Utility Week

UTILITY WEEK | SEPTEMBER 2022 | 13 Policy Energy Bills Support Scheme, which was announced by his predecessor Rishi Sunak in May. Administratively, the "easiest thing" for Truss to do is to "just change the numbers in Rishi's package", says Daniel Newport, head of net zero at the Tony Blair Institute for Global Change. Porter advocates a combination of cutting VAT on energy bills and transferring green levies into general taxation, which would save the typical customer £400 per annum. To help those on low incomes, she backs a social tariŠ with cost shortfalls funded through increased government borrowing. Consultancy Auxilione's forecast that the retail price cap will stay above £5,000 for all next year signals that the government needs to be thinking about its response beyond this winter, says Newport. "We all know that the energy crisis doesn't end on 1 April next year. What we need now is the outline at least of a longer-term intervention. "The implication of the May package was that there are about a third of households that really can't aŠ ord to spend a penny more than £1,500 a year on their energy bills. That's just not changed and won't change unless we radically reform our economy. "You're probably still going to have to give some element of support, at least to poor and vulnerable households, that quite frankly, could last for a decade." A longer-term response, which would mean the government "stopped lurch- ing from emergency budget to emer- gency budget" would be "refreshing", Newport"says. The industry has coalesced around sup- port for a de• cit support package, which uses government-backed loans to stabilise bills by smoothing out spiralling wholesale gas costs. On top of spiralling bills, recent weeks have seen concerns grow about whether the UK has su™ cient energy supplies to get through the winter. Consumers shouldn't worry about avail- ability of gas for home heating, says Foster: "People should not be frightened there's not going to be the gas available to keep their homes warm. We need to dispel any sort of concerns on that front." But the picture is less clear cut on whether there will be su™ cient gas supplies for electricity generation, he says. National Grid Energy System Operator has just announced that it is running an extended drill to test whether the electricity network will be able to cope this winter. Business and energy secretary Kwasi Kwarteng may have played down concerns that the UK will need to ration energy this winter, but the government should be "hon- est" about risks of potential under-supply, says Porter: "BEIS [ the Department of Busi- ness, Energy and Industrial Strategy] and National Grid need to be more on the front foot about this and more public." Pointing to recent sustained lulls in wind generation this summer, she says: "If you get that situation in the winter, when demand is higher, then obviously things could become very tight. "If we had weather patterns such as we've been having this summer in the winter, then it would be very di™ cult because you're trying to manage this low wind and high demand over many days." And policymakers' assumption that the UK can rely during these periods on imported electricity via interconnectors is looking shakier following recent events, including recent outages in the French nuclear Ÿ eet and low hydro-electric output in Norway, Porter says. "If Britain and Germany experi- ence low wind at the same time, things will get really stressed because we're going to be competing with each other for imports from other countries such as the Netherlands and Belgium. "There's been an assumption that it will always be windy somewhere, but the past couple of years has shown us that that's actually not true." The return of king coal? The risk of blackouts lends weight to the case for bringing forward measures that would have probably been unthinkable for the UK government last year when it was preparing to host the global COP 26 climate change summit. The UK's rump of coal-• red generation plants have already been given a fresh lease of life. As a further stop-gap measure, emissions regulations should be suspended this winter for industrial backup generation so that it is easier to bring forward diesel plant, says Por- ter. "Li¤ ing those emissions limits provides another alternative to using gas and elec- tricity directly from the grid, which could be very helpful." This step could address some of the cost prices currently causing inŸ ation. "Li¤ ing emissions regulations for back-up generation will reduce the cost of energy because then they can switch to [cheaper] diesel. That will mean that those companies don't need to start increasing the cost of their products and services to their customers, which is obviously inŸ ationary," she says. It may also be "sensible" to pause the oŠ - shore wind programme, but before doing so the government should ramp up its energy e™ ciency eŠ orts, Porter says. "We have an extremely leaky housing stock. It's really about time that we just bit the bullet on that and put in place a proper programme of reducing heat losses in homes. We shouldn't stop putting it oŠ because it's di™ cult and complicated." Darren Jones, chair of the BEIS select committee, agrees on the need to act on energy e™ ciency. "Everybody has been shouting about energy e™ ciency while smacking their head against the wall. They [the government] have to come up with an answer. They just can't keep ignoring it." This is one of the areas where whoever takes on the energy portfolio in the next Cab- inet can't aŠ ord to "waste any time", he says. Pointing to the plethora of energy visions and plans that have emerged from the gov- ernment over the past year, the answer isn't more policy, says Jones: "There's been lots of policies, but not much focus on delivery." Current high gas prices could last for three years or more, depending on when new pro- jects are brought forward to displace Russian output, says Porter. "We're facing an eco- nomic crisis. We have good reasons to believe the drivers of this are time limited. The ques- tion is how we get through this period caus- ing the least damage to the economy." This can best be achieved by limiting energy cost increases, which otherwise would stoke wage increases, she says: "What you don't want to do is embed those inŸ a- tionary eŠ ects into the economy too strongly. If you allow wages to increase, then obvi- ously it is really di™ cult to claw that back." David Blackman, policy correspondent "The economic cost of not acting is going to be large numbers of bankruptcies across many sectors." Kathryn Porter, energy consultant at Watt-Logic "The economic cost of not acting is going to be large numbers of bankruptcies across many sectors." , energy consultant at Watt-Logic

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