Weekend press: High interest rates could add billions to energy transition

This week's round up of stories from the national press include the extra billions of pounds added to the green energy transition caused by high interest rates; whistleblower reports expose non-compliance at sewage treatment sites; and the country's last coal-powered plant prepares to stop generating.

High interest rates could add billions to UK green energy transition, says report

A permanent shift to higher interest rates could add billions of pounds to the UK’s renewable energy transition, a leading thinktank has warned.

Borrowing costs have soared since the easing of pandemic lockdowns and Russia’s invasion of Ukraine as the world’s leading central banks raised interest rates to tackle inflation – pushing up the costs of investment in infrastructure across advanced economies including for green power generation schemes.

The Resolution Foundation said £29bn a year could therefore be added to household energy bills in 2050 in a scenario where interest rates persist at current elevated levels, relative to a situation where borrowing costs return to pre-pandemic levels.

However, it said the green transition would still save consumers billions of pounds compared with current sky-high energy costs, and slowing down the pace of transition was not an option.

The thinktank said a fourfold increase in investment in the UK’s power sector was required to provide the crucial next step in decarbonising the British economy, and a plan was needed to fund this investment in case interest rates stayed at current high levels.

Its report comes amid a pushback against green policies by rightwing politicians who argue the costs of hitting net zero are too high. Labour earlier this year slashed its green investment plans amid concerns over higher borrowing costs and a campaign by the Conservatives to weaponise the affordability of its £28bn price tag.

However, the Resolution Foundation said the green transition remained vital despite the higher costs of investment. Decarbonising the power sector is key to tackling global heating, it said, and would also help to reduce Britain’s dependence on volatile fossil fuel supplies, which risked exposing households to global energy shocks of the kind witnessed after the Russian invasion.

“Responding by pausing or slowing the pace of power sector decarbonisation is not an option,” the report said.

The government is committed to reaching net zero by 2050, with targets to decarbonise the power sector by 2035, and Labour promising to reach this goal five years earlier.

The report, Electric Dreams, outlined two scenarios for future costs by 2050: a “high-cost” one with global interest rates remaining at current levels, and a “low-cost” alternative where borrowing costs fall back to pre-Covid levels.

Compared with energy bills in 2023 – which are at a historically high cost – it said decarbonising the power sector would still save £14bn a year for households by 2050. However, larger savings of up to £47bn a year would be possible if interest rates returned to the levels seen in 2019.

However, in comparison with 2019 levels – before the spike in wholesale energy markets – it said household bills would be £11bn a year higher by 2050 in the high-cost scenario. If interest rates fell back to levels comparable with 2019, households would save £18bn a year – a difference of £29bn between the two scenarios.

The report called for a focus on keeping prices low when providing new investment, including pushing for the development of onshore wind – which can be cheaper than other renewable alternatives. It said some projects could be publicly funded, such as modernising the energy grid, because paying for investment via taxation – rather than through energy bills – could help to spread the costs more fairly across rich and poor households.

It also called for the government to introduce a social tariff for lower-income households, which could help to protect poorer households who are high energy users in particular.

Jonathan Marshall, a senior economist at the Resolution Foundation, said policymakers could not count on interest rates falling back to pre-pandemic levels in future. “If interest rates stay high, energy costs will rise rather than fall in the years ahead,” he said.

“So now is the time for planning on how we deliver the energy investment surge while protecting lower income households, with a greater focus on price reduction in contracts, price protection for vulnerable households, and rethinking the role of the state as an investor.”

The Guardian

Thousands await compensation for force-fitting of prepayment meters

The number of compensation payments made to people who wrongly had energy prepayment meters forcibly fitted in their homes is “completely unacceptable”, the energy secretary has said.

Ofgem, the Energy regulator, confirmed that about 150,000 cases had been “reviewed” so far by suppliers themselves, but just 1,500 have received payments, totalling £342,450.

A Times undercover investigation revealed last year that British Gas routinely sent debt collectors to break into customers’ homes and force-fit pay-as-you-go meters, even when they were known to have extreme vulnerabilities.

Ofgem said that so far British Gas has not made compensation payments to its customers who were affected. The regulator said that British Gas was not included in its review and was subject to a separate, ongoing investigation.

Claire Coutinho, the energy secretary, said that she had spoken to the regulator to attempt to resolve compensation “as soon as possible”.

“We’re getting new figures in the coming months but we are ready to act to make sure that people can get that money,” she added.

Ofgem told all energy suppliers to review cases of people who were forced onto prepayment meters between the start of 2022 and the end of January 2023 to assess whether they required compensation.

