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UTILITY Week 3rd February 2017

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10 | 3RD - 9TH FEBRUARY 2017 | UTILITY WEEK Policy & Regulation Analysis F or many, the words "industrial strategy" still conjure memories of the fiasco that attended government inter- vention in British Leyland and other private firms during the 1970s. The ghost of such misadventure has haunted Whitehall for decades, causing successive administrations to distance themselves from the fortunes of private industry. Now, however, industrial strategy is back in vogue and bigger than ever. On Monday 23 January, prime minister Theresa May took personal charge of the launch of her government's modern take on the concept. The document is broad ranging, ambitious and has many implications for the utilities sector. This fresh approach to industrial strategy has not leapt from a standing start. Under the coalition government of 2010-2014, the now defunct Department for Business, Inno- vation and Skills, with leadership from its secretary of state Vince Cable, made a robust effort to rehabilitate the term. It enjoyed some success – especially with regards to the aerospace and automotive industries – but its vision failed to encom- pass a broad swathe of the economy and was never truly endorsed by central government. May's role in the launch of the new indus- trial strategy, in addition to the much wider portfolio of the new Department for Busi- ness, Energy and Industrial Strategy, make it a weightier and, at least theoretically, more joined-up plan. The chapter of the industrial strategy green paper that will likely be pored over most thoroughly by energy sector executives is the one dedicated to reducing energy costs while promoting clean growth. This sets out government's belief that it is time to update our approach to addressing the energy "trilemma". It is confident that the interests of sustainability have now been enshrined in legally binding commitments. Equally, the "foundational" security of sup- ply challenge is considered to be well cared for under the aegis of the capacity auctions and Contracts for Difference. This leaves the affordability of energy for households and businesses as the policy focus for the current administration. It is of the foremost importance, says the document, that "the shi to a low-carbon economy is done in a way that minimises the cost to UK businesses, taxpayers and consumers". The implications of this ambition for energy suppliers are unclear in the green paper, although the smart meter rollout is expected to play a part and delivering energy efficiency is considered highly important. This will no doubt influence updates to the Energy Company Obligation and the Green Deal that are in the pipeline and a long-term roadmap for energy efficiency will be published by government later this year, following the industrial strategy consultation. It is the role of energy networks, however, that is positioned with greater significance within government's plan for a cost- effective energy transition. The outcomes of the "Smart, Flexible Energy System" call for evidence, which closed to submissions on 12 January, are keenly anticipated by gov- ernment, which is keen to seize the "prize of bringing prices down by making more flexible alignment of demand and supply". Government's recognition of the key role to be played by networks in the energy transition should be welcome to many – including shadow energy minister Alan Whitehead, who has previously set out his belief that smart grids are a "public good investment". The commitment to accelerating the benefits of smart grids is woven throughout the proposed industrial strategy, prompt- ing offers of funding for the development of energy storage and demand-side response technologies as well as electric vehicle charging infrastructure. If approved in con- sultation, this will add to other pledges recently made by government for the advancement of smart energy technologies – including a £28 million fund announced on 25 January. It is not only new approaches to network management, however, that get mentions Return of industrial strategy Jane Gray finds the government's new take on industrial strategy is weightier and more joined-up than previous efforts. There are many implications for the utilities sector. Key questions Government has asked for feedback on its proposed strategy by 17 April and has suggested questions for industry leaders to address. These include: What are the most important steps the government should take to limit energy costs over the long term? How can we move towards a position in which energy is supplied by competitive markets without the requirement for ongoing subsidy? How can the government, business and researchers work together to develop the competitive opportunities from innovation in energy and existing industrial strengths? How can the government support busi- nesses in realising cost savings through greater resource and energy efficiency? Which challenge areas should the Industrial Challenge Strategy Fund focus on to drive maximum economic impact? Are there further actions government could take to support private investment in infrastructure? Are there further steps that the govern- ment can take to support innovation through public procurement? How can the government and industry help sectors identify the opportunities a 'sector deal' should address? What are the most important institutions that need to be upgraded or supported to back growth in particular areas? Are there institutions missing in certain areas that government could help to cre- ate or strengthen to support local growth?

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