Regional devolution can create the conditions for a shift in how gas and electricity are distributed, with the right helpby Frances Cairncross / February 3, 2016 / Leave a comment
The north of England grew wealthy in the 19th and early 20th Century on the back of local supplies of energy, in the form of coal. Northumberland and Durham were the heart of England’s energy supply, and by 1919 almost a quarter of a million people worked in the mines of the northeast. Indeed, coal from deep mines was Britain’s main energy supply right up until the 1960s. Now the mines are gone, and over the past half century the northeast has begun to reinvent itself. As part of Prospect’s work on regional devolution, a group assembled to discuss how far new sources of energy and techniques of energy provision could be part of that reinvention.
The group benefited from the presence of David Gill from Northern Gas Networks (NGN) and Jim Cardwell from Northern Powergrid (NP), the two companies that between them operate the region’s gas and electricity networks. Both are eager to find ways to build on the opportunities that devolution may offer: for instance, NGN is one of the first gas networks to use only local contractors to service gas mains. But both also need government support to achieve the full potential of some of their ambitions, such as the Northern Gas H21 project to make the city of Leeds carbon-neutral, fuelled entirely by hydrogen for power and domestic heating.
The group also included Ed Davey, who until the last election was Secretary of State for Energy and Climate Change. He deplored the government’s decisions to cut back funding for renewables and for carbon capture and storage, arguing that both were bad news for the vaunted Northern Powerhouse. The North, he argued, had the potential to become a hub for offshore wind energy, which had huge potential for cost reduction. But its potential and the scope for cost-cutting innovation were completely misunderstood by the Treasury. And the decision to cut funding for research on carbon capture and storage was equally short-sighted, given the scope for undersea storage. But the development of shale could offer other opportunities, including the potential for developing geothermal energy to create renewable heat.
But which areas of energy policy should be the focus of devolution? Transport was difficult and so was power, but heating has to be local, argued David Hirst, Chair for the ICE Regional board in Yorkshire and the Humber. Local heat schemes are already on the drawing board. The tricky issue is to create the right regulatory framework, which would allow consumers some control over the heat they received, while at the same time building efficient distribution networks. Get it wrong, and people open windows to cool their homes, wasting the energy that the network is trying to save.
To make the most of devolution, argued Lord O’Neill, a former Shadow Energy Minister, the big energy suppliers would have to stop thinking like monopolies. The majority of their domestic customers had been with them since before nationalisation. The “monopoly mindset” would always make it hard for them truly to cooperate with local governments and communities.
If renewables continue to develop in spite of cuts in government support, might they offer one opportunity for developing energy supply? One participant pointed out that consumers who went partly “off grid” didn’t really save energy providers money—most still wanted a back-up connection to the grid. Madeline Cuff from BusinessGreen drew attention to a grassroots price localisation experiment in the region of Wadebridge, Cornwall, with “sunshine tariffs” which would incentivise the consumption of solar power at the time it is generated, rather than trying to export it to the grid. Professor Michael Grubb argued that experiments with renewable energy should dovetail well with regional agendas, because generation from renewable sources was geographically dispersed and therefore widely available in the regions. Devolving energy supplies, however, would require regional network operators to become regional system operators, and to play an active role in balancing and optimising local generation, much as the National Grid currently does on a national level.
Since the discussion coincided with the Committee Stage of the Energy Bill in Parliament, which (among other things) reduces subsidies for renewable energy, there was inevitably some scepticism about the potential to make the northeast a successful hub for developing renewables. The danger was that the future focus would be on gas and nuclear energy. That could still mean jobs—and Lord O’Neill drew attention to the job potential of decommissioning nuclear power plants.
Devolution, in short, does not fit comfortably with the traditional pattern of energy supply. To change that will require a change in approach by energy companies, and by central government. But some aspects of energy supply—such as the national grid—will continue to work best precisely because they are national and not regional. It may be that, as the economics of renewables continue to improve, wind and solar become appropriate ways to build and strengthen local power supplies. But devolution in power supply, it was clear from the discussion, has a long way to go, and will be limited by the need for security which consumers will always prize.
This roundtable discussion took place at Prospect’s offices in St James’s Park on 28th January 2016, and forms part of Prospect’s wider work on regional devolution and the future of the UK’s cities. For more information, or to find out about the work of Northern Gas Networks and Northern Powergrid, please email email@example.com