Bulletin 18 January

Issue 266: Tuesday 18th January 2011  

  • The Energy Paradigm changes

  • ENA Victory on planning

  • Are the Government really ending EU 'gold-plating'?  

  • Treasury Report on Infrastructure  

  • Meeting the Low Carbon Skills Challenge

  • Carbon Monoxide - Be Alarmed! Campaign - 2011 launch  

  • Former Labour Ministers reject Government energy job  

  • Minister at ENA/SBGI Street Works Conference  

  • SHE 2011

  • Brussels Update

  • Forthcoming events organised and/or supported by ENA  

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The Energy Paradigm changes  

Just before Christmas the Government launched a consultation that may well reshape the energy sector for a generation. Ever since the new Coalition Government came to power there had been talk of a generation defining policy paper. We had expected something in the Energy Bill currently in the House of Lords. Then we were told this was too soon and more discussion would be needed. The result came on 16th December with the launch of the Electricity Market Reform Consultation running until 10th March.  

It had been heavily trailed and was described by Chris Huhne as representing a “seismic shift” in policy. Charles Hendry has described it as setting energy policy “for a generation”. They went further.  It was being heralded by Government as rolling back “Thatcher’s Energy Market to Cut Emissions”. Echoing perhaps the “Post Lawsonian” speech by Ed Milliband when he became DECC Secretary in 2008.   

The narrative is interesting, and possibly closer to Mr Milliband’s thinking than they would care to admit. It is being said that the Government wish to reassert some level of state control over the market-based system introduced by Margaret Thatcher. Anticipating the political weather, Ofgem have added to the mix by saying that while privatization has kept down energy prices, the scale of investment needed to meet climate change targets and replace aging plants is so large it won’t happen without government guarantees.  

The proposals include introducing capacity payments and levying a pool of funds from consumers that would make pay-outs to low-carbon generators – including nuclear reactors and offshore windfarms. Also included are so-called contracts for difference to deal with the volatility of future power prices and prevent windfall profits. These contracts would compensate utilities for lower-than-expected energy prices or charge them if prices are higher, in this way locking in a price and allaying concerns that costly projects won’t get paid off.  

A carbon floor would benefit nuclear and renewable energy assets-owners. The Committee on Climate Change suggested replacing the climate change levy to introduce a carbon floor that rises to £27 a ton by 2020.  

This clearly signals a return to Government directed energy policy and, coming at the same time as Government take control of the smart meters roll-out and continue their Review of Ofgem, all points to a more interventionist approach. This represents both an opportunity and a risk for network companies, which given their key facilitating role are bound to be affected.  

Looming behind the tables at the great feast like Banquo’s Ghost is the issue of where the public fit into all this. It is clear that they are driven by the need for reliability and affordability. We have just gone through the coldest December on record with high gas demand. How will the public be persuaded to change how they use energy? Will they be prepared to pay more? Part of the answer lies with the networks. A smart grid can ensure we can minimise these increases. Mr Huhne has talked of the "lowest possible cost energy security". The smart grid can help facilitate this by ensuring energy is used more effectively. The way to deliver this lies in the heart of the distribution networks’ operations.   

The other part to this is the role for gas. A potentially low cost solution to our energy challenge. ENA attended the launch event for the Reform Consultation which was attended by Chris Huhne, Charles Hendry, Jonathan Brearley the author of the document from DECC and Mike Williams from the Treasury. We raised our Redpoint Report and the future role for gas. Chris Huhne said it had a future. He said "the conventional wisdom on gas has changed" as there are other unconventional sources becoming available. Referring to the recent gas CCS project announcement he said Gas CCS was a clear departure from previous policy. Charles Hendry said it had a "key transitional role". He was "less clear" what role it would have in domestic heat in the future. Jonathan Brearley said that it must have a role in our energy future and Mike Williams said it was important for the economy. It was the only question which they all wanted to answer, which was interesting since they had previously said there was a "bias" in favour of gas in the current market.  

