What next for energy after the General Election? A Cicero Group overview - December 2019

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What next for energy after the General Election? Cicero Group | December 2019

In this election of contrasts, you could be forgiven for thinking there is a clear dividing line between the two main parties when it comes to energy policy. Yet there is a remarkable amount of agreement amongst Labour and the Conservatives on the problems facing the sector and on some of the solutions too. While the date for meeting Net Zero emissions jumps around from Labour’s ambition of 2030 to the current Government target of 2050, there is broad agreement on the need for measures to improve the energy efficiency of homes, introduce a zero-carbon homes standard for all new homes and ban fracking. Both parties back nuclear and in varying degrees back an energy price cap. For both the Conservatives and Labour, their core message on energy is one of change. Although there is this consensus, nationalisation remains the key sticking point between the parties.

Energy priorities: Conservatives: Commitment to reaching Net Zero by 2050 but greater campaign focus on the NHS, police and infrastructure Labour: Position as a ‘climate election’, putting their ‘Green Industrial Revolution’ near the centre of their campaign Liberal Democrats: ‘Tackle the climate emergency’ is their second key policy after ‘Stop Brexit’ ciceroelections.com

Differing ambitions Across the political spectrum, energy policy ambitions differ considerably. Labour’s ‘warm homes for all’ policy to insulate almost all of the UK’s 27 million homes by 2030, will cost £250 billion over 10 years. Yet the Conservatives have pledged just a £9.2 billion investment in the energy efficiency of homes, schools and hospitals. Labour is also ahead on low carbon building regulations and they will introduce a new zero-carbon homes standard for all new builds from 2022. This is three years before the Government’s Future Homes standard is due to commence. What about the cost to the Consumer? Both the Conservatives and Labour, in principle, support an energy price cap. While the Conservatives have outsourced setting the cap to Ofgem, Labour have long argued for an energy price cap of £1,000 for annual bills (although not in their manifesto). Cicero Group | 1


What next for energy after the General Election?

Labour’s top three energy policies:

The Conservatives’ top three energy policies:

1

Net Zero in the 2030’s

1

Net Zero by 2050

2

Energy Grid Nationalisation

2

Maintain the energy price cap

3

£250bn for energy efficiency improvements

3

A moratorium on fracking in England

Renewables are given considerable focus by Labour. They have pledged 7,000 new offshore wind turbines: 2,000 new onshore wind turbines and enough solar panels to cover 22,000 football pitches. Labour would also deliver renewable projects like the Swansea Tidal Lagoon – a project rejected by the last Conservative Government. In contrast, the Conservatives have pledged a target for offshore wind to reach 40GW by 2030 and have rebuffed calls to drop the effective ban on new onshore wind implemented by the Cameron Government.

Let’s talk about Nationalisation... The main point of contention between Labour and the Conservatives is nationalisation. Labour have restated their policy of nationalising energy networks and included bringing the supply arms of the Big Six energy companies into public ownership. Interestingly, Labour has refrained from nationalising the Big Six entirely, which was a policy passed by delegates at the annual Labour conference in September. This has already caused grave concern for investors and the owners of the grid. Some have already sought to move holding companies abroad in the event of a Corbyn Government. This is to rely on Bilateral Investment Treaties, which the UK has with 90 other countries, which are designed to protect investors from state interference and unfair expropriation. Although giving them some protection from belowmarket-price compensation, these treaty protections might be lost were it successfully argued that investors had restructured purely to thwart a foreseeable Government intervention.

Energy in a hung Parliament With a hung Parliament a possibility and Labour likely requiring support from minor parties to secure a working majority, there are several points of agreement and disagreement on energy policy that are worth noting:

How will Labour nationalise the energy sector? Under Labour, we would see a new UK National Energy Agency that will own and maintain the national grid infrastructure and oversee the delivery of decarbonisation targets It will then be split into 14 new Regional Energy Agencies that will replace the existing district network operators and hold statutory responsibility for decarbonising electricity and heat and reducing fuel poverty

Net Zero: The Liberal Democrats and SNP have broadly similar targets to Labour for the proportion of renewable electricity to be generated by 2030. The SNP, however, have a less ambitious overall target at 2045.

