Great Britain's energy regulator has rolled out a plan that would govern the nation's net zero greenhouse emission target backed by the new prime minister. It emphasizes finding tangible, workable methods for the energy sector to provide needed power and hit the emission target in an economically viable fashion. That would include keeping consumer protections in place.
Ofgem's nine-point manifesto addresses some big and costly goals including getting 10 million electric vehicles to its roads by 2030, growing offshore wind generation fourfold, supporting low-carbon home heating, adding tariffs that would encourage homeowners to help balance the energy system, and a crackdown on “greenwash” energy deals.
The energy agency is promising to offset rising energy prices for homeowners that would come from this changeover. Incoming CEO Jonathan Brearley set out to clean up the regulatory agency’s outdated statutory duties that were out of line with the national government’s climate policies. He acknowledged that implementing the new strategy will be costly for energy companies and for consumers, and it must be balanced with the new climate change mandate.
“We are taking an approach that recognizes that our role protecting consumers includes achieving net zero,” he said.
Ofgem was originally created to regulate energy companies while safeguarding consumer interests, which can include facing controversial price increases. The agency has admitted it has a real dilemma to work out here — supporting hitting ambitious net zero targets while protecting consumers from rising costs.
Critics of the proposal could resist it -- including CBI, Britain’s biggest business group, a consumer group, and the Scottish Power agency. Ofgem appears to have structured the new plan to offset some of these expected arguments.
The CBI business group previously expressed concern that the regulator’s existing mandate sent “negative signals” to low-carbon investors. The CBI called for a legal change to the regulator’s statutory duties to directly prioritize tackling climate change.
One consumer group has shared that concern.
“Ofgem has set out the right challenges, it now needs to deliver on them,” said Gillian Guy, the chief executive of Citizens Advice. “If we don’t get the difficult decisions about the low-carbon transition right, it will ultimately be those who can least afford it who end up hardest hit.”
Ofgem attempted to make the new plan more adaptable to market conditions. Energy network companies will likely have the chance to ask for their spending plans to change during set time periods, so that they can adapt their green investment plans as the sector evolves.
Keith Anderson, the chief executive of Scottish Power, had been opposed to such a plan. Ofgem appears to have responded to his critiques when shaping the new nine-point plan.
Last year, Anderson had accused the regulator of hindering the UK’s electric vehicle rollout due to its “colossal disconnect” with Britain’s climate policies. The energy system will have to be flexible to respond to peaks and troughs in both supply and demand, and price controls applied to network companies would be able to provide the needed incentives for future investments.
Making price controls more adaptable to help firms invest in clean energy is one of the elements added to the new nine-point plan.
“As low-carbon renewable energy grows and more transport goes electric, the energy system needs to be more flexible to respond to peaks and troughs in both supply and demand,” Brearley said in a statement.
Previous Prime Minister Theresa May in June signed the “net-zero” mandate that would cut emissions 80 percent by 2050 compared to 1990 levels. Britain is the first G7 country to commit to a net zero greenhouse gas emissions target for 2050. The new Prime Minister, Boris Johnson, is continuing support for the net-zero emissions mandate.
During his campaign last fall, Johnson pledged to increase the UK’s 2030 offshore wind target from the current 30GW to 40GW if his Conservative party won the general election. Ofgem included the issue in the nine-point plan, committing to explore ways to create a “lowest cost” offshore grid to support wind power.
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To meet the net zero goal, Britain will have to change the way homes and businesses are heated. That will include supporting the use of hydrogen boilers or electricity to power heat pumps, Ofgem said.
Great Britain’s grid operator National Grid is supporting the new nine-point plan. The grid operator sees it as being critical that the regulator, government, and industry are aligned to decarbonize the energy sector on the path to net zero emissions at the lowest cost to consumers.
By Jon LeSage for Oilprice.com
