Network

NETWORK / 10 / APRIL/MAY 2020 are clearly stating that there has been no significant impact on network performance, and with effective prioritisation I think that is unlikely to change". The ADE has some short- term concerns, particularly in relation to the emergency funds reaching smaller manufacturers or suppliers in energy gen - eration or storage. According to press reports, businesses are struggling to access the Coro- navirus Business Interruption Loan Scheme, administered by high street banks: 300,000 have sought assistance, but only a few thousand have seen funds reach their accounts. Bragg notes: "It is important that committed funding packages reach busi - nesses and that risks and issues are communicated." As for the networks them- selves, employing a workforce of around 36,000, there will undoubtedly be a short-term impact on revenues and cash-flow. With fixed charges ac - counting for around 20 per cent of income, the remaining 80 per cent comes via unit charges that mirror customers' energy consumption. The reduction in demand during lockdown, cal - culated by Cornwall Insight as 13 per cent lower on Wednesday 25 March than on the average of Wednesdays in March 2019, will be felt as an income shortfall in the current price control year, which started in April 2020. However, in the longer term, network companies will be able to recoup the lost income by raising unit charges in the year from April 2022, explains Enzor. "Revenue will be less than allowed in the current charging year within the fixed price control allowance, but all of that is correctable," he says. "We're talking about a cash-flow impact, not a long-term rate of return impact. From the net - works' perspective, I think the pandemic's financial impact is relatively benign, as revenue is protected in the longer term." This baked-in revenue guarantee means that short-term issues are unlikely to affect net - work companies' ability to raise funds to see them through even an extended lockdown crisis, or to attract investment for capital projects. "They've all got major assets, and so have access to cheap debt, so I think a short- term cash flow impact is unlikely to have an operational impact. Although the networks will recover less revenue than they thought [in the current financial year], there is a well-established process to get it back,." he says. However, a backlog of lower priority upgrade works may build up. Demand patterns in a typical year dictate that many engineering projects are deferred until the post-Easter months. This year, prioritisation on other areas means that the networks may arrive in a post- lockdown period with a backlog of repair and replacement work. However, Ofgem has indicated that it is likely to grant flexibil - ity to carry over allowances for network upgrades into the next price control years. "Some work may need to be deferred; if planned work has been cancelled to concentrate on 'keeping the lights on', the networks might not have time to undertake what they had planned this summer. So the revenue allowances to deliver network upgrades could go unspent and might need to be rolled over into the next price control period, with Ofgem giv - ing the networks more time to spend it." This could particu- larly affect the transmission and gas distribution companies where RIIO-2 starts in less than a year, he suggests. But some capital works could be less disrupted, for instance improving networks for EV charging stations or battery stor - age sites, as there is a difference between new insertions to elec- tricity networks, and upgrades of existing facilities. A new age dawns? At this stage, the possibility of large-scale behavioural and mindset shižs around climate change are just a matter for speculation. But some commen - tators are hypothesising about how the pandemic's disruptive effects will continue into the future. For instance, with the global lack of preparedness coming into focus, consumer behaviour specialists Canvas8 suggests that forethought and forward planning will become increasingly valued assets in our society. Energy consult - ant John Scott feels that the enforced break from normal life could encourage many people to re-evaluate priorities, such as their attachment to combustion engines. "One positive observa - tion about net zero ambitions is the widely observed improve- ments in air quality during lock- down. This could be a great spur for people to move to EVs for their next car, when it comes to the bounce-back in sales when restrictions end. Might lock- down create some reflective time for people to consider this?" He refers to a survey of 200 consumers conducted by one fleet management company, Venso Automotive Solutions, asking whether the lockdown's clean air had influenced their attitudes towards EVs, with 45 per cent of the sample agreeing that it would encourage them to make the switch. Scott adds that emerging links between high air pollution levels and an increased toll of coronavirus deaths could, if further estab - lished, also drive policy makers towards pro-EV policies. Certainly, the hope in the sec- tor is that the need for climate change mitigation policies will appear even more urgent post- pandemic light. At the ADE, Bragg predicts that "the govern - ment will look to make invest- ments that will get the economy moving, level up the regions and nations and meet net zero targets. The decentralised energy sector meets all of those objec - tives, and the good news is that our technologies are not looking for a subsidy. Instead we are advocating for policy adjust - ments that will allow our tech to compete in the energy markets." The pandemic has dem- onstrated that our complex, modern society is highly vulner- able to external shocks, with millions facing a drop in income and future uncertainty. While a post-lockdown economic recession appears to be a given, it's impossible to predict how steep or prolonged the down - ward curve might be. But the networks appear to be in better financial health than other en- ergy players. and there is hope that they will be able to leverage pro-net zero policies to modern- ise networks to make them more resilient to the climate-related pressure points in the road ahead. "The whole energy industry will need to work closely with the government, the regulator and all key stakeholders to make sure that the public can still benefit from a net zero energy system." PETER KOCEN, SENIOR PRESS AND PUBLIC AFFAIRS MANAGER, ENA CORONAVIRUS IMPACT

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