Energy efficiency: Both the SNP and the Lib Dems have equally ambitious plans for energy efficiency and low carbon heating. The SNP want to have all new homes using renewable or low carbon heat by 2024 and reduce VAT on energy efficiency improvements in homes. The Liberal Democrats are calling for insulation of all Britain’s homes by 2030, prioritising bringing the poorest 3.5 million households out of fuel poverty by 2025.

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What next for energy after the General Election?

Nuclear: Nuclear would be a significant sticking point for the SNP given their opposition to nuclear power, however, that would not theoretically stop Labour’s plans for a new nuclear site for Wylfa in Wales.

X

Nationalisation: The Liberal Democrats’ manifesto describes Labour’s nationalisation plans as “enormously disruptive, ruinously costly” and “pointless”. While the SNP wants to create a public non-profit energy company for Scotland, it has never advocated for the nationalisation of energy networks. It is therefore unclear whether they would be prepared to support UK-wide nationalisation of the energy grid.

So what next for energy? Regardless of who is in power, the energy sector can bank on some certainty outside of nationalisation. The key question for the energy industry will be how we get there. The ambition of Labour could be welcomed by some but will worry investors due to the nationalisation agenda and heavy state involvement in renewable projects. While the Conservatives recognise many of the same problems, there is less of a ‘grand plan’ on how to deal with them. As such, the Conservative manifesto does not provide much of a roadmap for the energy industry. While there may be some agreement to the problems that need to be addressed by the Government in the energy space, industry might not like all of the answers on offer from the parties.

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What next for energy after the General Election?

Policies in comparison CONSERVATIVES

Net Zero

Net Zero carbon emissions by 2050

LABOUR Put the UK on track for a Net Zero carbon energy system within the 2030s – and go faster if credible pathways can be found Deliver nearly 90% of electricity and 50% of heat from renewable and low-carbon sources by 2030

Energy Price Cap

Energy Efficiency

Maintain current energy price cap

Lower energy bills by investing £9.2 billion in the energy efficiency of homes, schools and hospitals

LIBERAL DEMOCRATS

Generate 80% of electricity from renewables by 2030

SCOTTISH NATIONAL PARTY Targets of a 75% reduction in emissions by 2030 and Net Zero emissions by 2045 Call for 12% of Net Zero Fund to be placed in a Net Zero Industrial Strategy to diversify areas impacted by energy transition

Price cap of £1,000 for annual dual fuel bill

No mention

Consider new legislation to cap the most expensive energy tariffs

Introduce a new zero-carbon homes standard for all new homes

Free retrofits for low-income homes to reduce emissions and piloting of an energy-saving homes scheme

Reduce VAT on energy efficiency improvements in homes

Upgrade almost all the UK’s 27 million homes to the highest energy-efficiency standards, reducing the average household energy bill by £417 per household per year by 2030 and eliminating fuel poverty

An emergency programme to insulate all homes by 2030, prioritising bringing 3.5 million households out of fuel poverty by 2025

Invest £6 billion in retrofitting houses across Scotland

Increase minimum energy efficiency standards in privately rented properties

Reform UK tax system to support greener choices, including a tax deal for energy efficiency improvements in homes and businesses

Renationalise the energy grid and create:

• A new UK National Energy Nationalisation

No mention but oppose nationalisation

Agency that will own and maintain the national grid infrastructure and oversee the delivery of decarbonisation targets;

Describes Labour’s nationalisation plans as “enormously disruptive, ruinously costly” and “pointless”

Supports the creation of a publicly owned energy company but not nationalising the energy grid

Cont. overleaf ciceroelections.com

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What next for energy after the General Election?

CONSERVATIVES

LABOUR

LIBERAL DEMOCRATS

SCOTTISH NATIONAL PARTY

No mention

No mention

No mention

Oppose building new nuclear power plants, while prioritising investment on cleaner, cheaper forms of electricity generation

Support innovation in zeroemission technologies, including batteries and hydrogen fuel cells, supplementing Government funding with a new Clean Air Fund from industry

Press the UK to accelerate action to decarbonise the gas grid

• 14 new Regional Energy

Agencies that will replace the existing district network operators and hold statutory responsibility for decarbonising electricity and heat and reducing fuel poverty

Nationalisation cont.

