UK100: DNOs must avoid becoming net zero blockers

To achieve their ambitious decarbonisation targets, local authorities must get to grips with a complex and evolving energy system. But, as UK100 chief executive Polly Billington argues, the energy sector must also do its part in seeking to understand the needs and the capabilities of local government. She talks to Lucinda Dann about how the sector is doing so far and why local area energy planning must happen with councils, rather than to them.

Moving to a decentralised electricity system is central to meeting the UK’s net-zero commitments, but this new system must also meet the needs of the local communities it will serve if it is to be a successful transition.

For that to happen, local authorities must be central to the rapidly increasing conversations around local energy planning.

However, this is currently not the case, according to Polly Billington, chief executive of UK100, a network of local government leaders.

Although interactions between local authorities and district network operators (DNOs) have increased in recent years, it is not happening at the pace or scale needed to meet the goal of creating a net-zero economy, she adds.

While local authorities are being lined up for new roles such as identifying areas for heat network development, these responsibilities cannot be handed out without the necessary resourcing, and increased support from all facets of the energy industry.

The first step in that journey is building understanding on both sides of the priorities and mechanics of the different sectors.

But UK100 is also calling for a more formal range of measures such as regulatory obligations for DNOs and a national framework from government to ensure local area energy planning happens with local authorities, rather than to them.

Overwhelming complexity

While understanding the complexity of an energy system is a challenge for a lay person, arguably local government is its match for fiendish complexity.

DNOs will have to engage with a huge number of local authorities across their operating areas and get to grips with their different functions and powers, as these vary depending on the different tiers of government.

But these powers also vary according to other factors, such as devolution agreements for combined authorities, which sees one metro mayor have different powers from another.

“What I find is quite often when I’m talking to the energy sector, they want the local government to understand energy more, which I agree is really important if we are to transform the energy system to meet the needs and demands of communities”, says Billington.

“However, the energy sector does need to understand local government more and why local government has such a key role.”

“When you’re used to working at the scale that DNOs do, dealing with hundreds of district councils for example, but also alongside metropolitan boroughs, and county councils and metro mayors might be quite overwhelming, so understanding what we do at regional level and the co-ordination that is needed is really important.”

Local authorities have an interest across a wide range of areas which need decarbonising through proper design and market creation, such as transport, planning, building standards, retrofit and electric vehicle charging.

Public transport in particular is an area which demonstrates why proper engagement with local authorities is so vital.

In order for commuters to Sheffield or Greater Manchester to be able to complete their journeys via low-carbon public transport door to door, networks might actually have to start in Derbyshire.

“That requires a lot of regional co-ordination and collaboration, and it requires DNOs to understand how communities work and move around in those places and what powers local authorities have got, because transport, for example, is operated differently in both South Yorkshire and Greater Manchester, and indeed Derbyshire,” Billington explains.

Equally some of the bigger authorities have strategic planning powers which dictate where and what types of housing is put in that area, what the standards are, whether there are electric vehicle charging points and if there is public transport to support that housing.

“Local authorities which have got public transport powers, if they want to decarbonise their buses, they are going to come to the DNO at some point and say we are going to have some EV charging for our buses.

“If the block ends up being the energy system, then that’s not a good look for the energy system and energy players when they are meant to be part of the solution.”

DNO obligations

Billington says that engagement between some local authorities and DNOs has increased over the five years since UK100 was created, especially with councils that have declared climate emergencies.

“I have heard good reports from a number of our members about DNOs being keen to engage but it’s the scale that is required and the pace of change that needs to be shifted.”

One great example of energy projects being undertaken by local authorities is a subsidy-free retrofit scheme in the Trent Basin which was showcased by the government ahead of COP 26.

“I’ve been going on about the Trent Basin for five years, we need to have Trent Basin projects all over the place, but they are still small because things are not growing at scale.”

While some councils are very active on energy, such as Nottingham, Bristol and Cornwall, for others it is less of a priority, and in fact energy is not a statuary responsibility for any local authority.

“In terms of statuary responsibilities most local authorities only have responsibility for vulnerable children and adults, they don’t even by law have to empty your bins.”

