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UTILITY Week 21st October 2016

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UTILITY WEEK | 21ST - 27TH OCTOBER 2016 | 11 Policy & Regulation This week Progress on heating has 'stalled', says CCC Emissions targets will not be met without a new government strategy, says committee report Progress towards the decarboni- sation of heating has "stalled", the Committee on Climate Change (CCC) has warned. Emissions targets will not be met unless the government implements "a credible new strategy and a much stronger policy framework", it said in a new report. "Action is required now to reduce emissions and to prepare for future decisions," said the CCC. It identified the main options for the decarbonisation of heating as electrification through heat pumps, hydrogen pumped through the existing gas grid, and to a lesser extent district heating networks. It is not yet clear what would be the "best balance" of technologies: "More evidence is required about costs, industry's capacity to deliver and preferences of house- holds and businesses." If emissions from heating are to be largely eliminated by 2050, as the UK's emissions targets imply, then "a national programme to switch buildings on the gas grid to low-carbon heating would need to begin around 2030". A decision on which pathway to take would have to take place by the end of the next parliament in 2025. Failure to make a clear choice could add to costs due to "suboptimal infrastructure development or overlaps between the rollout of different low-carbon heat solutions in a given area". The Committee said there is time for "experimentation over the next decade or so to develop the best strategy", but warned this should not mean taking a "wait and see" approach. TG WATER No 'hand-hold' for firms through PR19 Ofwat will not hand-hold water companies through the next price review – PR19 – and will be "raising the bar" on the quality of their business plans. The regulator's chief execu- tive Cathryn Ross said that, during the last price review – PR14 – companies achieved a lot, but there was "rather more iteration and hand-holding than we had initially expected". Speaking at a water sector conference in London, Ross told delegates this was "the right thing to do", but is not something the regulator plans to repeat in PR19. She said it would be asking companies to "take ownership of their plans to a much greater extent". "In PR19, we will be simultaneously raising the bar on the quality of plans and reducing the extent to which, during the review, we help companies to get over that bar. "We are moving from four sep- arate price controls in PR14 to six. It means we have a lot to do in PR19 and we have a lower budget to do it. So we will need to take a more focused approach." ENERGY Digital revolution 'must be scrutinised' Smart Energy GB has called for digitalisation of the energy market to be "intensely scruti- nised" by government to ensure it goes in the right direction. Smart Energy GB also called for issues around serving vulner- able customers to be addressed and solved quickly. Sacha Deshmukh, chief executive of Smart Energy GB, which is behind the national campaign for the smart meter rollout, was speaking at a meeting of the Energy and Climate Change Committee on the energy revolution. He said: "Government deserves a pat on the back for making a revolution start – not all governments do that and it is a good thing. But like all change where you want it to benefit people, that change needs stewarding, intensely, and needs to be well scrutinised." RENEWABLES SNP: energy independence is key Scottish energy independence is crucial to ensuring the future of the renewables industry north of the border, according to the SNP. The party's business, energy and industrial strategy West- minster spokesperson Callum McCaig told the SNP party conference in Glasgow a sepa- rate energy system would help Scotland "realise its potential". "If we have our own energy system we can build a system that not only works for people but also for the climate, with wind, solar, offshore wind, biomass and hydro along with storage and some back-up gas," he said. See Lobby, p12 District heating: option to aid decarbonisation Renewables subsidies levied on customers' bills "have not secured value for money" because the government has "missed opportunities to exploit the full potential of the Levy Control Framework [LCF]". Despite efforts to rein in spending, the annual cap set by the framework is still on course to be breached by £1.1 billion by the end of the decade, a new report by the National ELECTRICITY NAO: renewables subsidies 'have not secured value for money' Audit Office (NAO) has warned. The report said the introduc- tion of the LCF in 2011 was a "valuable step" towards limit- ing the burden of renewables subsidies on customers' energy bills. However, "weaknesses in forecasting" and the govern- ment's approach to the alloca- tion budget have meant there is little le to be spent. "Holding back more of the LCF budget and allocating it later would have been more cost-effective because the costs of renewable energy sources have fallen," it added. The LCF sets annual caps on spending under the three schemes designed to support the development of low-carbon generation – the Renewables Obligation (RO), feed-in tariffs (FITs) and Contracts for Differ- ence. The budget is set to rise to £7.6 billion (2011/12 prices) by its current end in 2020/21. When the NAO last reported on the framework in 2013, the Department of Energy and Climate Change (Decc) projected the cost covered by the frame- work to reach £6.9 billion by 2020/21 – well within the budget. The government has changed energy policy to bring costs under control; closing the RO early and cutting FIT rates. Nevertheless, the NAO said spending is still set to hit £8.7 billion by 2020/21.

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