What do the CCC’s recommendations mean for the energy sector?

The Committee on Climate Change released its progress report last week and added another hefty load to the mountain of pressure steadily piling up at the doors of Greg Clark, Phillip Hammond and No10. With Lord Deben comparing the government’s (in)action to Dad’s Army, ministers must surely be eager to prove him wrong.

Although the power sector gets a comparatively glowing review, the report is quick to point out that progress is slowing. The CCC puts a figure of 60 TWh as the current gap in renewable generation needed by 2030 and they are clear that this can’t be done at the necessary speed, without government intervention. Specifically, the recommendation is for the Energy White Paper to produce plans to quadruple low carbon generation by 2050, alongside the statement that new gas-fired generation would increase power sector emissions. However, a clearer recommendation to prohibit any new-build fossil fuel generation would be welcome.

Although the report does set out some specific actions for adding this amount of generation capacity, the CCC believes that it can be delivered under the current market arrangements – as long as auctions are competitive and technology neutral. We have in the past questioned whether technology neutrality can really be applied, given the fiscal advantages that fossil fuel generation has and we would welcome further advice from the CCC on how to address these externalities.

The report also calls for a clear plan for upgrading and future-proofing the electricity networks to accommodate new electricity demands. Specifically, it recommends that when network capacity is increased, it is done to a sufficient level to avoid upgrading again before 2050. This is something Regen is working closely with Distribution Network Operators (DNOs) on – our work to produce detailed local scenario analysis for WPD, UKPN and SSEN helps DNOs to understand the growth potential of network connected renewable energy and storage.

The headline near-term targets for the clean energy sector are:

  • a route to market for solar and onshore wind
  • contingency plans for low-carbon generation in the event of delayed or cancelled projects
  • a consultation on future electricity market design, including subsidy-free CfDs and mechanisms for re-powering

Energy White Paper
The CCC has taken advantage of the timing of the report to push for specific actions to be taken in the Energy White Paper. Regen and the Electricity Storage Network organised for industry leaders to discuss the Energy White Paper with the government, and put forward specific recommendations we would like to see to stimulate the renewable and storage industries. It is reassuring to see alignment between these recommendations and those of the CCC and it is worth comparing them here.

The CCC has asked (along with the above near-term targets), for:

  • a quadrupling of renewable capacity by 2050
  • an outline of a subsidy-free route to market for cheapest low carbon gen
  • clear plans for resilience of energy supplies as heat and transport become electrified

Regen’s recommendations underpin these broader proposals:

1) Policy and regulatory measures to enable investment in renewables and flexibility

  • A clearer remit for Ofgem on decarbonisation, alongside consumer protection, would help ensure a supportive regulatory framework and guide the approach to key measures such as the review of network charging and the delivery of the Smart Systems and Flexibility Plan.
  • A commitment to ‘no steps backwards’ on new policy. Any new policy (from any department) should pass a decarbonisation cost benefit analysis.
  • Strong, granular and dynamic “time of use” and “location of use” price signals via the Access and Forward-looking Charging reforms.
  • Open source modelling of the future energy system and flexibility needs would help with clarity and investment cases.

2) Measures to de-risk investment in established renewables

  • Introduce a revenue stabilisation measure for established renewable technologies, suggested mechanisms include a floor price or other stabilisation mechanism and ways to make REGOs more effective at incentivising new projects.
  • Address high business and VAT rates for renewables and storage.

3) A level playing field for decentralised energy in markets for system services operated by National Grid System Operator and DSOs

  • Recognise the value of sub-second response to the system. National Grid ESO should release a new Fast Acting Response product/or other mechanism to recognise this value.
  • Clarity on how the balancing mechanism is likely to be reformed; this is a major source of revenue for batteries but widely accepted to be under increasing strain and need of structural changes.

The one subject that receives less attention from the CCC is storage and we would like to see more policy developed in this area – for example a revenue stabilisation mechanism, or potentially setting targets. We’ll engage with the CCC to develop this thinking and hopefully it will develop further in future reports.

The broad agreement between Regen’s and the ESN’s recommendations and those of the CCC increases the weight of our arguments to the government. As the independent advisor on climate change, the CCC is the one voice the government will find very difficult to ignore – Lord Deben has raised the possibility of third parties bringing legal action against the government with the CCC being called as witnesses. Fortunately, there’s no shortage of ideas and solutions to the problems we’re facing and at some point, that mountain of pressure must push the government into action.

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