Workers

Nuclear

Renewables

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Bring the supply arms of the Big Six energy companies into public ownership where they will continue to supply households with energy while helping them to reduce their energy demands Deliver 2 million new high-quality jobs in the “clean growth industry”

Support nuclear energy, including fusion, as an “important part of the energy system”

A target for offshore wind to reach 40GW by 2030

Support energy workers through transition and guarantee them retraining and a new, unionised job on equivalent terms and conditions Supports new nuclear power needed for energy security Deliver the Wylfa project and maximise its potential for new nuclear energy Build: • 7,000 new offshore wind turbines; • 2,000 new onshore wind turbines; • Enough solar panels to cover 22,000 football pitches

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What next for energy after the General Election?

CONSERVATIVES

LABOUR

LIBERAL DEMOCRATS

SCOTTISH NATIONAL PARTY

Trial and expand tidal energy and invest to reduce the costs of renewable and low-carbon hydrogen production

Support investment and innovation in cutting-edge energy technologies, including tidal and wave power, energy storage, demand response, smart grids and hydrogen

Propose a Green Energy Deal to provide long-term certainty to renewable energy schemes, supporting investment

Expand community and decentralised energy, support councils to develop local electricity generation and require all new homes to be fitted with solar panels

Press the UK to support the renewables industry or devolve powers to Scotland

Renewables cont. Create jobs in Wales through environmental energy schemes such as the Swansea Bay tidal lagoon project

Reform UK support for renewables to ensure wider economic considerations, such as supply chain benefits, are taken into account Require all news homes and nondomestic buildings to have a zerocarbon standard where as much renewable energy is generated on-site

Allow onshore wind and solar power to bid for the UK Government’s renewables support mechanism ‘Contracts for Difference’ Deliver a wave and tidal energy industrial strategy Scrap plans to quadruple VAT on home solar power

Low Carbon Heating

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Support gas for hydrogen production as an important part of the energy system”

Roll out technologies like heat pumps, solar hot water and hydrogen, and invest in district heat networks using waste heat as part of heat decarbonisation strategy

Adopt a Zero-Carbon Heat Strategy, including reforming the Renewable Heat Incentive, requiring the phased installation of heat pumps in homes and businesses of the gas grid, and piloting projects to determine the best future mix of zero-carbon heating solutions

Ensure all new homes use renewable or low carbon heat by 2024

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What next for energy after the General Election?

Carbon Capture and Storage

Fracking

Oil and Gas

CONSERVATIVES

LABOUR

LIBERAL DEMOCRATS

SCOTTISH NATIONAL PARTY

Invest £800 million to build the first fully deployed carbon capture storage cluster by the mid-2020s

Establish a Foundation Industries Sector Council to provide a clean and long-term future for our existing heavy industries like steel and glass and fund R&D into newer technologies like hydrogen and carbon capture and storage

Reduce emissions from industrial processes by supporting carbon capture and storage and new lowcarbon processes for cement and steel production

Scotland to be a leader in the development of Carbon Capture and Storage technology

A ban on fracking ‘for good’

The Scottish Government will not issue licences for new unconventional oil and gas development, and that Scotland’s planning framework will not support development using unconventional oil and gas extraction techniques

No mention

Demand ring-fencing of oil and gas receipts to create a Net Zero Fund to invest in the energy transition

A moratorium on fracking in England with immediate effect

Bring forward a new Oil and Gas Sector deal in the next Parliament

Immediately and permanently ban fracking

Introduce a windfall tax on oil companies Provide a strategy to safeguard the people, jobs and skills that depend on the offshore oil and gas industry

Get in touch... If you would like to speak to us about this document or how we can support your organisation, please do contact one of our energy specialists: Sara Price Account Director Sara.Price@cicero-group.com +44 (0)20 7343 1601

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Matthew Dunn Senior Account Executive Matthew.Dunn@cicero-group.com +44 (0)20 7947 5314

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