Utility Week

UTILITY Week 1st September 2017

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

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Page 11 of 31

12 | 1ST - 7TH SEPTEMBER 2017 | UTILITY WEEK Policy & Regulation Lobby Policy / Budget / Brexit Policy & Regulation The cost of energy review The government's long-awaited review of the energy market is due to start soon, but what will it cover? And who will be conducting it? The scope The government's cost of energy review vows to be wide-ranging and in-depth, but some key areas have been left out. Lois Vallely reports. T he launch of the cost of energy review ticked off a Conservative manifesto pledge and is an impor- tant step in government's plan to deliver the lowest energy costs in Europe, as set out in it Industrial Strategy green paper. On launching the review – which will be chaired by Oxford professor Dieter Helm – the Department For Busi- ness, Energy and Industrial Strategy (BEIS) promised it would be "ambitious". BEIS secretary Greg Clark said it would help government deliver an energy system "fit for the future" while also uncovering opportunities to "take advantage of changes to our power system and new tech- nologies to ensure clean, secure and affordable supplies over the coming decades". But critics have doubts. They say the review's short timescale, brusque methodology and tight terms of refer- ence mean it is unlikely to do much to clarify the murki- est uncertainties about best route to decarbonisation. Here we review what's in and what's out of scope: The cost of energy is never far from the political spotlight, and as the row over a price cap continued to rage this summer, the government fulfilled its promise to commission an independent review of costs along the entire value chain, from generation to supply. Ministers chose celebrated economics professor Dieter Helm to lead the review – a controversial choice in some quarters given Helm's track record of outspoken statements on matters such as the cost of renewable energy and the need for tariff intervention. Eyebrows were also raised at the review's short timescale – it is due to report back in October – and at the omission of key issues such as smart meters (see p14). Helm, who will be joined by a panel of experts from diverse backgrounds including former National Grid executive director Nick Winser and former Conservative MP Laura Sandys, promised to "sort out the facts from the myths about the cost of energy", and has been asked by the government to advise on meeting its ambition to have the low- est energy costs in Europe. IN: Electricity Despite recent acknowledgements from Ofgem that the decarboni- sation of heat is "the biggest challenge" facing the energy sector in the next decade, the review is set to focus exclusively on power. It will report on the full supply chain of electricity generation, trans- mission, distribution and supply, considering the opportunities to reduce costs in each part. Responding to the review announcement, former energy secretary Ed Davey cautioned Helm not to "repeat the mistakes" of the Com- petition and Markets Authority (CMA) energy investigation by focus- ing too heavily on the electricity market. But with the scope given, it looks as though this horse has bolted. Decarbonisation Last year's Future Energy Scenarios report from National Grid flagged that the UK is set to miss its carbon reduction goals because progress in decarbonising electricity has not been matched in the heat and transport sectors. BEIS writes in its terms of reference that the review will consider how energy policy can "best facilitate and encourage" technological developments consistent with the overall objectives of decarbonisa- tion and security of supply. The former boss of RWE Npower, and now chief executive of renewables company North Star Solar, Paul Massara is not con- vinced. He warns that there is "no discernible strategy" for tackling the total decarbonisation of energy, and argues that the short three- month timeframe in which the review must be completed will not be long enough to come to any "lasting conclusions". Energy efficiency Energy efficiency is commonly held to be the holy grail of energy cost reduction, with enthusiasts pointing out that the cheapest, cleanest Analysis

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