As with all good consultations there are many questions raised by the proposals. The challenge is always how deep or how wide ranging any policy analysis goes. There will always be a tension here. There are questions on how this plays into Ofgem reform. Who will the proposed ‘contracts for difference’ (to address market inbalances) be contracted with? Some form of Ofgem EServe or grandson of CEGB? How will the future energy mix be skewed by market intervention and what role will the networks play in facilitating this?      

At the launch Mr Huhne said it was the most significant set of proposed reforms since Nigel Lawson's in the 80s. He said he hoped that like the Lawsonian reform it would set the framework for the EU. The question is will the public embrace it as they did the share flotations of those bygone days.  

The Consultation document will last for three months. It will be followed by a White Paper in the spring of next year and then another Energy Bill with Royal Assent expected in 2012.  

The full documents can be read here.

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ENA Victory on planning

We have secured a victory on planning decisions following abolition of the Infrastructure Planning Commission. The Department of Communities & Local Government have said that following the abolition of the IPC decisions on major infrastructure applications will revert to the Secretary of State with the policy responsibility for the relevant industry sector which means that energy projects will be determined by the Secretary of State for Energy and Climate Change. There had been a battle over this in Cabinet with Eric Pickles arguing that he should make the final decisions. This would have been bad news for the energy sector – something we had made clear to Charles Hendry. However the Secretary of State for Communities and Local Government will chair a regular meeting of ministers from the consenting departments. It will also be attended by Infrastructure UK, the Treasury, and the Department for Business, Innovation and Skills. This is welcome. The group will look specifically at expediting outstanding cases under the previous regimes and at driving performance across government. It will also share good practice and take joint responsibility for the effectiveness of the new major infrastructure planning regime.  

The National Planning Policy Framework

The Government also made clear today that it will streamline national planning policy, presenting to Parliament a simple national planning policy framework which will cover all forms of development. They made clear that national policy statements will be part of the overall framework of planning policy and will remain the decision-making framework by which nationally significant infrastructure projects will be determined. This approach is also very welcome, providing considerably consistency across the planning process but of course the devil will be in the detail.  

Localism Bill  

The Localism Bill, which will abolish the Infrastructure Planning Commission and create the Major Infrastructure Unit received its Second Reading in the Commons yesterday.  

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Are the Government really ending EU 'gold-plating'?  

There is a new approach to EU regulation afoot across the land. BIS Secretary Dr Vince Cable has set out a series of new principles that the Government will use when introducing European measures into UK law. These will end so-called “gold-plating”.  

He says the key to the new measures will be the principle of copying out the text of European directives directly into UK law. He believes the direct ‘copy out’ principle will mean that British interpretations of European law are not unfairly restricting British companies. The question arises whether this literal approach really delivers the intended goal. In the area of complex energy regulations where legal wording must be constructed tightly and appropriately does a copy and paste approach really help?  

The new measures are part of a wider Government policy to tackle EU regulations at the source. The new measures will place an express duty on ministers to conduct a review of European legislation every five years. The review process would involve a consultation with businesses. The Government say this will provide an opportunity to improve how European legislation is implemented, to ensure that it poses as small a burden as possible on business.  

The Government say they will also start work early on how to implement EU directives to ensure that there is certainty and early warning about how legislation will be introduced, but will not implement the regulations early unless there is a compelling case to do so. Our early experience of this new approach is not favourable. Far from taking a longer approach there seems to be a desire to get the regulations through quickly and more worryingly, with a clear sheen of platinum, let alone gold about them.  

We will be engaging with both BIS and DECC on this and will seek to ensure that the undoubted best intentions of Government are not sacrificed on a mistaken policy initiative.  

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Treasury Report on Infrastructure  

The Government have published a report by Infrastructure UK which they say sets out a blueprint to save up to £3billion a year on building and maintaining infrastructure.  

