Who will foot the bill for net zero?

The conversations around the cost of meeting the 2050 net-zero emissions target are finally moving on from “how much?” exclamations to a serious evaluation of the most complicated bill-splitting exercise in history

Amid fractious and interminable Brexit debates and the turmoil of a Conservative leadership contest it was unutterably refreshing to see broad-based support for the decision to adopt a legally binding target to achieve net zero greenhouse gas emissions in the UK by 2050.

Of course, making that commitment is the easy bit and now utilities are in the hot seat to deliver it. 

It’s a challenge the industry should seize and relish. Not only is it the right thing to do, but it also provides an unmissable opportunity for utilities to move the dial on public perceptions of the industry and be seen as pioneers in creating solutions to the biggest single issue facing our society and way of life.

It won’t be easy. At Utility Week’s Energy Summit this month, industry leaders repeated their plea for an energy white paper to deliver clarity on key policy frameworks for decarbonisation. Particularly urgently needed are policy structures for tackling energy efficiency, the decarbonisation of heat, and rationalising the “free for all” development of electric vehicle infrastructure.

Behind even these critical requirements, however, sits the question of how to pay for the energy transition. Notwithstanding recent Treasury comments about the gross price tag (the Committee on Climate Change’s overall cost estimate of 1-2 per cent of GDP remains unchanged from the 80 per cent emissions reduction scenario), it is clear the cost conversation has moved on from incredulous “how much?” exchanges to pondering the most complicated bill-­splitting exercise in history.

Already a key industry debate, the net zero commitment has made all the more urgent the need for definitive decisions about how to socialise the costs of a decentralised and dynamic energy system. It has also brought into sharp focus growing unease among energy players about whether Ofgem’s focus on regulating for least cost to the consumer is still fit for purpose.

Ofgem chair Martin Cave promised Energy Summit delegates that the regulator will be “more explicit” about changes it is considering to its approach in light of the net zero challenge in six to nine months.

It’s not long to wait by normal standards, but with industry leaders keen to “bloody well get on with it” (as one CEO put it), there will be impatience nonetheless. And it seems unlikely the regulator will go as far as many would like in reviewing its role.