It said that it expected to update the number of cases where redress has been paid in the summer.

Prepayment meters require customers to pay for their energy use in advance, either through accounts or by adding credit to a card in a convenience store or Post Office.

Having one is a more expensive method of paying for energy than by direct debit. Energy companies have been able to force-fit prepayment meters into homes when bills went unpaid.

The practice was halted when British Gas’s actions were exposed by The Times last year but various suppliers have recently been given permission to resume the forced fitting of prepayment meters.

Strict rules are meant to apply that prevent energy suppliers moving an at-risk customer onto a prepayment meter if they are struggling to pay.

Energy UK, the industry body which represents the interests of energy suppliers, told the BBC that companies had “identified a small proportion of cases where the correct process wasn’t followed and where the customers affected are being compensated as a result”.

It said that with energy debt at “record levels”, prepayment meters had an “important role to play in preventing customers falling further into arrears”.

It added that new rules mean there are “stronger safeguards” in place governing forced meter installations, which it said “will only take place after repeated attempts to contact the customer and a visit to the property to confirm suitability”.

The Times

‘No dividing line’: consultants advising private water companies also work for their regulator, Ofwat

The water industry regulator has spent £26.7m on business consultants in the past five years, including several companies that have simultaneously worked for private water firms, the Observer can reveal.

The findings prompted environmental campaigner Feargal Sharkey to call for Ofwat to be abolished as fellow campaigners said there appeared to be no dividing line between “those who are meant to enforce the law and those who routinely break it”.

The Observer analysed invoices paid to Ofwat’s private sector suppliers from 2019 to the first three months of 2024, collated by procurement specialists Tussell.

The firm that received by far the most income from Ofwat over that period was PwC – which netted more than £11.5m, almost half the total.

PwC audits the accounts of Thames Water, which submitted plans last week to raise bills by 56% over the next five years, as well as providing services to the wider sector.

In a document sent to potential industry clients in 2013, the firm said its “leading role in professional and standard-setting organisations puts us in an ideal position to advise on regulatory, operating effectiveness and other developments”.

Several of the other consultancy companies used by Ofwat advertise their services working for the water industry on their websites.

Surfers Against Sewage chief executive, Giles Bristow said: “The regulators have already been exposed for schmoozing water industry fat cats at exclusive members clubs and now this – is there anything that divides those who are meant to enforce the law and those who routinely break it?

“For people across the country, who are rightly furious about the sewage being dumped into our rivers and seas, this is a bad look at a bad time for a supposedly expert independent body.

“It’s time for Ofwat to get their house in order and put clear water between themselves and our scandal-ravaged water industry, because, right now, the picture looks very murky indeed.”

An Ofwat spokesperson said PwC was its “main delivery partner” during its price review process – where Ofwat outlines the maximum water companies can charge to users and service standards for the industry. The spokesperson said the firm delivered “additional technical expertise in areas such as financial modelling, economics and engineering”.

They added that a “rigorous conflict procedure” ensured that “any potential conflicts of interest were identified and managed appropriately”.

A spokesperson for PwC said the firm adheres “strictly to all regulatory, professional, ethical and independence standards”, and has no “decision-making responsibility” in its services to Ofwat.

The Guardian

‘Dirty secret’: insiders say UK water firms knowingly break sewage laws

Whistleblowers say UK water companies are knowingly failing to treat legally required amounts of sewage, and that some treatment works are manipulating wastewater systems to divert raw sewage away from the works and into rivers and seas.

It is well known that water companies are dumping large volumes of raw sewage into rivers and seas from storm overflows but an investigation by the Guardian and Watershed Investigations reveals that the industry’s “dirty secret” is bigger, broader and deeply systemic.

By law, every wastewater treatment works must treat a minimum amount of sewage as stipulated in their environmental permits. Four whistleblowers have told Watershed that a large proportion regularly fail to do so and are not reporting it to the environmental regulator.

The insiders say the amount of sewage reaching a works is being “manipulated at the front end” by “flow trimming”, which can be done a number of ways including by “manually setting penstocks to limit the flow”, by “dropping weir levels” and by “tuning down pumps at pumping stations”. The diverted raw sewage makes its way into ditches, rivers and seas.

One industry insider says they “have personally surveyed works and found valves operated and diversion pipes installed so that part of the flow arriving is deliberately diverted to an environmentally sensitive stream, rather than into the works, so that the works passes compliance of sanitary parameters.

