Weekend press round-up: UK households will need help paying winter bills, warns supplier

In our latest review of sector coverage across the national newspapers, Ovo Energy’s founder says the government will need to provide a “safety net” for households struggling to pay their utilities bills. Elsewhere, Octopus is set to create 1,000 new jobs and there is renewed speculation about upcoming policy announcements set to impact the sector.

UK households will need help paying winter bills, warns supplier

Households hit by the coronavirus crisis are likely to need government support to pay their heating bills this winter, one of Britain’s biggest energy suppliers has warned, as utilities report an uptick in bad debt.

Stephen Fitzpatrick, chief executive of Ovo Energy, now Britain’s third largest supplier, said the government would need to provide a “greater social safety net” to help financially distressed households, as rising unemployment coincides with the season when spending on heating increases as much as 10 times.

So far, energy suppliers report that the number of households struggling to pay their energy bills has remained lower than expected at the start of the pandemic, but companies such as Ovo say there has been a “notable increase” in recent weeks in customers contacting them for help.

Suppliers are concerned about the pressures the end of the UK government’s £39bn furlough scheme this month will place on the industry at a time when the balance sheets of smaller energy companies in particular can become stretched as they have to pay certain policy costs.

So far, Covid-19 loans have been focused on the suppliers themselves so they can offer payment holidays to customers but this has proved unpopular with many bigger companies, which claim such support is merely propping up poor business models. They would rather see funds go directly to customers.

Mr Fitzpatrick, whose company was propelled into the top tier of suppliers in January by its £500m acquisition of SSE’s British household supply business, said “it’s pretty obvious that private companies can’t indefinitely offer financial support” to households in difficulty.

“This is the period we’re going to see how hard it’s going to bite and I think it’s going to require the government to provide a greater social safety net,” Mr Fitzpatrick told the Financial Times.

“There’s only so much that the energy sector itself and the energy industry can do, some of these challenges are not commercial, they are very definitely social issues so there’s lots of conversations with the regulator, with BEIS [the Department for Business, Energy and Industrial Strategy] about how we are going to tackle this as an industry,” he said.

Mr Fitzpatrick said the amount that would be required to help the hardest-hit households pay their heating bills “is not insurmountable” when compared with other Covid-19 economic stimulus packages, although the energy sector has yet to release a concrete estimate. “I hope that we see some movement from government before we reach the depths of winter,” he added.

The Financial Times

‘Tech unicorn’ Octopus Energy to create 1,000 new UK jobs

Octopus Energy plans to create 1,000 new technology jobs across sites in London, Brighton, Warwick and Leicester, and a new tech hub in Manchester, as part of its vision to make the UK the “Silicon Valley of energy”.

The supplier will employ graduates at the new sites to help develop the proprietary green energy technology platform which has helped to make Octopus one of the fastest-growing companies in the UK.

The prime minister, Boris Johnson, said the new jobs will “provide exciting opportunities across the country for those who want to be at the cutting edge of the global green revolution”.

“It’s UK tech companies like Octopus who will ensure we continue to build back greener and remain a world leader in pioneering renewable energy, leading the path to net zero whilst creating thousands of skilled jobs,” Johnson said.

Octopus became the UK’s latest “tech unicorn” (a startup company valued at more than $1bn) in May this year after the Australian energy company Origin paid £300m for a 20% stake. It has since announced a £100m push into the US market, as part of its goal to reach 100 million energy customers around the world by 2027.

The company’s newest recruits will help to develop smart grid technologies that can help Britain’s transport and heating systems harness cheap renewable energy, helping them to reduce their emissions in line with the UK’s pledge to be carbon neutral by 2050.

The chancellor, Rishi Sunak, said the growth of green jobs was not only good news for British jobseekers, but also “a vote of confidence in the UK economy as it recovers” and a pivotal part of “our collective efforts to build a greener, cleaner planet”.

Octopus has already used its cutting-edge energy technology platform, known as Kraken, to help its customers earn money by using more electricity when renewable energy generation is high, and avoid paying higher costs when renewable energy is low.

It has also widened its reach to other UK energy companies including E.On UK, Good Energy and Co-Op Energy, which also use the Kraken platform under technology licence deals.

Greg Jackson, the chief executive of Octopus, said the technology could help “make Britain the best place to invest in creating new clean electricity generation”.

He said: “When Apple created the App Store, nobody knew that it would change the way we order food or transport forever.”

“We’re revolutionising the energy industry in the same way, creating jobs not just through increased demand for affordable renewables, but by facilitating the development of new and emerging industries like electric vehicles, electric heating and vertical farming.”

The Guardian

UK’s gigafactory dream could fall without change to state aid rules

A £1.2bn project to build Britain’s first ‘gigafactory’ to supply electric batteries for the UK car industry could unravel without changes to UK state aid rules, according to the company’s chief executive.

Orral Nadjari heads up Britishvolt, which is close to submitting formal applications to build a so-called ‘gigafactory’ at two potential sites in South Wales and southwest England.

The scheme, which could create 3,500 jobs, could prove critical to plans to protect the industry after Brexit as the UK aims to phase out all sales of petrol and diesel vehicles by 2035.

