Whitehall energy policy bandwidth ‘at 30 year’ low

The government’s energy policy making bandwidth has “never been smaller” in the last 30 years and the UK needs a national transmission plan, according to a former senior official.

Giving evidence to the House of Lords economic affairs committee, KPMG head of power and utilities Simon Virley said the government had made “tremendous progress” on setting targets in energy, such as the target to roll out 40GW of offshore wind by 2030.

But a series of crises from Brexit to the current Ukraine war has cut the government’s energy policy making capacity, he said: “The need for system thinking has never been greater but the bandwidth has never been smaller in my experience of 30 years of dealing with energy policy. That’s no criticism of my former colleagues but it is the reality of crisis after crisis.”

Virley, who was director-general for energy markets and infrastructure at DECC (Department of Energy and Climate Change) from 2009 to 2015, said these blockages could be relieved by turning the mooted Future Systems Operator into a “Bank of England for energy”.

“It needs to come out of Whitehall,” he said, adding that the new agency’s remit should only apply to monopolistic parts of the energy system, like networks, and that it should advise  councils on the delivery of local energy plans.

“We don’t want to create 650 expert bodies: we want one body that can provide advice for what might be the best solution.”

Virley also called for the establishment of a “clear” national plan for the UK’s transmission system.

Such a blueprint would make it easier to demonstrate the national need for projects, which are important for the grid’s development, he said: “We can’t carry on as we are at the moment.”

Virley also told the committee that the government’s target for hydrogen to provide up to 35% of the UK’s energy by 2050 is “realistic and achievable” and that the low carbon fuel could compete on cost  with natural gas by the end of this decade.

“With the investment going on around the world, we expect to see fairly significant cost reductions that would make it a very significant storage vector.”

But he described developers’ claims that small modular reactors will be operational by 2030 as “stretching” and cast doubt on whether much new build nuclear will be on stream by 2035.

Commenting on reports that the government’s upcoming energy security plan will focus on big boosts for nuclear and renewable generation, Virley said the apparent absence of measures to tackle energy efficiency is a “big omission”.

Describing the government’s track record on energy efficiency  over the last 10 to 15 years as a “sad and sorry tale”, culminating in the botched introduction of the green homes grant scheme, he said “If you were really serious about getting bills down, energy efficiency is the place you would start.”

Virley said a beefed up package of incentives and higher standards could make “a significant dent on energy efficiency within two years”.