Labour’s 2030 plan is unfeasible – but will anyone call it out?

This week Utility Week Live opens its doors at Birmingham’s NEC, welcoming a range of experts to discuss the biggest challenges facing the sector in 2024.

If we were to compile a word cloud across the six stages of content across two days I would imagine one word would stand out – uncertainty.

The sector faces uncertainty in a number of different ways – on policy, regulation, the speed of the adoption of low-carbon technologies, the impact of climate change, the pace of behaviour change and the appetite for investment in the sector, to name just a few.

In preparation for the debates this week, we have been running a series of polls on what we believe are some of the big questions facing utilities. I can now reveal the results.

The first of our six questions returned one of the clearest signals. Labour’s leader Keir Starmer last week reiterated the party’s “missions” if it forms the next government, including the pledge to remove fossil fuels from Britain’s electricity generation by 2030. The ambition has always been welcome by the sector but, while publicly companies have been diplomatic on the chances of hitting the target, in private they have been deeply sceptical.

This view was backed up by the results of our LinkedIn poll, which showed 88% of respondents saying the plan is unfeasible.

This is not the view of National Infrastructure Commission chair John Armitt, who said last week the gap between Labour’s plan and the current target of 2035 was not that significant. He stressed that what was needed for either target to be successful was consistency in policy implementation and the attraction of private capital. Others in the sector have told me that while they don’t believe the target will be met, it will act as an impetus to faster progress. They argue that if 2030 actually means 2032, that’s still a lot better than 2035.

Fair enough but setting false targets comes with the risk that you undermine public confidence in the net-zero milestones we are all chasing. As has been repeatedly pointed out we are at the stage of the energy transition where we really need public buy-in. We cannot take this for granted. While I understand that no one in the energy sector wants to publicly challenge a laudable aim from the likely next government, there is merit in being on the frontfoot in acknowledging how challenging it is.

Smart decisions

An example of what happens when a target is set without a clear plan of achieving it is the smart meter rollout. With one deadline already missed the rollout is due to hit 75% of homes by the end of next year. At the close of 2023 the figure sat at around 60%. So, what are the chances of reaching next year’s deadline? Some 87% of our respondents believe it can’t be done.

As we have discussed many times in Utility Week, suppliers can do more to ramp up delivery but what is sorely lacking is support from government. It is probably too late for a mandate on the remaining homes without a smart meter (although there is a stronger case for implementing this for smart water meters) but ministers could definitely do more to make the case for smart meters as a vital cog of net zero and a way to help customers save money.

An appealing prospect?

As well as being a key year for smart meters, 2025 is also the start of the next asset management period (AMP) for the water sector. We are now just a few weeks away from Ofwat’s draft determinations on water company business plans for the second half of the decade. Will water companies like what they hear?

Ofwat’s price control director Chris Walters has acknowledged widespread concerns about historic underinvestment in the sector and told us the company plans are likely to get a “trim rather than a lop”. He has also said the regulator will “err on the side of investibility”, although it remains to be seen how generous he feels he can be on returns while it remains such a sensitive topic in the public debate.

We asked whether it is likely Ofwat will face appeals to its determinations, as it did for PR19. While this poll had fewer responses than others, the sentiment was clear – with 93% saying they expected companies to go to the Competition & Markets Authority.

This isn’t an outcome anyone wants, representing yet more uncertainty, draining management time and doing little to improve public perception. Ofwat’s first pronouncements on 12 June will give us some idea of how likely this scenario is.

Blame game

Sticking with the water sector, we also asked who is most responsible for pollution of Britain’s waterways. This is perhaps one of the most debated and least understood of topics in the public discourse, with water companies largely seen as the sole culprits.

According to our poll, which I should stress, was open to anyone, regulators / policymakers were most to blame (chosen by 41%). As discussed above, there have long been criticisms that Ofwat has favoured lower bills over driving investment in the sector, something successive governments have been comfortable with until the current clamour over combined sewer overflows.

Water companies were the next most culpable (33%), followed by agriculture (22%) and transport (4%).

Does the cap still fit?

We also broached another subject which is certain to be debated at length over the coming year – the future of the energy price cap.

Ofgem is in the process of exploring the future of domestic price protection, with a call for input closing earlier this month. In that document, the regulator moots a number of alternatives to the current cap. These included a more targeted approach, a “dynamic” price cap to encourage consumer flexibility or using the ban on acquisition-only tariffs (BAT) as an alternative. The potential for the BAT to replace the cap will be debated at Utility Week Live, when I will be joined by So Energy, Citizens Advice and Ofgem.

According to our snap poll, there is appetite for change, with 59% saying the current cap should not be kept in perpetuity.

Heated debate

Our final poll question may elicit some groans from our readership. But how can we pose utilities big questions without addressing the future of domestic heat? As we have discussed, the government’s decision not to progress work on a hydrogen town pilot until after 2026 has left gas networks in something of a hiatus and Ofgem with a very difficult task. There are growing calls for the government to end this uncertainty and make a decision on whether the future of domestic heat will be primarily through electrification or hydrogen.

Our, admittedly unscientific, poll found 64% think hydrogen will not have a significant role in home heating by 2050.

As with the other questions, this is merely a snap poll which was not attempting to be robustly representative of the full range of views. But the future of heat is one of the many big questions facing the sector that will dominate discussion over the next few years.

I look forward to exploring all these topics and more at Utility Week Live over the next few days. If you haven’t booked your place, there is still time by heading to the website to claim your free pass.