improved governance across the sector is to try and set out clear accountabilities for different parts of the energy ecosystem. Right now, we have a growing list of institutions, many with overlapping functions and responsibilities. The creation of NESO, which is a brilliant step in my view, creates further overlap. If Labour win, GB Energy could potentially create more. 

So a priority for any new government is to set out the clear accountabilities/functions for different parts of the system. This could be a key initial action for the new Cabinet committee. This would be extremely valuable to the wider sector and ensure the system works well as a whole. 

Being sharp on the different functions between different institutions is an essential part of harnessing the potential of the wider energy/Net Zero ecosystem to deliver change at the pace and scale we need. That is why progress on governance — both within central government and with government’s interfaces with wider industry — is an urgent challenge for any new government.