Utility Week

UTILITY WEEK | 24TH -30TH MAY 2019 | 9 News Inside story P rojections of the impact that the Brexit Party could have on Westminster elec- tions show that Labour would emerge with the biggest number of MPs, albeit short of a parliamentary majority. This means the energy sector must take even more seriously the opposition's plan to renationalise energy networks, fresh details on which emerged last week. Behind the scenes, the proposals were the subject of an intense dispute within Labour's top ranks earlier this year. Reflect- ing Labour's le ward turn under Corbyn's leadership, the dispute has centred less on the principle of public ownership than on how decentralised the future grid should be. The paper itself, Bringing Energy Home, is a compromise that proposes the partial break-up of the existing transmission and distribution monopolies. The transmission assets of National Grid and gas network companies will be trans- ferred to a new National Energy Agency, which will act as the system operator and take over some of Ofgem's regulatory duties. The paper rejects the idea of taking just the system operation functions of the trans- mission network into public hands, leaving ownership and maintenance of National Grid's infrastructure in private hands. New Regional Energy Agencies will take over the ownership, maintenance and opera- tion of the distribution networks. The regional agencies would be set a statutory duty to help meet Labour's target that 60 per cent of all energy be sourced from renewable or zero carbon sources by 2030. They would also be responsible for deploy- ing electric vehicle charging infrastructure. Councils will be able to take over the ownership and operation of their local dis- tribution networks, which the regional agen- cies would be obliged to devolve. Networks next in Corbyn's sights First water, and now electricity and gas networks. Labour think renationalisation is a vote winner, despite the cost and complexity. By David Blackman At a neighbourhood level, Labour moots the establishment of local energy communi- ties. These would typically cater for the 100 to 200 households typically served by sec- ondary substations, with responsibilities for distribution, supply and generation. The document warns that full decentrali- sation of the networks could result in the creation of "gated energy communities" or "local energy islands", within which privi- leged communities with the financial and physical resources to generate and supply electricity could opt out of wider energy net- works. This could leave poorer communities with the "disproportionate burden" of hav- ing to pick up the tab for wider infrastruc- ture, it says. Labour says this solution would allow local and municipal grids to be created, "nested" within centralised structures that will help to maintain standards and enable the continued regional and national plan- ning of infrastructure. The paper says this approach is not a return to the "distant bureaucracies of the 1970s' 'Thatcherite prosumer' model", which would exacerbate existing inequalities. It argues that public ownership is an essential "backstop" to enabling community control while ensuring that decentralisation reinforces rather than undermines the wider shared grid infrastructure. The decentralised grid One of the loudest internal Labour voices calling for a decentralised grid has been ex-MP Alan Simpson, who advises Corbyn and shadow chancellor John McDonnell on energy and environment issues. Simpson was a member of the tiny Cam- paign Group of hard le Labour MPs during the 1990s and 2000s, which also included the now Labour leader and McDonnell. The networks require a systemic change in order to achieve decarbonisation by 2030, he says: "Renationalisation, in itself, doesn't guarantee radical decarbonisation. To avoid climate breakdown we have to set statutory duties to take 'clean' before 'dirty', to reduce annual consumption and cut carbon content by around 15 per cent a year. "This is what physics, far more than poli- tics, is telling us. Renationalising a Robin Reliant wouldn't magically turn it into a Nis- san Leaf." Ranked on the other side of Labour's dividing line are the energy unions, which while supportive of Labour's renationalisa- tion plans, have expressed private concerns continued overleaf Compensation Shareholder compensation will be a key issue if a Labour government succeeds in passing the necessary legislation. Shadow chancellor John McDonnell has suggested MPs should decide how much. Hence, if a three-line whip were imposed, the level might be modest. Like the proposed water renationalisa- tion policy, McDonnell has indicated that it would be financed by gilts; these would be used to compensate shareholders at whatever price is eventually decided. While it is true that a sharp reduction in the annual public sector deficit of late has meant far fewer gilts being issued, this tap cannot be turned on indefinitely without unwelcome side-effects. Indeed, if borrowing levels soared, interest rates would assuredly rise and the UK's credit rating would come under real pressure, as would sterling. NH See full article at: utilityweek.co.uk

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