Treasury Ministers said “it could promote growth by freeing up more money for infrastructure investment, as well as helping keep water, gas and electricity bill costs down for consumers by reducing costs for utility companies”.  

The report outlines how costs of building and maintaining energy, transport, waste and flood defence infrastructure projects can be reduced by at least 15%. With between £15 and £20 billion being spent each year, this equates to savings of between two and three billion a year – between £20 billion and £30 billion over the next decade.  

They say the “savings in delivery cost would be achieved by Government working with industry to improve procurement, raise productivity, simplify processes and promote innovation and better industry integration”.  

The report concludes that:  

  • there is a lack of certainty over long-term workflow;

  • the UK over-specifies and applies unnecessary standards;

  • strategic investment is constrained because industry is fragmented;

  • blurring of decision-making roles make governance inefficient;

  • competitions are burdensome and stifle innovation;

  • a lack of data limits capability to set challenging targets.

The evidence of the Steering Group of industry leaders found the following scope to reduce costs in the delivery of UK infrastructure by:  

  • eliminating peaks and troughs in the infrastructure investment pipeline;

  • improving client leadership, streamlining project governance and procurement;

  • reducing unnecessary prescription, standards and third party requirements;

  • improving asset management and benchmark data;

  • developing smarter ways to use competition; and

  • encouraging industry to invest more in innovation and skills.

The Government is working to finalise a prioritised programme for implementation to be announced by the Budget in 2011.  

The full report can be read here

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Meeting the Low Carbon Skills Challenge  

The Government has responded to the Low Carbon Skills Challenge Consultation.  

It recognises that the market has not been working effectively in two ways. Firstly, the ageing of the energy workforce was not signalled or recognised early enough for employers to take action in time to engineer a smooth transition to a balanced age profile. Those employers who did see a looming problem were unable to take early action because their competitors did not. This led to an over-reliance on the labour market and an ageing skills base to supply skilled workers. Secondly, the market is not creating sufficient confidence in the future demand for skills, especially for the emerging sectors, to allow employers to invest in skills today. Given the lead time to train workers, this runs the risk of delay to future investment.  

The Government has now published its new skills strategy, which includes support for expanding apprenticeships and reform to ensure that the skills system responds to learners’ demands quickly and flexibly. DECC recognises that market certainty is critical for investment in skills and plant and is addressing this in the delivery plans under development for renewables, carbon capture and nuclear.  

Finally, the Government is also aware of energy industry concerns around the recent Home Office announcement that a cap would be placed on economic migration from outside the European Economic Area. The limit “aims to be sensitive to these concerns” by implementing a new more selective approach; “one which brings in more of the brightest and the best who will make a real difference to our economy - such as engineers - while at the same time reducing the overall number of people coming to Britain through the economic routes”.  

The full Response document can be read here

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Carbon Monoxide - Be Alarmed! Campaign - 2011 launch  

Following on from last year’s Carbon Monoxide - Be Alarmed! Campaign, which saw a 400% uplift in the purchase of Carbon Monoxide alarms, this year's campaign was launched on 13th January by Terri Dwyer ('Loose Women' presenter and actress) and Richard Arnold (former GMTV presenter and LBC talk-show host), both of whom have personal experience of the dangers of Carbon Monoxide.  

Over the next few weeks the campaign will also include:  

  • Working with retailers and alarm manufacturers to sell alarms at discounted prices  

  • Engaging with social media followers on Facebook and Twitter and encouraging others to create new digital content, such as online video case studies

  • Hosting a week-long display in Parliament to: educate new MPs on the dangers of CO poisoning, equip them with materials to share with their constituents and local media, and encourage support for future legislative change on alarm provision.  

Further details on the campaign can be found at: http://www.co-bealarmed.co.uk   _____________________________________________________________  

Former Labour Ministers reject Government energy job  

There have been interesting developments in the Government’s approach to fuel poverty. It seems an attempt by the Government to create a big tent approach to the issue has backfired. It has approached two very imminent and widely respected Labour figures from the previous Government only to be rejected by them both. The role as Fuel Poverty Tsar was first offered to former Energy Minister Malcolm Wicks, someone with a strong and enduring interest in this area. The Government then approached the former Transport Secretary Lord Adonis only for him to turn down the post as well!  