“I have spoken to staff who have carried out surveys to inform investment plans, who have found that the controls of terminal pumping stations have been deliberately altered so that they pump only a reduced proportion of the flow figure they were designed to pump, in the knowledge that this was a breach of flow compliance. This continues.”

The insider adds: “I have spoken to [people at] other water companies who confessed that flow compliance is a dirty secret of the UK water industry, which environmental regulators know about (although perhaps not the scale) and have turned a blind eye due to resourcing constraints.”

The raw sewage that is diverted away from the works either flows directly into ditches, rivers, lakes and seas, or backs up in the sewer network and finds its way out into the environment via storm overflows. Flow trimming, along with ingress from groundwater and an underlying fundamental lack of capacity at many sewage works, which have not been updated to meet population growth or changing weather patterns, are responsible for the widespread sewage pollution seen around the UK.

“It is an enormous scandal that many who work in the industry know about, but nobody wants to talk about,” said the whistleblower. “Water companies report their overall compliance with wastewater rules as good, but dig a little deeper and you’ll see that lots of treatment works are failing to deal with the amount of sewage they are legally meant to treat.”

The insider says non-compliance is widespread across the UK, and that they are aware of works where as much as 30% of the sewage they are expected to handle goes straight into the environment without treatment.

“Some operators, with or without the support of their chain of command, are deliberately reducing the flow of sewage into the treatment works by either dropping the levels of weirs so that sewage flows out into the environment, or by cutting back the flows at pumping stations. This way they can say they are treating a greater proportion of the sewage they receive because they are now receiving less into the works,” says the whistleblower.

“Sadly there are many incentives for water companies, rogue teams or staff to do this, including reduced cost of pumping and treatment, and treatment works that were struggling to comply appearing to be passing, with the resulting regulatory performance rewards leading to staff bonuses and increased dividends to shareholders – with very little risk that the manipulation will be found or anyone prosecuted.”

A second insider says it is “almost standard practice to control penstocks by hand to set it at a limit to reduce the flow”, adding that the problem “stems from sweating the assets … There are a lot of undersized, overcapacity sewage treatment works out there … and I’ve rarely seen a works where all the assets are working, there’s usually something out of service.

“Spilling to the river saves millions of pounds that they should be spending on assets. Lots of storm tanks are sized to meet 30-year-old permits, and there are sites with no storm capacity at all.”

A third insider says they have seen evidence of flow trimming at works owned by two different water companies.

“Operational teams on site look for a workaround, often in the full knowledge of what they are doing, and in full knowledge of all the stakeholders, from the project manager all the way up to the person holding the purse strings. Other times it’s done without knowing the implications … no one knows the true scale of what’s happening across the country.”

According to a fourth whistleblower, it is possible to identify instances of flow trimming in a company’s figures “but no one truly looks into the data, they won’t look at the detail”.

England’s water companies declined to comment, but the industry body Water UK says: “We recognise the current level of spills is unacceptable and we have a plan to sort it out. Between 2025 and 2030 water companies in England and Wales want to invest £96bn to ensure the security of our water supply in the future and significantly reduce the amount of sewage entering rivers and seas. We now need the regulator Ofwat to give us the green light so we can get on with it.”

Ofwat says water and wastewater companies’ environmental performance is “simply not good enough” and that the industry regulator is “acutely aware of the damage this does to our natural resources and to public trust.

Read the full article at The Guardian 

Claire Coutinho defends government’s climate record

Energy Secretary Claire Coutinho has defended the government’s environmental record following criticism from the outgoing boss of the climate watchdog.

Head of the Climate Change Committee, Chris Stark, told the BBC’s Sunday with Laura Kuenssberg that Rishi Sunak had “set us back” on climate change.

Ms Coutinho said the government had a “very strong track record of delivery”.

However, she also said it did not want to “heap costs on families” in its pursuit of net zero targets.

The UK is committed by law to ensuring that by 2050 its emissions will be net zero – meaning the country will no longer be adding to the total amount of greenhouse gases – such as carbon dioxide and methane – in the atmosphere.

Last year, Prime Minister Rishi Sunak announced a major shift in the government’s approach – including delaying a ban on new petrol and diesel cars and weakening targets on phasing out gas boilers.

Labour in February rowed back an earlier commitment on environmental project spending buy a shadow minister told the BBC the party still has “incredibly ambitious plans”.

The Climate Change Committee provides independent advice to ministers and monitors its progress on targets.

Mr Stark, who is due to stand down from the body, told the BBC the “diplomatic impact” of Mr Sunak’s announcement had been “immense”.

