Utility Week

26 | 6TH - 12TH JULY 2018 | UTILITY WEEK Event Energy Summit 21 June, Church House, Westminster, London I f one thing was clear from Utility Week's latest annual energy summit, it's that the industry faces a long list of challenges. One of the first topics to arise was the fast-approaching price cap of default tariffs, due to be introduced by the end of the year. Ofgem chief executive Dermot Nolan said there have been improvements in the retail market, but it is still not functioning as it should: "The idea of the bifurcated market has frankly not been resolved." Hence, the need for the price cap. Laura Sandys, a former MP and now chief executive of Challenging Ideas, said she was concerned that market interventions have led utility companies to start considering the government as a "proxy for consumers". She worried that they have become "infantilised" to the extent that "they're not understanding what the consumer look like and wants". The two-tier energy market has ultimately emerged because of a lack of engagement with customers, and many in the industry are looking to smart meters to help solve the problem. Suppliers have been tasked with offering all customers a smart meter by 2020. SMETS2 unattainable But Antoinette Sandbach, chair of the Busi- ness, Energy and Industrial Strategy Com- mittee, said: "I don't think we will hit the target realistically." She said customers remain mistrustful of suppliers, and they must be convinced of the benefits. Labour shadow minister for energy and climate change, Alan Whitehead, shared her concerns. He joked that, with the cumulative number of SMETS2 installations rising from 250 in November to 1,000 in June, the target would be met in "under 6,000 years". Whitehead said a "cliff edge" is approach- ing when suppliers stop ordering SMETS1 meters: "We will get a situation in about a year's time, whereby whatever the intentions of the various suppliers there will be empty vans going around for installations. We've really got to get out of this swamp." His solution would be to continue rolling out SMETS1 meters "as fast as possible". Former energy secretary Ed Davey said the government should scrap the 2020 dead- line on the basis that the "SMETS2 rollout has gone way slower than was planned". He disagreed with Whitehead's suggested solution, saying he was unconvinced by the claims that SMETS1 meters could be success- fully upgraded to make them interoperable. RIIO2 response Suppliers aren't the only ones facing scrutiny over energy bills. Networks too have started to come under fire in recent years, and Ofgem has responded by promising a tougher set of price controls for RIIO2. Sahar Shamsi, a principal at Oxera, said, although they are important, the regulatory agenda should not be "monopolised" by a focus on network returns. She said the RIIO framework has successfully incentivised net- works to be more efficient and innovative. Examining some of Ofgem's proposed changes, she said: "Arguably we are now going backwards, full circle, from a primary focus on incentives, or outputs, or outcomes, to a de-facto rate of return, where networks earn no more and no less than their actual out-turn costs." Bonkers 'EV' Another issue facing both suppliers and net- works is the growth of electric vehicles (EVs). Nolan said it was important to get the right systems in place to avoid the need for extra capacity on the power grid which would be "hugely expensive to whole-system costs". Ovo Energy chief executive Stephen Fitzpatrick said it was "bonkers" for the gov- ernment to continue subsidising dumb EV chargers: "The path of least resistance for consumers is to plug their car in as soon as they arrive home, and somehow we expect to avoid the need for massive investment in upgraded networks and generation capac- ity." He said smart charging standards must be established urgently. Muddy policy On generation, Whitehead said the industry must be upfront about the fact that "pretty much all energy is underwritten in one way or another". This, he suggested, is not an issue in itself. But he criticised a lack of con- sistency, which he said was causing "great uncertainty for investors". Whitehead lamented the lack of consen- sus on energy policy in Westminster – par- ticularly in the ruling Conservative party. "There's considerable tension, for example, between what the Treasury thinks is energy policy and what [the Department for Busi- ness, Energy and Industrial Strategy] think is energy policy," said Whitehead. "And that, I think, has been responsible for a number of policy lurches over the last few years…" Davey agreed, saying the government has a number of "stupid policies" as a result. He lauded the work of Ofgem, whose leadership, he said, is "filling the vacuum". Davey also praised the efforts of Tory allies, including both Sandys and Sandbach, but said Whitehead was right that the prob- lem was inside in the Conservative party: "You need people to stand up to those dino- saurs and climate change sceptics who still lurk on the backbenches". For those looking for common ground, one possibility is energy efficiency. All agreed that, as a cheap, no-regrets option, it should be a priority for the government. Whether consensus can be turned into action is another question entirely. Going by past progress, they could still be making the same call at next year's energy summit. Challenges are stacking up From smart meters to electric vehicles, politicians and industry insiders shared plenty of concerns – and even a little common ground – at this year's Energy Summit. Tom Grimwood reports. Customers

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