Lobby: Putting energy at the heart of business

A new department is tasked with aligning energy, climate change and industrial strategy.

Out of the post-Brexit political chaos of the past month a new department has emerged – one that appears to place the energy sector at the heart of the wider economy. Eight years after it was created, the Department of Energy and Climate Change is gone, folded into the Department for Business, Innovation & Skills to form a new entity, the Department for Business, Energy & Industrial Strategy (BEIS), headed by Greg Clark. The former shadow energy secretary has been tasked with bringing together government and business to develop a “comprehensive industrial strategy” at the same time as “delivering affordable, clean energy and tackling climate change”.

This marriage of business and energy is, in a sense, something old as well as something new. It harks back to the days before Decc, when energy policy was in the hands of the business secretary, and many would say this is a more logical fit. Since its establishment in 2008, there have been murmurings about whether it was sensible to hive off energy policy into a standalone department. It has resulted in many industrialists blaming the complex, sometimes counter-intuitive and often expensive impacts of energy policy for driving them out of business – the costs of energy and energy-related regulation are, for example, among the primary reasons for the closure of Tata’s Port Talbot steel works.

A department that can align the growth of a green economy with industrial competitiveness will be welcome. But, without climate change stamped into its identity, there are fears the new department will be less committed to tackling the issue. Could the scrapping of Decc and its absorption into a revamped business department symbolise a shift in government priorities away from decarbonisation and towards affordability and security of supply?

“There is a very real worry that the progress made on tackling climate change could be relegated to the bottom of the intray,” said John Sauven, executive director of Greenpeace.

That said, there is no indication so far that the government is planning to scrap any of its current climate change policies and a spokesperson for Decc told Utility Week that they understand all of its current responsibilities for energy policy and climate change will be transferred into the new department – including relevant matters arising from the process of exiting the EU.

Indeed, if it had been prime minister Theresa May’s plan to sweep climate change under the carpet, her appointment of Clark – a strong advocate of decarbonisation – doesn’t make much sense.

So, in the face of yet another political upheaval, there is cautious optimism from the majority of energy industry leaders about the merging of Decc and Bis. “It is a great shame that a department directly focused on the critical issues of energy and climate change is to close, but a joined-up business, industrial strategy and energy approach could provide huge opportunities for solar in the UK,” said Solar Trade Association chief executive, Paul Barwell.

Meanwhile, former energy minister Greg Barker told Utility Week: “I think bringing together energy, climate change and industrial strategy under one roof is going to make for a much more effective approach to decarbonising the economy as a whole and will allow for a more comprehensive and ambitious strategy across government.”

Committed to the green agenda

Greg Clark’s track record of supporting decarbonisation means his appointment is welcomed by many

The MP for Tunbridge Wells was voted into parliament in 2005. When the Department of Energy and Climate Change was set up by the Labour government in October 2008, Greg Clark was appointed as the shadow secretary – a position he held for a year and a half.

Since then he’s had several stints as a minister for the Department for Business, Innovation and Skills. Before his most recent appointment, he served as the secretary of state for communities and local government – something that might help him to advance the interests of distributed and community energy.

Clark has a strong track record of supporting the decarbonisation agenda, for example advocating the development of carbon capture storage and policies to improve energy efficiency. His appointment as secretary of state for BEIS has been welcomed by many.

“He understands climate change and has written influential papers on the benefits of Britain developing a low-carbon economy,” said Richard Black, director of the Energy and Climate Intelligence Unit. “Importantly, he sees that economic growth and tackling climate change are bedfellows, not opponents.”

In a speech in 2009, Clark argued forcefully against curtailing climate change policies to save money following the financial crisis: “The first thing to note is its underlying premise, which is that fighting climate change is costly and, therefore, particularly unaffordable in a time of a recession. As a working assumption, it forms part of a larger narrative that portrays environmentalism in purely sacrificial terms. Ironically, this unites the greenest of the greens, who advocate a simpler way of life, with their sworn enemies, who see environmentalism as a matter of rationing and regulation.

“My view is both extremes are wrong, and that this theme of great sacrifice – however you choose to spin it – is fundamentally misconceived.”

Former energy minister Greg Barker told Utility Week: “We have in the new secretary of state someone with an outstanding record of thoughtful commitment to the green agenda. I worked closely with Greg Clark in opposition and I know that he continues to be committed to the most efficient, cost-effective but also ambitious decarbonisation of the UK economy that will allow us to reach our carbon reduction targets.”

Next steps after the merger?

The pros and cons of the Dec-Bis merger will remain speculation until junior ministers are settled in and the ramifications for civil servants across the two departments are ironed out. Only then can the nitty-gritty of policy implementation continue.

Decc’s freshly appointed permanent secretary Alex Chisholm – former chief executive of the Competition and Markets Authority – is leading discussions on workforce arrangements in partnership with the Decc permanent secretary and more detail is expected imminently, including confirmation about which of them will act formally for the new department.

There are key projects that will need protecting during this period of transition. The ongoing investigations into barriers to energy storage and the future role of the system operator as well as the Future Power System Architecture (FPSA) project, which reported on 20 July, are all essential. Many are also in critical stages of development with nascent markets relying on them to progress.

The FPSA project’s chair, Dr Simon Harrison, told Utility Week that his team will be swift in “urging government to continue its engagement with this important project”, which is “key to transforming our energy system to meet the challenges of the energy trilemma”.

Some disruption and delay to this and other projects is almost inevitable, however, as BEIS goes through the messy process of integrating Decc and Bis workforces and IT systems and moving to a new building. Establishing a strong working relationship between the new department and Ofgem is crucial for continuity and progress.

Among other items high on the BEIS to-do list will be:

• Levy control framework: this mechanism for managing taxpayer contributions to the decarbonisation of energy has attracted calls for reform and has no clear future beyond 2020. BEIS will need to set out its formula for spreading/capping the costs of decarbonisation;
• Smart meter rollout: energy suppliers heading up the national rollout of smart meters have asked repeatedly for the 2020 deadline for completion to be shifted, or for an 80 per cent rollout target to be set rather than the current 100 per cent; 
• Ownership of the National Infrastructure Plan (NIP): traditionally the jurisdiction of Treasury and Cabinet Office, the NIP is highly relevant to BEIS’ industrial strategy remit and incorporates an enormous level of investment in energy infrastructure. There is therefore an argument for transferring ownership of the plan to the new department.

The new department is also likely to find itself lobbied hard by advocates of carbon capture and storage, keen for a revision of the decision to scrap support for the technology. There will also be a great deal of work to do in relation to Britain’s EU exit and matters arising for energy policy – though some of these may now fall to the Department for International Trade, which has taken on Bis’s old responsibility for trade and investment.

This means that the Department for International Trade, headed by North Somerset MP Liam Fox, is now the lead department for discussion of Hinkley Point C.