How would Oscar Wilde have put it, to be rejected by one former Labour Minister is misfortune but two seems like carelessness.  

Watch this space.  

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Minister at ENA/SBGI Utility Street Works Seminar  

Transport Minister Norman Baker MP will close this year’s ENA/SBGI Utility Street Works Seminar speaking at a drinks reception following the day’s proceedings.

This year’s Seminar takes place on 24th February 2011 between 9:15 – 5pm and is will be held at One Great George Street in Westminster.

With the prospective of lane rental charges in the Capital moving ever nearer, mounting overstay charges and Olympics 2012 on the horizon, the climate for critical utility infrastructure maintenance, repair and replacement in urban environments has never been more challenging.  ENA together with SBGI are pleased to announce their 2011 ‘Utility Street Works’ seminar taking place in the heart of Westminster on 24 February 2011.  The seminar attracts representatives from all organisations with an interest in utility street works. Come and join delegates from the utility companies, engineering contractors, technology providers, and local and national government departments, to debate policy and share experience and best practice from across the sector.  

Confirmed Speakers include:  

  • David Jones, Director Enterprise plc  

  • Richard Buckley, Head of Street Works, DfT  

  • Phil Clarke, Head of London Operations, National Grid plc  

  • Marian Coombs, Major Projects Integration Team Leader/ClearWay 2012 Project Manager at Transport for London  

  • Martin Low, Director of Transportation, Westminster City Council  

  • Richard Wakelen, UK Power Networks  

  • Les Guest, CEO, NJUG  

  • Marc Hobell, Strategic Developments Manager for Utilities, OS obo NUAG  

Following the formal seminar you are invited to a drinks reception hosted by ENA at which Norman Baker, MP for Lewes and Parliamentary Under-Secretary of State for Transport will launch a book published by ENA on how a partnership approach to street works can deliver real results. The book by Richard Wakelen of UK Power Networks and Roger Williams of East Sussex County Council sets out how they worked together to deliver a more effective way to manage street works.  

There will be an opportunity to discuss with the authors how their approach worked and to meet the Minister and other senior DfT officials.  

BOOK NOW TO AVOID DISAPPOINTMENT  

Cost:  

SBGI/ENA Members     £265 plus VAT  

Non Members                £315 plus VAT  

For further information please contact Vanessa Webster on 01926 513763 or email [email protected]     _____________________________________________________________  

SHE 2011

With unprecedented challenges facing the energy industry, the advent of a new Government and the launch of Powering Improvement, SHE 2011 is set to be the best ever.  

Among the highlights are addresses from Paul Noon, General Secretary for Prospect, Dame Carol Black, author of the Working for a healthier tomorrow report and Lawrence Waterman, Head of Health and Safety for the Olympic Delivery Authority.  

We will also hear from our Powering Improvement champions for 2011, John Crackett of Central Networks and Jane Willis of the HSE.  

The Energy Industry Safety, Health & Environment Conference is unique in the way it brings together all stakeholders, from the companies through Government and its agencies to the trades unions, to focus on safety, health and environment issues.  

This is the 22nd such conference and it has established itself as ‘the event’ to attend for all those involved in safety, health and environment issues across the energy sector and beyond.  

The Conference takes place on the 13th,14th and 15th of April 2011 at the famous Belfry Hotel near Birmingham, starting with a pre-conference reception being held there on the night of the 13th April and formal conference dinner on the night of the 14th. The conference is being hosted by E.ON UK.  

As with last year delegate fees include accommodation for both nights of the conference (13th and 14th) and a discount is available for early bird bookings, on top of the special rates offered to ENA, AEP, ERA, GISG and Gas Forum members. So book early!  

