Long wait for answers to keep lights on after Brexit
THE CHANCELLOR has been clear about his priority for Brexit negotiations: the economy and business should to be front and centre of discussions.
His view is to get a deal that creates certainty and confidence in companies and sectors across the country; maintaining investment and protecting jobs in readiness for a post-Brexit world of trade. Investment in the UK’s power system is an important part of this.
We now need Philip Hammond and ministers in the Department for Business, Energy & Industrial Strategy to be clear on the policies that companies will operate under, especially in those sectors, including energy, where planning for the very long term is crucial. This is what will help business and industry make the investment decisions needed to support post-Brexit Britain.
And there are plenty of companies across a number of sectors that would be ready to push the button on investment when government gives the signal.
Transport for the North has announced a new 30-year, £1bn strategy, to deliver 850,000 jobs and £100bn in GVA to the UK economy by 2050. Lord Adonis, chair of the National Infrastructure Commission, set out 12 priorities requiring infrastructure decisions, including transport, energy, broadband and flood defence.
On the issues of smart energy systems, support for renewable energy and a strategy for decarbonisation of energy, Lord Adonis says the government should publish its plans for all of these no later than October 2017 – three months away.
In the energy sector, we don’t know yet what will replace the Levy Control Framework – this was the mechanism the previous government used to control the costs of subsidies for low-carbon power.
We also need a commitment to retain the Carbon Price Floor beyond 2020 to further stimulate continued investment in clean energy, as well as more clarity around the criteria for future Contracts for Difference (CfD) – the contracts given to renewable power projects.
Policy certainty on these three essential matters will give companies the green light to continue decarbonising and investing in renewables – without which it is difficult to see how we will get coal off the system by the Government’s deadline of 2025.
In driving forward with low-carbon power generation, we must also address how best to maintain security of supply and balance the energy system so the grid can operate at optimum performance and cost efficiency as more intermittent renewables come online.
System support is going to be vital as coal plants close, old nuclear comes to an end and we see the rise of solar and wind.
The way our energy is produced is changing dramatically – renewables records are being broken regularly. This is great news for reducing emissions, but it is increasingly apparent that producing electricity and counting the amount of megawatts generated is not enough.
National Grid is currently consulting industry on the best approach and options to deliver system stability. Drax is ideally positioned, using our biomass and remaining coal units, to provide flexibility, to turn up or down to manage changing demand as the amount of power from solar and wind fluctuates.
Drax has a solid track record of delivering jobs and prosperity with an effective policy framework in place to encourage investment. In 2015 researchers at Oxford Economics revealed that our biomass upgrades contributed £245m to the Northern Powerhouse economy and supported some 4,200 jobs in the region, half of these in construction, manufacturing and transport.
As a member of Northern Powerhouse Partners Programme (NPPP), we are focused on helping deliver a private sector-led solution to issues like infrastructure, skills and innovation.
I, too, have been working with businesses to look at energy innovation and the policy landscape as part of Drax’s board-level involvement in the Northern Powerhouse Partnership chaired by George Osborne, which is set to release its second report this autumn. The NPP has identified energy as one of four primary capabilities where the region can become a world leader, exploiting our expertise and building growth in the UK and internationally.
For its part in this, Drax leads the world in biomass technology and with the right conditions we stand ready to convert more of our coal units and produce more reliable, renewable power for the UK’s homes and businesses.
Now is the time to grasp the opportunity to develop the energy infrastructure needed for post-Brexit Britain, so we are decarbonising our economy with flexible power that maintains system security and stability.
This will be vital in improving our prosperity and creating thousands of highly skilled jobs, but for that to happen we need the Government to give us the ground rules now.