Billington adds that with a significant number of local authorities experiencing “painful financial situations”, even for those who have declared a climate emergency the decarbonisation of the energy system risks being seen as another burden.

To avoid this, DNOs need to understand how decarbonising and decentralising the energy system can help achieve many of local authorities’ priorities, such as tackling the cost of living, reducing people’s energy bills, creating jobs, skilling people, improving health and wellbeing by dealing with damp and mould and air pollution.

“The knowledge and understanding of the energy system that the DNOs have needs to be shared with local authorities with an open mind and a recognition that they need to understand what local authorities’ priorities are when it comes to growing their community’s strength, resilience, economic prosperity, health and wellbeing, and how the energy system and its transformation to net zero can help support those priorities,” says Billington.

Currently the DNO price control advises them to do local energy planning, but it is not mandated.

UK100 has been in conversations with Ofgem to introduce obligations on DNOs to bring about the kind of pace and scale required.

“That is where we would like to get to, so we would like to continue those conversations with Ofgem and the DNOs to get that to the closest we can over the next price control period, because so much has got to happen in the next business period.”

Billington says that while DNOs could act without obligations, a formal framework would ensure that the right capacity, competence and relationships are developed in a regionally co-ordinated fashion.

“We’ve just got to get on with it, I’ve been banging on about this stuff since the establishment of the Department for Energy and Climate Change in 2008 when technology wasn’t as advanced, but the urgency was still there.

“We’ve now got the technology which could enable this to happen, the last thing we want is for the problem to be the regulatory and legislative framework, which is currently what it looks like.”

National framework

As well as new obligations on DNOs, UK100 is also calling for the government to put in place a national framework which would give a greater role and more powers to local and regional authorities.

“The decentralisation of our energy system is essential to the decarbonisation of it, and therefore the shaping of it needs to have some kind of democratic oversight and directly elected officials, ie councillors and metro mayors and others should have a say in shaping what that energy system needs to looks like,” says Billington.

The government’s net zero strategy, which was published late last year, set out policies and proposals for decarbonising all sectors of the economy.

Although UK100 had specifically asked for a net zero local delivery board, the strategy did agree to a forum.

“That’s going to have representation from across government and from across local authorities to start talking about what that framework might need to look like.

“It’s a start of a conversation, we wanted a delivery board specifically so it had teeth and had milestones.”

One of the key features UK100 had wanted from a board was the ability to feedback about policy and regulation changes that are needed to allow local authorities to act.

Such changes include the 50MW cap on local authorities in England for developing energy projects, and rules which prevent heat networks being built larger than currently required in anticipation of future need.

Both rules are seriously hindering the ability of local authorities to develop effective heat networks, which is at odds with the proposals to hand more powers to local authorities for identifying areas for heat network development.

System Operation

Although the role and scope of a future system operator (FSO) is still up for debate, UK100 believes it could play a role in either providing advice directly to local authorities or setting a common approach to local planning.

Billington says it is key that when the FSO is being devised that the role of local authorities in delivering action is acknowledged.

“When I say delivering the trouble is the risk about that is there is a perception that local authorities do what they are told, but actually the whole point about local authorities is they know their communities well and they need to be involved in designing something that works for them.”

The approach for Liverpool cannot be the same as for Ludlow, says Billington, but that does not mean that each community is so unique that there cannot be a framework.

“The challenges around social equity I totally understand, and we are very alive to the fact that different local authorities have different targets.

“Ofgem as a regulator will say how are we supposed to meet the needs of people with different targets when we are supposed to be trying to do this equally and fairly, that is a useful and constructive conversation to have, because that is about brokering what is achievable within the targets that people have committed to and what the technologies are that available, energy resources are which are close to them, what the demographics will accept, what the costs and opportunities are – that’s a useful conversation to have.”

The other difficulty – the lack of knowledge of the energy system by councils – could be solved by the newly renamed Net Zero Hubs.

“We understand that expecting every local authority to become an expert in climate is probably not going to happen so therefore that’s why we think the net zero hubs need to be really resourced up with expertise to be able to do this stuff at pace and scale.”