Local pricing and Winser plans clash, warns renewables body

It is “probably not possible” to reconcile Electricity Network Commissioner Nick Winser’s recommendations for more centralised grid planning with proposals in another government review for localised power pricing, a RenewableUK (RUK) director has warned.

The renewable industry umbrella body’s executive director for policy and engagement Ana Musat said that her organisation “fully supports” the recommendation in Winser’s government-commissioned review for a centralised, spatial transmission network plan.

However, Musat expressed concern about tensions between Winser’s recommendation and “very radical options” for locational marginal pricing (LMP) mooted in the government’s own ongoing review of electricity market arrangements (REMA).

The government must provide “clarity around the direction of travel” on its REMA proposals, Musat said while speaking at an online briefing hosted by the Energy and Climate Intelligence Unit (ECIU) thinktank.

“It’s going to be really important to consider how we provide certainty that is delivered through this centralised plan and we don’t seek to undermine it by providing those locational signals and how you can abide by those locational signals if you are moving to a more centralised plan for building network and generation infrastructure,” she said.

“There is a question about how this (LMP) will work with this centralised network plan and whether you could even have the two together, which is probably not possible.”

She also told the online event, which was held to discuss the UK’s response to the Inflation Reduction Act (IRA), that RUK was “very surprised” by chancellor Jeremy Hunt’s Budget announcement postponing the government’s response to the US federal administration’s package of support for low carbon investment.

“If we don’t get a comprehensive response to IRA this time round there’s very little hope of seeing something comprehensive being developed this year,” Musat said, noting that the looming general election meant that this may take years rather than months.

She expressed particular concern that the government is “still struggling” to draw up a business model for supporting green hydrogen while other countries are developing packages of investment and production credits for the low carbon fuel.

She was backed up by Andy Palmer, CEO of electric vehicle charging company PodPoint, who said he had been “shocked” by the timing of the chancellor’s response to IRA.

“The UK deludes itself into thinking that we are a long way ahead. That is not true: we are long way behind and getting further behind,” he said, adding that even following recent investments by Tata and Envision, the UK is “at best half way” to achieving the 100GW of battery manufacturing capacity the car industry needs by 2030.

He added: “If we don’t put in place incentives, car and battery manufacturers will go elsewhere. Others are moving more quickly.”

The ECIU event followed an earlier appearance by Sir John Armitt, chair of the National Infrastructure Commission, in front of the House of Commons Treasury select committee.

He told the committee that private investors in UK infrastructure are “confused” by “constant shifts of policy”, giving as an example the government’s “bolt from the blue” introduction of energy windfall profit taxes.

“It is clearly a political decision and not one that helps future investment,” Armitt said, noting that infrastructure investors are not doing so over the “short term”.

He added: “You may not see a return for 10 to 15 years because of the time it takes to build infrastructure out and therefore when you make an investment decision, you need to have confidence that the policy environment when you switch it on is going to be the same as when you make that calculation. It is important that the broad thrust of policy remains the same if we are going to encourage the private sector.”