“The overall message was that the UK is less ambitious than it once was.”

Asked about his comments, Ms Coutinho said the UK was the first country of all major economies to halve its emissions since 1990.

She said that since coming into her role in 2023, she had made changes to the tax system to boost investment in the energy sector.

However, she also argued that the government would take “a sensible and pragmatic” approach to achieving net zero.

She said she did not want to “heap costs on families” particularly when “other countries are polluting a lot more”.

Broadcaster and environmental campaigner Chris Packham said he understood the government were “giving people room to breathe” but asked: “What about their children, what about their grandchildren.”

He said clean energy needed to be affordable for people but argued that if the Conservative government had invested more in renewables when it came to power in 2010, the UK would be in a better position now.

Mr Packham also defended environmental protests after Mr Stark said campaigners were often “their own worst enemy”.

In recent years some climate change groups such as Just Stop Oil and Extinction Rebellion have carried out disruptive protests to promote their cause.

The Springwatch presenter said: “When it comes to climate protests – sometimes we have made mistakes” adding that the methods had occasionally prevented the message from getting across.

However, he said it was important to have a “radical flank” and that disruptive protests by groups such as Just Stop Oil prompted people to contribute to “less radical” organisations.

In his interview, Mr Stark also urged Labour to be more “bold” on climate change, saying that, compared to his shadow energy secretary Ed Miliband, the party leader Sir Keir Starmer “doesn’t talk about it quite so much”.

Earlier this year, Labour announced it would be ditching its policy of spending £28bn a year on its green investment plan, but still wanted to achieve net zero emissions by 2030.

Appearing on the same programme, shadow justice secretary Shabana Mahmood said her party had had to “scale back” its plans, blaming the “likely economic inheritance” from the Conservatives.

However, she insisted that had not stopped Labour from having “incredibly ambitious plans” including its 2030 target.

She acknowledged that, under a Labour government, there would still be a “strategic gas reserve for when the wind and sun are not available”.

BBC News

Powering down: end times for the UK’s final coal-fired station

From the northernmost reaches of the River Soar in Nottinghamshire, the towers of Britain’s last coal-fired power station emerge from the flat countryside like concrete monuments to another time.

For more than half a century Ratcliffe-on-Soar has burned millions of tonnes of coal to generate the electricity needed to power the British economy. But one by one Britain’s coal power stations have closed, leaving Ratcliffe the sole survivor. In less than six months it, too, will finally power down for good, extinguishing the last embers of the once-mighty coal industry.

With its last winter behind it, the sprawling site, which covers the same acreage as the City of London, is quiet save for the hum of a single turbine and the crackle of electricity power lines overhead.

It once employed up to 3,000 people, but now a total of about 350 engineers are working there, in shifts, as Ratcliffe ekes out its final months, unsure of how many hours the site has left to run before it closes around the end of September.

“Last Saturday night was my last night shift,” says Ian Jackson, a shift leader at the site. “I’ve worked night shifts for the past 30 years. In that time, I’ve become a father and a grandfather. My family has only ever known me as a shift worker.”

Jackson was on duty in January this year, when Ratcliffe was called upon to fire up all four of its generating units and supply extra power as an icy Arctic blast chilled the country. It was almost definitely the last time the plant will run at full capacity. Jackson was also there earlier this month, when the first of these units was put into “preservation”, awaiting the plant’s final shutdown.

“It was the quietest I’ve ever seen the team,” he says. “You could see people reflecting on the moment. There were quite a few lifers there, but it was emotional for all of us. What it will be like for us when it does close, I can’t imagine.”

‘The end of the first Industrial Revolution’

When Ratcliffe was opened in 1968 by the Central Electricity Generating Board, the very first series of Dad’s Army was about to be broadcast, the Beatles were topping the charts and coal power was in its heyday.

Coal-fired stations mushroomed through Britain’s mining heartlands in the late 1960s and 1970s to provide baseload power for Britain’s electricity network. The 2,000-mega­watt Ratcliffe broke up the skyline for drivers on the new M1 motorway, and provided power to heat and light 2m homes.

It was built in an area rich in coal, where collieries employing tens of thousands of miners dotted the landscape. By the early 1980s, Ratcliffe was burning 65% of south Nottinghamshire’s coal output.

The new power stations were built at speed. At the time, their scale and engineering complexity were unprecedented, and their impact on the climate unforeseen.

When Ratcliffe generates its last megawatts this year, it will represent the final dismantling of Britain’s coal heritage and end almost 150 years of coal-powered economic growth.

