On the eve of Scotland's Climate Week (25th Sept – 1st October 2023) where individuals, communities and businesses are encouraged to join forces to tackle climate change, it’s a critical time to take stock and critically review where we are as an industry in the global context, and in our battle against climate change.
Whether you are a believer in global warming or not, climatic changes are happening quicker than scientific models anticipated, fact. We’re seeing the stark evidence in more frequent extreme weather events - from changes in the oceans’ currents, which regulate the global climate, to the increasingly bizarre occurrences of wildfires and rain bombs.
Against this backdrop, the UK is sadly losing its momentum in developing the technologies needed to slow and halt the change. We have led the world in the development of offshore wind, and the auction systems needed to deliver cheap renewable generation at scale; however, this lead is being eroded fast in the global context of renewable energy production, and the damage will soon be seen. Quick action is needed to reinstate our progress before irreversible damage is done to the UK’s long-term reputation and its attractiveness to investors.
If/when we fail to meet the big targets, or fall behind in transitioning the whole economy, we send mixed messages to the essential parts of the system that will deliver the changes needed. Falling behind on delivery of renewables slows the development of the supply chain and does not give it the confidence to invest in the new factories, vessels, port facilities, turbine models and networks needed. These are driven by the investments from institutions in the global marketplace that will enable us to accelerate the pace of deployment.
Government cycles and inconsistent messaging, despite strong core policy statements, creates instability. The UK creates a stop start delivery for the renewable transition our supply chains will not be able to deliver efficiently, and we will lose many of the job opportunities stable consistent growth brings. Feast and famine markets also deliver poor value for consumers.
In addition to project slow down we do not have the right mechanisms in place to deliver the renewable energy grid infrastructure the UK needs to deliver the energy transition. The proposed Future System Operator must be supported to deliver a long-term vision and plan which can achieve cross party-political backing. The network we install in the next 15 years will determine the economic security and competitiveness of the UK as an economy over the next 50 years. Under development will not serve the consumer, industry or the UK in an increasingly competitive world.
Furthermore, there is still pressure to continue using oil and gas in the UK with numerous new licenses for gas awarded in the last year.
Our government has committed to decarbonise the electricity system by 2035, and reform is essential to deliver the pace and scale of change needed to meet this target. There needs to be a greater incentive to decarbonise, while keeping consumer prices affordable, and maintaining a secure and reliable system.
I am fully supportive of a complete reorganisation of the wholesale energy market, which is still driven by gas, and means we’re prisoners to the high gas prices set by international markets.
Proposed reforms being considered by government in the Review of Electricity Market Arrangements (REMA) include modifying government support mechanisms for decarbonisation and security of supply, implementing location dependent wholesale prices, and options to pass on the low costs of renewables to consumers by separating the market. We’ll hear more on this from the government consultation this autumn.
Investor confidence is also crucial, as is minimising disruption to the deployment of new generation and network infrastructure improvements. REMA must balance the reshaping of the market with the delivery needed to stay on course.
Securing capital at low interest rates is key for affordable electricity for consumers in the long term. War and uncertainty are causing capital prices and interest rates to increase, which will mean higher prices for consumers in the short term. To deliver the best outcome we need stable policy together with clear and agile delivery mechanisms. The trilemma of price, security and sustainability is best achieved by balanced, stable, predictable and coordinated growth.
By Jeremy Sainsbury OBE, Director at Natural Power