Energy Transition Report 2018

TR & NSITION ENERGY

ENERGY TRANSITION OUTLOOK 2018

The Energy Transition Policy Roadmap To further promote investment, energy policy needs to be refocused on a smaller number of strategic government objectives including the development of CCUS at scale and the hydrogen economy. Energy strategy should also explicitly recognise the importance of the oil and gas sector Vision 2035 to the UK economy. Ideally, energy strategy should aim for cross-party support as is the case in, for example, Denmark. 14 The need for a clear government energy strategy Government policy has a key role in providing an efficient pathway to the low-emission future and its role in the energy sector has become much more prominent since the 2008 Climate Change Act. However, policy has reached something of a crossroads in recent years. The 2017 Clean Growth Strategy sought to set out a long-term vision for government energy policy. 15 But although some aspects of this provided a clear long-term picture, policy arguably remains overly focused on small marginal improvements rather than addressing the key strategic choices. General dissatisfaction with outcomes for some groups of consumers has led the government to introduce a regulated price cap for electricity and gas bills for those on standard variable tariffs. Under the EU Energy Union Governance Regulation, agreed in principle in June 2018, each EU Member State is required to prepare a national energy and climate plan for the period 2021 to 2030 aligned with the overarching EU targets. This Regulation will likely be in force during the Brexit transition period. However, in any case, the time is right for a restatement of energy policy goals in the UK, including government expectations related to the oil and gas sector. Strategy and policy should focus on key high-level objectives The 2017 Helm Review 16 of energy prices identified the extensive, overlapping and complex interventions in energy markets as a key driver of higher prices for consumers. Although the review was focused strongly on electricity markets, this assessment is also relevant to energy policy more widely. Meanwhile some individual policies have been assessed by the National Audit Office (NAO) as poor value for money. 17 18 One lesson from these assessments could be that government should focus more closely on large-scale and innovative technologies where the UK has an advantage or interest from a competitive and industrial policy perspective, and where potential market failures are more apparent. This would include the oil and gas sector, offshore wind and the development of CCUS and the hydrogen economy.

14 https://oim.dk/media/19094/energiudspil2604.pdf 15 https://www.gov.uk/government/publications/clean-growth-strategy 16 http://www.dieterhelm.co.uk/energy/energy/cost-of-energy-review-independent-report/ 17 https://www.nao.org.uk/wp-content/uploads/2018/02/ Low-carbon-heating-of-homes-and-businesses-and-the-Renewable-Heat-Incentive.pdf 18 https://www.nao.org.uk/report/green-deal-and-energy-company-obligation/

16