Following her appointment as Energy Secretary, Amber Rudd will not want to wait long at the energy policy traffic lights. There is a long road ahead in order to deliver the Conservative Party’s objective of clean, affordable and secure energy supplies.
In SSE the new Minister will find a company that is with her on this journey. SSE has demonstrated its commitment through a number of ways, be it our commitment to affordability by cutting our prices twice in the past 15 months and not raising them until at least July 2016, or via our leadership position in renewable energy and new technologies such as Carbon and Capture and Storage. Of course, everybody will have a wish-list for the new Energy Secretary, so I thought I would share mine. Based on the Conservative Manifesto I see three priority areas of focus.
The first priority area is around long term plans to unlock investment in electricity. To deliver secure, stable and low-carbon supplies of energy, a period of stability and certainty is required following the introduction of electricity market reforms in the last Parliament. I would argue that the manifesto commitment of a ‘long-term plan’ should focus on maintaining Capacity Auctions as the principal mechanism to ensure the UK government fulfils its responsibility to ensure secure energy supplies at an affordable cost to consumers. Any changes to this mechanism must be fully considered as they will have notable implications for the future of existing and new plant. There is also a clear need for clarity to be provided regarding the contribution of onshore wind to the country’s energy mix. The Conservatives have a mandate to “halt the spread of onshore wind farms”, but as a major investor in this area it is important to discuss how to achieve this while meeting climate change commitments cost-effectively, protecting existing investments and retaining the economic benefits brought by investment in renewable sources of energy.
Anybody who has heard me speak over the last few years will be able to predict my second priority area: keeping bills as low as possible. Consumers expect action to be taken to keep prices stable, and where possible to bring them down. Whilst factors such as commodity markets can have a significant impact on costs, governments can assist by ensuring that the costs of policies funded by bill payers are controlled. A key area here is energy efficiency policy which must be both ambitious and targeted at vulnerable households. In the past, schemes have been overly complex and therefore not value for money for the customers who pay for them. There is a strong case for this cost to come off bill payers and to be funded progressively by taking into account an individuals’ ability to pay. With the ECO scheme ending in 2017 there is also an opportunity to refocus and simplify the scheme.
I would also argue that we have to get smart metering right. Whilst smart metering is a unique opportunity to transform customer interaction with their energy usage, and is supported by SSE, the rollout cost is paid for through customers’ bills and the net benefits depend on consumer engagement with the technology. With delays to the programme’s key enabling infrastructure shrinking the delivery window and putting the benefits to customers at risk I think a new Secretary of State has the opportunity to review the delivery timetable and rollout plans to ensure it is as cost-effective as possible and on course to deliver all of the planned benefits for customers.
I’m also sure that we will hear a lot about my final priority issue from a lot of people: the EU referendum. The forthcoming referendum on membership of the European Union is clearly important for efforts to provide stability and certainty in investment. I take no view, at this stage, on the referendum and await further details; however I am clear that the progressive integration of the GB energy market with other countries in Europe is in the best interests of efforts to deliver clean, affordable and secure supplies of energy.
So, plenty of things for the new Secretary of State, the industry and other stakeholders to get working on and drive forward. As a UK-listed utility, contributing almost £9bn annually to the UK economy, I look forward to working with the new team over the coming years to deliver GB energy policy in the best way possible for energy customers.