Utility Week

UTILITY WEEK | MARCH 2021 | 15 Countdown to COP things happen to people, then that legiti- macy will be diminished. We can't let that happen." The first hurdle of a just transition is to overcome the perception that investment is targeted at the early adopters – the type of people who would have slept outside the Apple shop to shell out almost £300 for a phone. Marzia Zafar, head of customer policy and strategy at Kaluza, believes this comes down to true segmentation of customer groups, proving there is a solution to everyone's needs. "We have price sensitive customers, we have some older customers who may not want to deal with everything. Each one needs a different message," she says. "Agile tariffs are great for some consumer archetypes but most customers don't want to monitor their energy use on a half-hourly basis. It's down to us as an industry to show that we have an option that suits everyone. "To bring customers along you need to make it extremely easy for them to engage. You have to show them what they're paying and why they are paying. It has to be tailored to them." To this end, Kaluza has introduced what it claims is the first "type of use" tariff, offer- ing EV drivers a fee of 6p per kilowatt-hour at any time of day. Kaluza will use live data on energy pricing, the weather and local net- work constraints to shiŒ charging away from peak times to "capture the cheapest and greenest electricity on the market". However, if the customer wants to charge their car at peak times, they have the option to over- ride Kaluza's optimal charging path and the 6p/kWh rate will still be offered. Jeff Hardy, senior research fellow at the Grantham Institute – Climate Change and the Environment at Imperial College, agrees that energy suppliers need to absorb much of the complexity if they are going to attract a true cross-section of society. He says: "The kind of company that is likely to win out in a decarbonised world is one that looks pretty much fixed price. For your energy needs its £X. Then the company is facing all the complexity on price and eve- rything is automated. "Then you're in a world where the more risk a customer wants the business to take, the more automation that company will want in the home. "It shouldn't be about competing on price it should be competing for customers that suit your company's profile. That means companies getting to know their customers better, and that might need greater segmen- tation. Is it slow and steady, full flexibility or everything in between?" Hardy believes that to ensure the benefits of a smart energy system reach those who most need they "should go first". "However you define that segment of society that is most in need, give them meas- ures that bring them to a net zero lifestyle – at society's expense – so they can benefit by lower bills, a more stable environment, more comfort, better health, better wellbeing. "Then, if, and only if, they want to, they could be trailblazers for the kinds of busi- ness models that are going to follow – energy as a service, flexibility or whatever. Why can't they be the early adopters?" Where more affluent, better resourced areas do take the lead, Hardy believes there is an option for them to share their model with areas that are less well-positioned. "Oxfordshire has two projects part-funded by the taxpayer which are giving them valu- able insights into how this transition could be achieved," he says. '"That puts them at an advantage and that advantage should be shared." Councils and other local actors will be vital partners in the national push to net zero, Hardy insists, saying "zero carbon is inherently local". Hardy wants to see a framework that allows the whole economy to hit the 2050 target but lets individual areas go down the routes that are right for them. Alli agrees that the industry needs to work hand in hand with local authorities to understand the pace of change they are com- fortable with. "We need to bring the best skills of DNOs – around efficient network planning – and combine that with the skills and expertise of civic authorities who are really good at local development. It's when you bring those two complementary skills together that you will get to some tangible actions to respond to the climate emergency." The role of energy suppliers Nolan stresses that the question of how directly involved distribution networks will be with local net zero plans is a significant one for the ED2 price control. However, he points out that the role of energy suppliers in the just transition is even more difficult. "Retailers have an obligation towards the vulnerable but only to their customers. And they only have an obligation to treat them 'fairly'. What exactly does that mean? It doesn't obviously mean putting an EV charg- ing point on their house or installing a heat pump." Audrey Gallacher, deputy chief executive of Energy UK, admits that retailers need to take a more holistic view of net zero. "We've not always been great at the whole house approach and net zero might give us the chance to really nail that. Being efficient on your water use will massively impact your energy bills and vice versa, so as a society we have to ensure we are working collabora- tively and thinking about consumers' needs as a whole." But for retailers to take a more active role in guiding consumers towards net zero they must first transform themselves, says Laura Sandys, who recently released her report ReCosting Energy, which calls for a "citizen's dividend" on net zero. Sandys says: "There has been an his- toric issue with utilities being able to really engage with consumers so I think it's time we started listening to them rather than beat- ing them over the head." Sandys wants to see a move away from commodities to services, with the capital investment passed on to the retailer while the customers gains the benefits through product-based services. She also cites the example of smartphones. "If we didn't have the kind of contracts we have in mobile phones then 2 per cent of the population would have a smartphone." Clearly such a move could not happen overnight, which returns to the question of how you protect those consumers at most risk of losing out. In a report commissioned by SSE, the Centre for Sustainable Energy suggests that in cases where there are vulnerable custom- ers genuinely being leŒ behind and beyond the reach of mitigating interventions, there is a strong case for a protective "non-partic- ipant" tariff. Nolan sees the case for this and argues "in some ways that's what the retail price cap is – in an old world sense". However, he raises the difficulties of how to identify who would benefit and how it would be implemented. It is clear that there are no easy paths to ensuring a just transition, and even if we use the iPhone as an inspiration we must still go further and faster. Despite the proliferation of smartphones, there remain more than 12 million people in the UK without access to a smartphone. If the energy transition does not touch the lives of a similar number of people, and if they are disadvantaged as a result, then it will have failed. James Wallin, digital editor This is an edited version of a report which can be found here, together with all our in-depth coverage on COP26: https://utilityweek.co.uk/ category/countdown-to-cop/

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