Utility Week review of 2018: Energy policy

As we rapidly approach the end of the year, the Utility Week team looks back at some of the highs and lows for utilities.

ENERGY POLICY

By David Blackman, policy correspondent

“Theatres are preparing for the Christmas season, but the biggest pantomime taking place is in the House of Commons.”

The nation’s theatres are preparing for the annual Christmas show season. The biggest pantomime taking place at the moment, though, is in the House of Commons where MPs embarked earlier this month on a six-night run of the Brexit withdrawal follies.

The prime minister’s proposed EU withdrawal deal, which MPs were debating proved to be relatively good news for the energy sector.

And the risk of a much feared ‘no deal’ appears to have receded during the Parliamentary toing and froing.

The political declaration, which sets out a framework for the potential future relationship between the EU and the UK, keeps the UK linked into the EU Emission Trading System- probably the paramount concern for energy businesses about Brexit.

It also signals continued technical cooperation between UK and EU energy regulators, which is seen as a way of maintaining alignment on energy matters.

The package avoids the risk of the so called ‘cliff edge’ which Energy UK and its counterparts at an EU wide level, have been keen to avoid.

But the sheer amount of time consumed by the Brexit process within government means little bandwidth available to consider other issues.

The government’s main initiative in the energy space this year has been its crowd-pleasing ploy to introduce a cap on standard variable tariffs, which is due to be implemented in time for the arrival of the winter energy bills.

Labour made a renewed push at its annual party conference to push its proposals to renationalise the utilities but has far provided few more details about how the new regime would work. For the time being though the heat has gone out of the energy costs debate, although it could easily flame back into life if the widely predicted rise in the price cap happens.

Elsewhere though there has been a sense of government  energy policy beginning to unravel around the edges.

The spectacular fall in offshore wind prices, revealed via the last contract for difference auction in September 2017, has given the government some breathing space. Ministers have been able to plausibly claim that low carbon electricity can be generated at affordable prices.

However forests of wind turbines around the coast of the UK, only gets the UK so far in its efforts to transition to a more sustainable power mix.

This year has seen more low carbon options closed off more than opened up though.

The self-proclaimed green energy enthusiast Claire Perry, who holds the clean growth portfolio, has set her face firmly against any relaxation of what is effectively an embargo on new onshore wind and solar generation.

During the summer, the government finally put the costly Swansea Bay tidal lagoon project out of its misery by saying it would not back the plans because the electricity that it would generate is too expensive.

And the summer saw ministers pull the plug on the feed in tariff scheme to subsidise small scale renewable generation without any proposals for a replacement scheme

The move, which included removing the mechanism that enables those with small-scale devices to sell their surplus power to the grid, palpably appeared to fly in the face of ministers’ professed commitment to encourage the development of a decentralised, low carbon electricity system.

And the government seems scarcely any nearer to a solution about decarbonising heat than at the beginning of 2017.

But there was happier news for the proponents of CCS, who saw the government give the green light to develop the UK’s first such plant, albeit reversing a previous decision by former chancellor George Osborne to abandon support for the technology three years ago. Perry has signalled that the government is prepared to rethink its position on the so called export tariff for small scale generation.

And the government appears has taken some encouraging steps on energy efficiency, increasing the amounts that private landlords will have to pay to bring their properties up to scratch.

However there are growing question marks whether a government, which has been so keen to trumpet its commitment to an industrial strategy for the UK, has an over-arching idea about how to achieve its energy goals.

Greg Clark attempted to bring a bit of coherence to the picture in mid-November with a speech that set out his response to the cost of energy review carried out by Professor Dieter Helm just over a year ago.

The secretary of state for business, energy and industrial strategy set out four principles which he argued should underpin future energy policy.

In the speech, he promised a policy paper setting out how these ideas would be translated into policy. But three weeks on of the document there is no sign.

Of course, Whitehall has had other things on its mind.  And whether the secretary of state gets the chance to even begin implementing his vision, given the ructions that Brexit is causing within the government, is a moot point.

Clark has stuck his neck out in the Cabinet with his advocacy of the softest of Brexits so will be marked man amongst those who would see such an outcome as a betrayal of the 2016 referendum.  For the time being, energy looks set to remain is a sideshow in the wider Whitehall farce.

Read Utility Week’s full round up of 2018 here.