But Mr Nadjari said changes to UK state aid rules are essential to ensure the viability of the scheme, which is competing directly with a string of big projects in the European Union. Unlike Britishvolt, these are receiving generous government funding and support packages worth hundreds of millions of pounds.

He said: “We need to have something similar in the UK otherwise battery manufacturing will not be based here… The UK Government needs to recognise how critical building a gigaplant is to the nation’s economy and UK automotive industry, this benefit is even more amplified if you encompass localisation of upstream manufacturing in the materials supply chain.”

Rival projects such as Northvolt in Sweden have been designated under a special EU scheme created in 2017 which allows them to bypass EU state aid rules, as so-called Important Projects of Common European Interest (IPCEI).

He said: “IPCEI in Europe allows intervention by nations outside of EU state aid rules.”

Mr Nadjia added that under existing rules, the UK Government can legally provide less than £40m in support for the Britishvolt project to build a £1.2bn battery plant.

In contrast, Sweden’s Northvolt has been backed by Volkwagen, Goldman Sachs and Daniel Ek, the billionaire founder of Spotify, has been granted a €443m (£402m) loan guarantee from the German government, additional funding from the Swedish Energy Agency and a €350m loan from the European Investment Bank.

The European Commission recently approved nearly $3.5bn (£2.7bn) in funding for the electric-vehicle battery supply chain.

Belgium, Finland, France, Germany, Italy, and Sweden are participating in the IPCEI program which is being coordinated by the European Battery Alliance, which includes more than 400 industrial companies and agencies from mining to recycling.

Because the UK is not part of the scheme and has left the EU, Britishvolt will not have access to it and is instead in talks with the UK Government about alternative forms of support.

Sunday Telegraph

How Alok Sharma can put Britain on course to reach net zero emissions in a post-Covid world

Boris Johnson spoke with customary bombast as he laid out his vision for UK energy in a call with world leaders. “We want to be the Saudi Arabia of wind,” the Prime Minister told the United Nations meeting on climate change last month. “We have massive potential – huge, huge gusts of wind…”

Declaring himself a converted “evangelist” for carbon capture – removing carbon emissions from the atmosphere – he also said the country would make a “big bet” on hydrogen as a fuel. Humanity, he observed, had been “caught napping” by coronavirus but, as for climate change, “nobody could say we had not been warned”.

Johnson and Alok Sharma, his Business Secretary, are under pressure to meet a gargantuan global challenge: putting the country on course to cut carbon emissions to net zero by 2050.

The pressure is now on Sharma and his colleagues as they prepare to deliver a long-awaited energy white paper, possibly as soon as this month.

It is among a flurry of policy papers expected to be published soon, raising hopes that a clearer blueprint will start to take shape.

That could also set the stage for new jobs for workers who have lost out during the pandemic, such as North Sea oil drillers fleeing lower oil prices, or airline workers with no flights.

It would be a stretch, though, to say that hopes are sky high for what forthcoming announcements will deliver. There are concerns that a piecemeal approach, no match for the task, will continue. A more radical approach is needed, some believe.

“Net zero means that the need for whole systems thinking about the future of our energy system has never been higher,” says Simon Virley, head of energy at KPMG. “But the bandwidth to do this in Whitehall is now heavily constrained by Covid and Brexit. So there is a growing case for an independent energy agency to provide that expert advice to government.”

Coal, which generated 70pc of UK electricity in 1990, is almost out of the picture, while wind, solar and hydropower generated 26.5pc of electricity in 2019.

But the next steps, cutting emissions from transport and heating, are arguably tougher. Sharma’s energy white paper is likely to contain measures to encourage the development of hydrogen as a fuel, including as a replacement for gas-fired boilers alongside heat pumps.

It has many critics, but if hydrogen is going to be widely used, support is needed to bring down the cost of hydrogen generated through electrolysis (“green hydrogen”), and develop carbon capture to mitigate emissions from making it from natural gas (“blue hydrogen”). Europe has put a focus on hydrogen and the UK is “unlikely to want to lag behind”, according to one senior industry adviser.

Off the coast of the Netherlands, Shell – the company that doesn’t want to be known as an oil business anymore – is developing a wind farm that will also produce green hydrogen. Sinead Lynch, its UK country chair, is also co-chair of the Government’s Hydrogen Advisory Council, as an independent industry representative, alongside energy minister Kwasi Kwarteng.

While necessary to encourage investment in uncertain technologies, new subsidies are likely to stoke controversy about dumping the costs of the shift to a low-carbon economy on to bill payers. A new levy is already under consultation to be added to gas bills to help pay for biomethane.

“They have to be very careful,” says one industry source. “Everyone is up for this but it needs to be fair.”

The Treasury estimates, perhaps optimistically, that its new £2bn in vouchers for home improvement, which need to be spent by the end of March, could support “more than 100,000 green jobs”.

Government advisers on the Committee on Climate Change also argue that training builders and installers for low-carbon heating could provide a massive jobs boost, although a strategy on what heating will look like first would clearly help.