“It’s the end of the first Industrial Revolution, really,” says engineering manager Nigel Bates. He first stepped on to the Ratcliffe site more than 40 years ago, as a 16-year-old mechanical apprentice with a handful of O-levels. “Coal started it all, and soon we’re going to end it,” he says.

Read the full article at The Guardian

Thames Water ends standalone river health team

Thames Water has folded the standalone team charged with looking after the health of its rivers into a wider engineering team, stoking concerns about cost-cutting and its focus on tackling pollution.

The river health unit used to work under Thames’ sustainability division but, following a restructuring, that has been merged into its “engineering and assets” unit, in a move that Thames said would help the company remain “financially and operationally resilient”.

Sources said the majority of the team had been retained, but would no longer report to a separate head of sustainability. Thames’ last sustainability director retired in March. It comes after the company cut 300 jobs at the end of last year to slash costs.

The end of a separate team focused on sustainability has raised fears that Thames is downgrading it as a priority even as it faces investigations by the Environment Agency and the industry regulator Ofwat into sewage treatment.

Charles Watson, chairman of campaign group River Action, said: “Thames Water has one of the worst environmental records of all the water companies. The notion that the team who are responsible for river health can be rationalised into some engineering function is just shocking.”

Thames Water said that the health of its rivers was “a key focus”. It said: “Like any business we are constantly looking to optimise our operating model to ensure we progress our plans efficiently so we can deliver for customers, communities and the environment.

“The sustainability team has been moved across to the engineering and asset management team which manages our strategy for environment and sustainability. We are committed to supporting a number of regional partnerships that improve river health and see this as a positive move to better solve many of the problems we face today.”

The Times

Landowners cover countryside with solar panels in ‘sunrush’

Craig Fuller is a rural property buying agent, so when plans recently revealed that his country home could be surrounded on all sides by solar panels as part of proposed 2,000-acre solar park, he knew the devastating impact it would have on house prices in the area.

“I should think house prices will fall by 30 to 40 per cent,” he said of the proposed Lime Down Solar Park, which would cover swathes of agricultural land in north Wiltshire with three-metre-tall solar panels and security fencing.

“It’s going to be devastating. I know three neighbours trying to sell and in all cases their prices have been knocked by at least 30 per cent. We are talking proper houses around £10 million, £4.5 million and one was £2.5 million. They will feel the impact the same as they will in all the villages.”

Fuller, 58, and his neighbours are being caught in the wave of dozens of huge new solar farms planned around the country, which is being described as a “sunrush”.

Millions of solar panels will be erected from marshes in Kent and former farmland in Essex and Wiltshire, to near the site of old coal power stations in Nottinghamshire.

Historic estates are increasingly utilising solar, with the King submitting plans for 2,000 solar panels across two hectares of horse grazing paddocks on the Sandringham estate. The 2.1 megawatt solar farm is designed to make the estate largely self-sufficient with a supply of green electricity.

Others such as the Blenheim and Badminton estates are getting involved in much larger projects which will result in thousands of acres being covered in solar panels.

The surge is being driven by the return of government subsidies for solar power, carbon targets and new lows for the cost of panels. Driven by production in China, solar panels are now so cheap they are even being used as fences by homeowners in Germany and the Netherlands.

Jenny Chase, a solar analyst at Bloomberg New Energy Finance, said they had become “super cheap” and predicted: “We are going to see them everywhere.”

David Cameron’s government effectively brought new solar farms to a halt by cutting incentives in 2016. However, the government introduced new contracts in 2022 offering a guaranteed minimum power price for solar developers. More than 50 solar schemes secured such contracts in an auction last year.

There is about 9 gigawatts of solar installed in the UK today, supplying about 5 per cent of electricity, mostly in large projects but also across the million-plus homes with panels. The figure is set to spiral.

A further 12GW has planning permission, according to examination of government data by the energy analysts Cornwall Insight. An additional 10GW has been submitted but does not yet have a green light.

One of the most contentious plans is Lime Down Solar Park. It is designed to create 500MW of renewable energy, enough to power 115,000 homes, from six agricultural sites surrounding historic north Wiltshire villages such as Sherston, Norton and Hullavington. These sites would need to be connected into the National Grid’s substation 25 miles away in Melksham.

Island Green Power, the developer, says it will give a “net gain in biodiversity”.

“There are only nine landowners in the whole scheme and most of them are neighbours we have lived alongside, so it’s incredibly divisive,” Fuller said. “There is a lot of bad feeling and it’s caused a huge amount of resentment.”

The Times

Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.