Utility Week

UTILITY WEEK | 3RD - 9TH NOVEMBER 2017 | 11 Policy & Regulation Analysis R enowned Oxford economist Dieter Helm has published his independent review into the cost of energy in the UK. The paper calls for a drastic over- haul of the energy system, its existing market structures and institutions, and prompted a rash of national headlines, inevitably revelling in Helm's conclu- sion that the cost of energy in the UK is too high. But will Helm's government-commissioned study now be embraced by the energy secretary as a driving force behind policymaking? Or are his recommen- dations so far-reaching and challenging that they will find themselves dismissed as the blue sky theories of a consummate academic? The answer to this question is critical to whether Helm's opus will be remem- bered as a seminal document in the history of the energy industry, or a flash- in-the-pan stunt, pulled together in a hurry and with no notable external input. Executives and investors whose interests stand to be radically affected by some of Helm's proposals will be watching closely to see just what the ambiguous promise from the Department for Business, Energy and Industrial Strategy (BEIS) that it will now "consider carefully" how to apply the evidence presented in the review, really means. In the shadow of Brexit, it cannot be denied that it will be hard to elevate Helm's recommendations from blue sky to blueprint for the future. Some of his recommendations for reform rely on swathes of new primary legislation being passed – for example his call for the establishment of "regional system opera- tors" to manage flexibility and balancing markets at a local level. And it is hard to imagine the parliamentary time being made available. This feeling certainly resonates with most energy industry experts, one of whom told Utility Week that the "enormous" challenge set out by Helm for both BEIS and Ofgem is simply "too much work" – even if it does contain "a lot of good sense". Some went further, describing the report as a "roller coaster" which passes over practicalities in favour of putting forward grand theories, or occasionally even taking "unnecessary" swipes at past policy decisions. Former energy sec- retary Sir Ed Davey derisively told Utility Week that the publication is already "gathering dust". It has also been widely noted that Helm's report is not much of a blast of fresh thinking. Big chunks of the publication rest heavily on his past work and per- sonal convictions about what is best for the energy system, leading some observ- ers to label it a vanity project. On Twitter, Richard Black, director at the Energy and Climate Intelligence Unit, observed that Helm managed to plug his own books twice in the introduction. This said, many commentators are also clear that Helm's publication will prove to be no flash in the pan, and that its usefulness in influencing thinking about the evolution of the energy system should not be dismissed. As Energy UK chief executive Lawrence Slade suggests, at a time when "most agree that the sector needs to evolve", Helm's review should be viewed as a help- ful addition to a growing canon of thinking around energy system reform. And it is notable that Helm is not alone in his radicalism. He is joined by Laura Sandys in her "Reshaping Regulation" report, and by other reports published by the Future Power Systems Architecture programme, in suggesting that the incremen- tal approach being taken to adjust today's market structures and regulations, is not sufficient to meet the requirements of fast-paced change already impacting the sector. Does Dieter deliver? Dieter Helm's review of energy is certainly radical, but is it a blueprint for the future or just an academic's wishlist? "While this report adds constructively to the debate, it should not delay the policy decisions needed for industry to invest in our clean energy future." LAWRENCE SLADE, CHIEF EXECUTIVE, ENERGY UK "Some (but not all) of Dieter's ideas are good, even if he's floated them before… it gives the government and Ofgem real food for thought, but certainly doesn't give a blue- print that they could go out and implement tomorrow." TONY COCKER, CHAIRMAN, INFINIS (FORMERLY CHIEF EXECUTIVE, EON) "It's stronger on theoretical solutions than practical poli- cies, so runs the risk of being quietly put on the shelf." TIM YEO, FORMER CHAIR, ENERGY AND CLIMATE CHANGE COMMITTEE "It's gathering dust before it's even pub- lished… There may be economic arguments for what he is proposing but the politics are extraordinarily difficult, and I can't see them working." ED DAVEY, FORMER ENERGY SECRETARY "The question really is whether there is the political appetite… in a time of Brexit and minority government anxieties, that seems unlikely." SIMON HARRISON, ENERGY POLICY PANEL CHAIR, INSTITUTION OF ENGINEERING AND TECHNOLOGY "It makes radical suggestions about industry structuring but is silent about the mechanisms for change that will need to be much more agile and inclusive than today's governance struc- tures." JOHN SCOTT, DIRECTOR, CHILTERN POWER

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