Utility Week

40 | JUNE 2021 | UTILITY WEEK Analysis The net zero investment trilemma: scale, pace and sensitivity How do we incentivise the investment necessary to reach net zero? How do we ensure regulatory and planning policies don't impede progress and that local communities are not adversely impacted? A Utility Week virtual roundtable tackled the big questions. James Wallin was there. W e have a very tough target in 2050 but we also have some pretty tough targets on the way to it. It's amazing how the ambition just keeps on increasing." A policy expert set out the scale of the challenge – and the appetite to succeed – during an exclusive roundtable to discuss the urgent investment challenge posed by the UK's 2050 net zero target. The discussion centred on what needs to be done to fund the huge swathes of infra- structure necessary to support decarboni- sation at the same time as addressing the needs of the communities affected. Despite the considerable feats required to hit net zero, the word spoken more o†en than any other during the debate was "excite- ment". The senior industry figures gathered around the virtual table all expressed their pride in their role in such a pivotal moment for the energy transition. This article focuses on five key takeaways from that discussion, hosted by Utility Week and sponsored by Hitachi ABB Powergrids. But first here are two more quotes setting out just how much needs to be achieved over the next few decades. "People sometimes talk about decarbon- ising the power sector as the easy bit of net zero. In a way they have a point and we have already made great strides, including a five- times increase in renewable capacity in the past decade. But there's still a very long way to go and the 78 per cent emissions reduction target implies an unprecedented build-rate of infrastructure." "We've effectively got an economy that has been built up over the last 200 years on carbon-based infrastructure. We've got about 15 years to completely remake and reshape the infrastructure so we can support net zero. That pace needs to happen now." Anticipatory investment That huge investment is needed to deliver these ambitious targets is a point of unanim- ity, but opinions varied about how early this should take place and the risks inherent in different approaches. A regulatory expert said that while this had been a key debate in the gas and trans- mission RIIO2 process, it would be even more important in the price control for distri- bution network operators. RIIO-ED2 will run until 2028 – a point at which 600,000 heat pumps a year need to be added to the system and the electrification of transport will be entering the mainstream. They said: "The reality is, if you don't get the capacity in place then you can't decar- bonise transport and heat." However, a senior figure from a transmis- sion network warned against assuming the distribution networks were the only ones fac- ing rapid evolution. They pointed out that there were more projects on the table for the current price control than were delivered in the eight years of RIIO-T1. They also cautioned against siloed thinking, saying: "To get around pub- lic disruption, you need combined strategies – it can't just be individual plans." The discussion inevitably led to the issue of cost of capital, with several companies reiterating their view that the scale and pace of net-zero projects risk being undermined by a lack of incentive for investors. One business leader lamented that their company was bidding for investment against energy projects all over the world, and while the UK is still seen as an attractive market, it is increasingly out of step in terms of the rates of returns. "

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