Utility Week

UTILITY Week 13th May 2016

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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UTILITY WEEK | 13TH - 19TH MAY 2016 | 7 Interview W hen le-winger Jeremy Corbyn swept to victory in the Labour leadership contest last year it opened the door to the possibility that Labour's controversial pre-election price freeze policy might be followed by even bolder statements of renationalisation. Indeed, in the run-up to the election Corbyn expressed a personal wish for an energy industry under state control. In the event, nationalisation was categorically ruled out by shadow energy secretary Lisa Nandy at party confer- ence last year. It falls to shadow energy minister Alan Whitehead to fill Utility Week in about what Nandy's vague statement about Labour being for the "democratisation" of energy actually means. In doing so, he quashes any idea of a re-emergence of a Central Electricity Generating Board in Labour's vision of the future of the energy market. Far from harking back to old ideals, Whitehead says Labour has grasped the level of change underway in the energy market and realised the significance of the smart meter rollout in the transition to smart grids. He says there needs to be a whole-systems approach, possibly through a systems architect. When asked by Utility Week in a snatched hour between chambers and a meeting one sunny aernoon in Westminster whether he supports nationalisation, Whitehead says: "The energy world has moved a very long way from that." The energy market is undergoing a period of fundamental change, with the emergence of a two-way energy system based on renewables and smart technology challenging not just the concept of large- scale generation, but even the notion of a single grid. In the choice between holding true to its princi- ples and moving with the times, Labour has chosen to embrace evolution. It has chosen to add its weight to the decentralisation process already in progress through the smart meter rollout and growing penetration of renewa- bles. Such changes are already leading to the evolution of distribution network operators into distribution sys- tem operators. "That's fundamentally different from nationalisation, but it's also fundamentally different from the rather tired old system that we have at the moment, which, actually, privatisation or not, maintains a lot of the assumptions of centralisation that always were in the system to start with," Whitehead says. And this is not new thinking for Labour, Whitehead insists. Policies designed to support the evolution of the energy system co-existed with the price freeze, but paled in comparison to that headline-grabbing initiative. Although designed to "reset the market" and restore consumer confidence, the price freeze, which hung over the energy industry until it was annulled by the election, was blamed for scaring off investment and new market entrants. It was even slammed as "economically insane" by a leading market analyst at the party's own confer- ence in 2014. If Labour had won the election, the measure would now have been nearing its close. Was Whitehead a supporter? "At the time, it was a good idea, but from the word go it always was the case that if you ran a price freeze just for its own purpose, then it would actually serve no purpose at all. I made those points very strongly at the time." The price freeze would likely have been the precur- sor to the introduction of a central buyer model, allow- ing the energy secretary to largely dictate the fuel mix of electricity generation rather than leaving it to the market to decide. The price freeze may have been abandoned, but Whitehead feels strongly that this trading model has merit. "I maintain that view for a whole host of reasons, such as the transparency and reliability that a pool sys- tem of trading would introduce," he says.

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