Britain’s switch to low-carbon energy could give a £21bn boost to the economy. Stephen Hall and Jeffrey Hardy explore the sweeping economic benefits that could come with continued decarbonisation. They have analysed how new markets are created and destroyed within these UK electricity system scenarios. These new markets include large-scale low-carbon generation, such as offshore wind or new nuclear power stations, and the provision of new services, such as charging infrastructure for electric vehicles. Our work shows that in these new markets electricity utilities could access up to £21 billion per year of new value by 2050. In context, that would be worth up to 30 per cent of the total energy market that year. Understanding how the transition to low-carbon energy might cause certain sectors to grow or shrink is important because, first, it helps utilities plan for the future. Our work shows that large-scale low-carbon generation, for example offshore wind, could be worth up to £8bn annually by 2050. However, in scenarios in which electricity demand is met through decentralised, smaller-scale systems, big offshore wind farms are needed much less. In that scenario the market would be worth less than £1bn per year. Second, focusing always on “cost” as opposed to “opportunity” misses the critical point that new investment leads to new jobs and technological innovation. If the UK focuses on offshore wind or solar, for instance, it would need a plan for when the wind doesn’t blow or the sun doesn’t shine. This would mean a big boost for the “flexibility” market, which includes everything from batteries to services which encourage people to use energy at certain times. In a high-renewables future, it could be worth more than £1bn per year. But if the UK instead goes for large carbon capture plants, the flexibility market will be worth almost nothing. Finally, by demonstrating how different markets are created and destroyed in different energy futures, we can better understand the effects of energy policy on market creation. The UK is leading the world in the development of offshore wind power, as shown by a dramatic fall in the cost of government subsidies. Rather than focus on lowest total cost, this type of analysis shows how government can make policies which both achieve low-carbon ambitions and foster new export sectors. This requires innovation policy as well as subsidy support and new environmental regulation.
Business Green 6th Oct 2017 read more »
First there was going to be a hard energy price cap, then it was kicked over to regulator OfGem, now we’re back with the Government in hard cap territory again. With a backlash in full swing, we’ve since learned that there might not be one after all. OfGem might be a badass when its proposals emerge. So then we won’t need one. If we do need one, the chances of getting it done by the time it gets cold look, well, slim given that there will need to be consultations, and legislation, not to mention time earmarked for dealing with the inevitable challenges.
Independent 5th Oct 2017 read more »
Theresa May’s Conservative Party conference speech was meant to be a full-throated defence of markets, but despite a promising start – she choked. The reason Mrs May’s free market rhetoric fell flat was that she pursued policies that show she simply does not understand how markets work. Mrs May argues that “the energy market punishes loyalty with higher prices”, yet the idea we should reward loyalty to massive energy companies is bizarre. It is right to praise loyalty to our partners, our children, and our football teams, but business is different. Businesses do not reward loyalty out of duty, but out of self-interest. The reason Starbucks, Costa and Caffe Nero have loyalty schemes is because customers can, and do, regularly switch coffee shops. Loyalty is rewarded in business only when disloyalty is the norm.
Telegraph 6th Oct 2017 read more »
Plans to cap energy bills for up to two million vulnerable households this winter have been thrown into doubt after the government said it would legislate for a wider cap on all standard tariffs. Ofgem, the regulator, had said it would publish proposals at the end of September to fast-track protection for vulnerable households and had told companies that the cap could come in by January. Energy companies agreed to the plan, despite it hitting profits, on the understanding that it would see off the threat of a wider cap. However, Ofgem, which was expected to publish plans this week, has further delayed publication until at least next week as it reviews the implications of the government’s announcement. “Now they have no idea whether they are going to go ahead or not,” an industry source said.
Times 6th Oct 2017 read more »