With the looming ban on sales of new combustion-engine vehicles, there are also hopes ministers will outline plans to make it easier for electricity to be sold back to the grid by the owners of electric cars or solar panels. “We have had huge success reducing the cost of renewables,” says Guy Newey, of the Energy Systems Catapult innovation centre.

“Now we need innovation on the demand side so people can take advantage of new technologies.”

With so much at stake and having delayed the paper for so long, Sharma has a lot to live up to. Wary of disappointing, officials are rumoured to be “dampening expectations”.

A Department for Business, Energy and Industrial Strategy spokesman said: “The energy white paper will set out our plans to decarbonise and modernise the UK’s energy system as we power our way to net zero emissions by 2050.

“It is our ambition to publish the white paper in the autumn.”

Sunday Telegraph

Will we go for Sizewell C nuclear option to meet zero-carbon goals?

To its supporters, it’s a crucial step to meeting Britain’s net-zero emissions goals, providing reliable low-carbon power and creating thousands of jobs. To its critics, it’s an outdated, risky technology that will push up energy bills and blight the landscape. The proposed Sizewell C nuclear plant has long provoked debate in the energy industry — but what does the government think? That’s the £20 billion question.

The twin-reactor plant in Suffolk proposed by France’s EDF could generate 3.2 gigawatts of electricity, enough to provide 7 per cent of Britain’s needs. It would be a sister station to Hinkley Point C, which EDF is building with the Chinese state group CGN in Somerset, and which the government said in 2016 should be the “first of a wave of new nuclear plants”.

Yet of five projects that were proposed to follow Hinkley, three — in Cumbria, Anglesey and Gloucestershire — have been abandoned by their Japanese developers, while CGN’s hopes of building its own reactor in Essex look politically highly unlikely amid hostility to China. That leaves the £20 billion Sizewell plant as the test case for whether the government still wants nuclear, and what it’s prepared to do to make it happen.

“What we need to see is a strong and unambiguous statement of the need for new nuclear to be able to meet the net-zero target,” Tom Greatrex, chief executive of the Nuclear Industry Association, says. He hopes an energy white paper, delayed by more than a year and now promised this autumn, will include a clear indication of how much nuclear is wanted. “Ministers haven’t said in recent times anything about the proportions of power coming from which zero-emission sources. There has to be a greater sense of direction.”

As the costs of wind, solar and batteries have fallen, critics have questioned whether nuclear is really needed. The National Infrastructure Commission advised the government in 2018 that it should commit to only one more nuclear plant by 2025 since renewables may prove to be cheaper.

Mr Greatrex insists this view is mistaken and does not reflect the requirements of Britain’s net-zero target, set last year. The Committee on Climate Change, the official advisers on that goal, say that power demand may double by 2050 and 38 per cent of it may need to be met by firm low-carbon power: either nuclear, or gas plants fitted with carbon capture technology.

Dermot Nolan, who led the energy regulator Ofgem until January, says that he believes “we probably won’t know until 2040 or 2050 if we were right to do nuclear” but that to minimise risks, “it is better to develop some nuclear at this point”. He adds: “I think there’s sufficient uncertainty about overall power demand, and sufficient uncertainty about whether a 100 per cent renewable mix will be lower or higher cost, that it’s just not putting all your eggs in one basket.”

The limited indications are that the government agrees: the business department says that “nuclear power will play a key role in the UK’s future energy mix as we transition to a low-carbon economy”. But if they do want new nuclear, ministers will need to decide how to fund it. “The current financing mechanism won’t work,” Mr Greatrex says.

The Times

A clear infrastructure policy is more vital than ever

Two years ago the National Infrastructure Commission published the first ever comprehensive assessment of the UK’s infrastructure needs, looking ahead to 2050 (writes NIC chair Sir John Armitt).

Since then, many of the areas we highlighted – such the need for greater investment in flood resilience measures and accelerating the rollout of gigabit broadband – have seen significant steps forward. The challenge is now one of acceleration and delivery.

As the decision to postpone the autumn Budget has shown, the pandemic is understandably forcing a rethink of short-term priorities.

But it is partly because of the economic challenges posed by the health crisis that industry is craving a clear statement of future direction for infrastructure policy.

A market-led recovery requires increased business confidence. Significant parts of national infrastructure, including energy production and distribution, water, and digital communications, are privately owned and funded. Boosting the confidence of investors and firms is therefore critical for future investment and new jobs.

When we were delivering the new infrastructure needed for London to host the Olympic Games in 2012, it was the immovable date of the opening ceremony and the clarity of vision around the importance of legacy that ensured we could plan and deliver effectively.

A golden opportunity for ministers to provide similar clarity exists. The Government has said it will publish a National Infrastructure Strategy – its formal response to our 2018 assessment – in the autumn.

This strategy, alongside a White Paper on energy, can set out a road map for delivering the net zero target by 2050 and promote economic growth balanced across the nations and regions of the UK.

These statements need to move beyond goals and ambitions to also provide long-term plans, commit realistic funding and establish clear ministerial ownership.

The full article can be read here

Daily Telegraph

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.