By Jeremy Sainsbury OBE, Director at Natural Power
As it’s Scotland’s Climate Week (25th Sept – 1st October 2023), it’s a critical time to take stock and critically review where we are as an industry in the global context of 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.
Sadly, the UK is losing its momentum in developing the technologies needed to slow the change. We have led the world in offshore wind and the auction systems for delivering cheap renewable generation at scale; however, this lead is quickly being eroded and the damage will soon be seen. Quick action is needed to reinstate our progress before irreversible damage is done to our long-term reputation and attractiveness to investors.
If we fail to meet the big targets, we won’t gain the confidence required to secure institutional investment from the global marketplace that enables us to develop the infrastructure needed to accelerate the pace of deployment.
Government cycles and inconsistent messaging, despite strong core policy statements, creates instability. A stop start delivery for the renewable transition means our supply chains will not be able to deliver efficiently, and we’ll lose many of the job opportunities that stable, consistent growth brings. Feast and famine markets also deliver poor value for consumers.
We currently don’t have the right mechanisms in place to deliver the renewable energy grid infrastructure for the energy transition. The proposed Future System Operator must be supported to deliver a long-term vision and plan that 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 throughout 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 include modifying 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. The reforms 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 co-ordinated growth.