Yesterday afternoon (28 March), members of the energy sector held a briefing discussing what they hope to be included in the UK Government’s ‘Green Day’ announcement which is expected on Thursday, 30 March.
Originally published in October 2021, the government legally must update its Net-Zero Strategy by Friday (31 March).
The speakers consisted of: Bim Afolami, Conservative MP for Hitchin and Harpenden; Ana Musat, executive director of policy & engagement at RenewableUK; Ben Nelmes, chief executive of New Automotive; Vicky Hird head of the Sustainable Farming Campaign for Sustain; and Emma Pinchbeck, chief executive of Energy UK.
Current± has summarised some of the most interesting takes from the briefing below.
You can find our ‘snapshot’ article on the briefing here.
Green levies
“The most exciting thing in the document, is that we are supposed to see decisions on green levies as well,” said Emma Pinchbeck.
“So can we move financing a lot of this transition from levies on bills into general taxation or recognise it as an investment in the future economy rather than something that we should be paying for in bills and making electricity artificially expensive?”
A green levy is a government-enforced tax on generators is pollution and carbon emissions, intended to reduce the use of fossil fuels.
From 30 November 2021, the UK government imposed a Green Gas Levy on all licensed fossil fuel gas suppliers.
In January 2022 the Treasury considered scrapping the Energy Company Obligation to manage the energy crisis, a decision met with widespread concern over long-term effects to the UK’s net zero target.
Additionally, Pinchbeck told Current±: “Policy costs which fund vital initiatives to support clean energy, energy efficiency improvements and customer bills do have the effect of making electricity artificially expensive compared to gas. So the industry supports removing these costs from electricity, given that we need to incentivise moves to electrify heating and transport and should also reflect the ever-increasing amount of generation that is provided by low carbon sources.
“We would welcome such a move and wait to see whether this will mean transferring such costs to gas – which would need to bear in mind the potential cost implications for some customers – or funding them through general taxation.”
Policy Support
More stable and secure policy support for renewables was unanimously called for by the panel.
This is an increasingly urgent requirement for the UK as international renewable policies (such as the Inflation reduction Act in the US) could drive away investors from the UK market.
“My first point is really around policy and regulatory instability,” began Ana Musat.
“Since the beginning of the energy crisis, we’ve had quite a few interventions in energy markets in the form of the price cap, windfall taxes and then we’ve got the review of electricity market arrangements (REMA), which can contain some pretty radical options, which are hanging over the sector.
“Regulatory changes are not a bad thing but it also depends on how it’s done and I think we’ve had quite a lot of disruptions which have put off investors, at time when other investors are really offering very strong incentives and process stability. So we really need to look at how we can maintain a stable policy and regulatory framework.”
Pinchbeck added: “It’s remarkable that government thinks of itself as driving the energy transition when I think it has been some five years since, that the energy transition is driving government policy.
“In many ways what government policy needs to do is get out of the way or enable or accelerate rather than drive the whole thing from the beginning, we are fully on board with this as the energy sector, in fact, we see it as the future of the economy.”
Grid capacity
The panel mirrored the energy sector’s sentiments which have been continuously addressed in the media surrounding the ever-growing need for greater grid capacity to facilitate the renewable transition.
“The sector has been calling for reform for quite a long time, I would say the biggest barrier is grid, we haven’t got enough transmission grid built, we need to build it much faster than then we have today,” continued Musat.
“We’ve got a really long connections process, currently renewable energy projects that want to connect to the grid can be delayed by even 10 years or sometimes more. That’s the longest time it takes to get a grid connection in Europe. And if you think of the package that Europe has put out, it’s a really good area for us to establish competitive advantage
“I think the conversation is more advanced in the UK when it comes to grid and planning. And on the grid side, especially there is some exciting things that are happening, we just need to go much faster and really now is the time to single all of this.”
EVs
Turning to the EV market, Ben Nelmes hoped that the ‘Green Day’ announcement would provide more clarity on the Zero Emission Vehicle (ZEV) mandate – which sets out how to reach net zero in the motor industry – ahead of its launch at the beginning of next year.
“We’ll be watching very closely tomorrow and hoping very much to see further details of the government’s plans for a zero emissions vehicle mandate,” said Nelmes
“This policy is simply huge from a climate change perspective. The single biggest chunk of emissions in the UK is cars, that’s 15% of all emissions, and a further 5% comes from vans so together the ZEV mandate covers 1/5 of UK emissions, so it’s simply huge from a climate change perspective.
“We’ve got the inflation Reduction Act, which is pulling a lot of investments from Britain and also from Europe, over across the North Atlantic. You know that act is having an impact when you see the likes of Volkswagen, rethinking investments in Germany, in favour of America.
“And so, the question is, what does the UK do to try and match that? Clearly, the UK can’t outspend the US federal government. But what we can do is play to our strengths, which is creating a clear policy environment to stimulate private investment in these green technologies.”
The highly anticipated ‘Green Day’ announcement is hoped to ultimately provide clarity for the energy sector as to how the government can support its transition to a low-carbon future.
The energy sector’s widespread participation in the energy transition conversation, not only ahead of tomorrow’s announcement, but throughout the energy crisis, shows that the sector is willing and eager to take proactive steps to decarbonise.
Policy is perhaps the overarching topic in this conversation and although the Review of Electricity Market Arrangements (REMA) is entering its next stage, imminent action is paramount to ensure near-term results.
