Utility Week

UTILITY WEEK | 3RD - 9TH MAY 2019 | 13 Policy & Regulation "Citizens are not just buying and selling things: they have a view about the future, about all sort of things like where we get our energy from." The use of bill payer subsidies to decar- bonise the energy system brings these con- cerns into sharper focus, said Watson: "If they are paying more through their bills, they want more transparency about how that is being used." The issue is particularly acute in England, where a bigger share of energy e• ciency improvements are paid via energy bills rather than general taxation. He said research carried out for the UKERC by Cardi„ University had identi- … ed the limits of what customers would be willing to pay for decarbonisation. "People strongly support this sort of change towards a lower carbon energy system but have lim- ited appetite for paying for it through their bills," he said, noting that the study showed consumers would be prepared to pay 9 to 13 per cent on top of their bills to support a transition to a lower carbon energy system. "They expect industry and government to take the lead. Whether they pay through bills or taxes, the distributional e„ ect is very di„ erent." Gillian Cooper, head of energy policy at Citizens Advice, told the conference it is "inevitable" that changes will need to be paid for from a combination of taxes and bills, expressing the hope that a consensus will have developed on the issue by 2030, when the … ' h carbon budget kicks in. Lack of trust Audrey Gallacher, policy director at Energy UK, expressed concern at the conference about lack of trust in the energy market. "The real danger is that we are going to create a system that isn't seen as legitimate. This is a particular worry because that will impact on what we have to achieve in terms of providing an a„ ordable, clean and secure energy system in the future. "We want an energy system that encourages innovation while ensuring that protections are there." Watson agreed. "The public already think that industry and government are too close together and they don't think there is enough separation." Vyas told Utility Week: "This not a market that people always have a positive experience with and that is going to remain the case unless you build in customer protections at the outset." Greater digitalisation, combined with a more widespread uptake of renewable energy devices, will enable the development of a more " exible approach for consumers to manage their demand. This could mean charging consumers based on the impact they have on the network or the how big their connection is – rather than the num- ber of units of electricity they consume. This would avoid expensive network upgrades a„ ecting all energy users "indiscriminately", the Energy UK report says. "The energy system should … t the user, not vice versa." Another option is to o„ er households incentives through time-of-use tari„ s. How- ever, Vyas said research on existing usage patterns shows households can't necessar- ily take advantage of " exibility, even when it is on o„ er. A study presented at the Citi- zens Advice conference showed low-income households were o' en unable to fully take advantage of existing time-of-use-style tari„ s. "People on legacy Economy 7 don't always use tari„ s when it is cheapest," she said, noting that 40 per cent of people said it isn't practical to use appliances at o„ -peak times because of factors such as worries about the safety of leaving appliances running over- night or the disruption to sleep caused by noisy washing machine spin cycles. Services such as auto-switching may help customers to seek out cheaper services, but must o„ er the option of a manual override, she said: "For lots of consumers, automation will be brilliant, but there will be times when things change, for example if someone gets sick or there is a very important meeting for which you want to ensure the car is charging. "There should also be the ability for people to take control." Energy UK's ideas for a future policy framework Energy UK's Future of Energy report estimates that £170 billion will have to be invested by 2030 in order to meet the UK's decarbonisation targets while ensuring security of supply – similar to the sums ploughed in since the privatisation of the early 1990s. But these levels of investment won't be attracted solely on the back of wholesale market revenues, which look set to continue to be "highly risky". Increasing deployment of renewable generation creates more volatile wholesale prices, which will plunge to zero or even negative values for increasing periods of time. In order to achieve the UK's goals "most e„ ciently and at lowest cost to consumers", Energy UK believes the future policy framework must include: a support mechanism for investment in low- carbon generation, a "technology neutral" capacity market, an e‡ ective carbon price to support the wholesale market, and "open and liquid" flexible markets. The report suggests there is no need for "radical change" to the contracts for di‡ erence (CfD) and capacity market mechanisms. But it says every technology type should have the opportunity to participate in the capacity market CfD auctions and low-cost options such as onshore wind should not be excluded. Energy UK's report also says that in the future, using the wholesale price to benchmark the level of subsidy may no longer be relevant as fossil fuels are phased out. Instead, competitive auctions, rather than an arbitrary £/MW target set by policymakers, should be held. And the trade association's Audrey Gallacher warned the Citizens Advice conference about the importance of not ignoring the vulnerable end of the customer spectrum. "Transition has to work for everybody." "The real danger is that we are going to create a system that isn't seen as legitimate. This is a particular worry because that will impact on what we have to achieve in terms of providing an aff ordable, clean and secure energy system in thefuture. Audrey Gallacher, policy director, Energy UK

• Cover