Yselkla Farmer, director of policy and marketing at BEAMA, discusses how to galvanise investment and accelerate deployment of new technology in the UK energy infrastructure.
The recent government Select Committee inquiry into financing energy infrastructure has sparked widespread discussion across the industry on the current investment and finance climate for renewable generation, low carbon technologies, and products that enable an efficient and flexible energy system. When we refer to investment throughout this article, we are referring to predominantly private investment.
With the decision of Toshiba and Hitachi to withdraw investment from UK nuclear projects, the question has been put to industry: how will we fill the ‘nuclear gap’? This is a huge opportunity for the UK to decarbonise further and invest in renewables at all levels in the system. BEAMA represents an industry that collectively is already delivering the technologies needed to do this. However, the current investment landscape is limiting progress and inward investment in the UK, making it more difficult to address our growing energy needs.
A low carbon future
How can we galvanise investment for the UK market and accelerate deployment of new innovative technologies to enable our low carbon future?
This is a question BEAMA is championing with government today. There is a huge opportunity here for the UK to be a world leader in delivering new technology and markets, but investment is essential.
This investment is needed, regardless of the ‘nuclear gap’ we may be facing, because the nature of our energy system is already drastically changing. The way consumers access electricity is changing fundamentally, driven by the move to digitalise and advances in our ability to control energy in the home, as well as trends towards prosumers taking control of their energy choices by generating and trading their own electricity.
These changes are driving new and greater demands on our networks – in particular, the need for more electricity and more flexibility. Improving the capability of the energy system will be key in ensuring capacity for growing electrical demand from electric vehicles and heat, as well as the ability to deal with the volatility of energy from distributed renewable generation.
Change from the top
We know from recent evidence presented by the Committee on Climate Change (UK housing: Fit for the Future?, February 2019) that emissions reduction from UK housing has stalled. The focus needs to move to reforming policy and regulation to help drive investment in low carbon technologies and our housing stock.
One example is the recommendation to support the growth of low carbon heating by ceasing the connection of new builds to the gas grid by 2025. The pure electric and hybrid systems to enable this are easily available today, and acceptance of these new technologies is essential if the UK is to achieve the level of decarbonisation from the housing stock to meet its targets for emissions reduction.
To add to this growing electrical load from heat, we will also see widespread adoption of electric vehicles. With the recent Committee on Climate Change net zero by 2050 report, arguably the growth and pace of deployment for these new technologies needs to accelerate even further. To do this, government needs to now recognise the new opportunities from real-time energy data, and consumer control. This has the potential to provide for domestic and non-domestic customers, save unnecessary investment in the grid and reduce carbon emissions. Government should embrace these new data-driven solutions.
It is therefore evident that radical infrastructure planning is needed across the system – from the transmission network, to behind the meter technologies in buildings and on streets.
Rhetoric or reality
While government ambition and rhetoric has in recent years supported the move to develop low carbon energy and associated flexibility solutions on the energy system, investment in the sector is declining and it is becoming increasingly difficult for technology companies to launch new projects in the UK.
In many cases, diminishing investment is linked to policy failures and unhelpful regulatory changes. There is insufficient policy support for the uptake of required technologies for the UK housing stock, and current building standards, incentives and market mechanisms for the trading and management of flexibility (for example through storage) are not ambitious enough.
A key driver of uncertainty that has had a significant impact on investment decisions, particularly in distributed energy assets, is the state of policy flux and regulatory uncertainty that has come from BEIS or Ofgem in the past eighteen months. Regulatory actions being contradictory to aspirations set out by ministers, policy changes that are harmful or detrimental to the business case for investment in energy assets, a piecemeal approach that leaves investors deeply unsure about future revenues and the stability of the incentive and market frameworks that should be encouraging investment in renewables infrastructure have all had an effect. Examples include the recent proposal to fix residual charges, the removal of the Renewables Obligation and the Export Tariff.
To return to the question asked earlier, the answer is to provide clear market signals and planning. We know regulatory change is necessary for system flexibility, and for improving our housing stock, and this must be done in a planned and co-ordinated way. Before removing existing market incentives, government should be setting out planned new market mechanisms that will enable investment in the UK renewables market, including energy storage.
A strategic infrastructure plan linked to the current government strategies – the Road to Zero strategy, Smart Systems and Flexibility Plan – covering the next 10-20 years will support the UK’s efforts to meet its carbon targets and deliver its Industrial Strategy. This plan will set out not only broad physical infrastructure requirements, but align policy and regulatory change into a planned program of work that provides the market signals needed to ensure investment in the UK. The government should set about making the UK the preferred location for developing future energy markets.