For more details and to make your booking click here.  

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15th/16th February 2011: Energy Economy Conference - Delivering our Shared Energy Future

The Energy & Utility Forum are pleased to announce their new conference taking place on February 15th & 16th 2011 in London. The Government is sending very clear signals with emerging low carbon energy policy; most recently with clarification of the Green Deal and the announcement of the electricity market reform consultation. It is clear that the biggest transformation of the energy sector since privatisation will continue to gain pace, and will bring with it threats for existing players and opportunities for newcomers. For more information follow the link to forthcoming events – ENA members have been offered a 10% discount.  

For further details click here.

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Brussels Update  

Hungarian Presidency  

Hungary took up the 6 monthly presidency of the EU on 1st January.  

The main energy objectives of this presidency are: sustainability; safety and security; and integrated markets.  

The Hungarians will host a major European energy summit on 4th February which will consider, amongst other things, the Energy Strategy 2020, and the Infrastructure Blueprint to 2020 and beyond, published by the Commission last November. The Heads of State will also review the proposals for a new Energy Efficiency Action Plan to 2020, with the Plan itself, already delayed several times, now expected in March.  

Later on in the Presidency, an informal energy ministers’ meeting is planned for 2/3 May, to discuss, amongst other things, the work the Commission has been doing on longer term fuel mix scenarios, so that Member States can make their input. The EU 2050 Energy (previously Low Carbon) Roadmap, is now envisaged for this autumn.  

DG ENER, as part of its public consultation on the possible inputs to the 2050 Roadmap has launched an online high level consultation questionnaire: http://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&reference=A7-2010-0331&language=EN  

Infrastructure Blueprint  

ENA has welcomed the Blueprint, with its long overdue focus on what European policies will best support energy infrastructure developments to 2020 and beyond.  

The challenges associated with building low carbon energy networks are already being addressed by networks companies across Europe, albeit working within different legislative and regulatory frameworks. What has been absent, so far, is a unified policy approach at EU level, which is particularly needed to deal with permitting delays that can often blight new projects. Well co-ordinated support for the new technological advances e.g. the development of smart grids, accelerated roll out of electric vehicles, and the transport of hydrogen and CO2 will also be of value.  

The Commission has rightly identified the two key problem areas which currently put at risk many energy infrastructure projects, namely project authorisation delays and securing sufficient financing.  

Public awareness and acceptance is a particular challenge. Networks companies in the UK are working hard to communicate to the wider public the scale of work anticipated, with plans for infrastructure reinforcement, renewal, and replacement across both the transmission and distribution networks, and of course the low carbon agenda that underpins all this work.  

The UK Government recently introduced a localism policy, which will encourage the early and effective involvement of local inhabitants in the decision making process, with guidelines aimed at increasing the transparency and predictability of the process for all parties.  

However, we can see a useful role for the EU, to develop a public awareness campaign across Europe which will promote infrastructure projects, and help justify the associated, and unavoidable, risks of disruption and increased costs. This could be extremely helpful in boosting what is already being done by the energy companies and by national governments.  

Within the European Parliament, the ITRE Committee has appointed Mr Sosa Wagner, an independent Spanish MEP, as Rapporteur. Another Spanish MEP, Teresa Madurell has been appointed as shadow Rapporteur on behalf of the Socialist group. ENA is due to meet with Mr Sosa Wagner later this month to discuss the infrastructure package. Timescales for the production of his report have ITRE discussions in February and March, with the vote in April.   MEPs also plan to host a public hearing on infrastructure issues, provisionally set for 15th March.   ______________________________________________________________  

'The Bulletin' is ENA's free fortnightly round-up of key issues affecting the sector. Visit http://www.energynetworks.org/bulletin for the latest edition or sign up at http://www.sign-up.to/signup.php?fid=602&pid=4068 to become a subscriber.  

For more information, contact Tony Glover on 020 7706 5122 or email [email protected].  

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