Hanover

30 Apr 2020

As the Covid-19 pandemic highlights the destructiveness of silent forces, there are growing calls to focus the recovery on tackling climate change. This message was echoed this week by UK Foreign Secretary Dominic Raab, telling global leaders at this week’s Petersburg Climate Dialogue that it is the “duty of every responsible government” to reboot economies along climate-resilient lines.

COP26 President Alok Sharma reiterated Raab’s calls, promising the UK would raise the bar on climate action in the lead up to COP26, which was originally scheduled for Glasgow in November. It was hoped that COP26 would provide a stimulus for renewed action to meet the fourth and fifth carbon budgets. COP26’s delay until next year has therefore been a severe blow.

Prior to the outbreak, the Government’s target of net zero greenhouse gas emissions by 2050 sat atop the domestic policy agenda. There are now concerns about the affordability of net zero given the economic contraction due to Covid. This will create additional pressure for the Treasury’s Net Zero Review to provide a credible way to manage the cost.

Progressing policy

Although Whitehall’s focus has shifted temporarily, this has not halted developments in energy policy. BEIS has this week issued a consultation on future support for low carbon heat, providing more details on the new schemes that were announced in the March Budget. The main proposals include a Green Gas Support Scheme to increase the proportion of green gas in the grid through support for biomethane injection and a Clean Heat Grant, which would support the roll out of heat pumps, addressing the barrier of up-front cost.

Other Government consultations announced before the lockdown remain in progress. In early March, the news that the Government plans to reopen Pot One of the Contracts for Difference subsidy scheme to onshore wind and solar PV was welcomed by many. After four years in the doldrums, there is optimism that these increasingly low-cost technologies can play a key role in aiding the UK’s net zero ambitions. The deadline for responses  to the consultation remains 22 May.

Balancing the grid

Meanwhile, renewables have been powering the country. The UK lockdown has coincided with the sunniest April on record, which has led to a record-breaking period without coal-fired generation, thanks to record solar generation and lower electricity demand by industrial users.

Although this surge in renewable generation is to be celebrated, with the early-May Bank Holiday forecast to be a new low for UK electricity demand, this could force the National Grid to issue emergency instructions to turn off wind, solar or nuclear plants. While this is a cause for concern, larger players in the Balancing Mechanism can respond to this situation, and utilities such as Octopus Energy have applied time-of-use tariffs to pay consumers to use electricity to help balance the grid. Other businesses in the flexibility space, such as Statkraft, have limited the curtailment of renewables by using their storage and trading facilities to place flexibility where it is needed. Now is the time for flexibility players to communicate their contributions to energy security.

Ensuring customer supply            

The overall drop in electricity demand has not been offset by the obvious surge in domestic consumption with much of the population working from home. Suppliers were quick to agree proposals with Government to protect vulnerable customers falling into debt while in self isolation. The short-term priority for these companies is to keep prepayment meter customers on supply and in the medium-term deal with the debt accrued during the crisis.

Communicating clean recovery

In the coming weeks, the contribution of a climate-focused energy sector will be an important message to share. Despite the pressures of the crisis, Government is still progressing elements of ‘business as usual’ future-looking work where possible, and good news in the media will be more welcome than ever. Businesses that show leadership will be fundamental to the direction of the UK energy sector.