Earlier this year, the government announced plans to ‘Build Back Better’ from the Covid-19 pandemic, announcing a number of new initiatives to support a green recovery. In addition, the long-awaited Energy White Paper is due to be published imminently, which is designed to update energy policy and help set a road map to net zero.
But what can businesses expect?
We put your questions to Arjan Geveke, Assistant Director of Energy Policy at the Department for Business, Energy and Industrial Strategy, and we got his views on what businesses need to do to help deliver net zero by 2050.
Q: Will the Energy White Paper be published this month, and what has caused the delay? And, what can businesses expect to see?
AG: It’s probably useful if I start with a bit of background on where the Energy White Paper has come from and what it has gone through to get to where we are now.
It goes back to where a predecessor to our current Secretary of State, Greg Clarke, gave a speech about the energy trilemma in response to the Cost of Energy Review by Dieter Helm committing to publishing an Energy White Paper.
However, since then, we’ve had changes in government, elections and two Secretary of States, so all of that has delayed the timetable that Greg Clark wanted to set out.
The other reason it’s been delayed is because of the Covid-19 pandemic, and the impact the pandemic has had on the electricity system - not so much the gas system but particularly the electricity system. It almost has given us an insight on how the electricity system might work in the future, and how we might cope with that.
So, we needed to assess and review that, and update the draft accordingly.
It’s certainly still the aim to publish at the end of this month and set out a path to net zero, although it is difficult to look that far ahead. We will try and give investment certainty up to a point so that we can kickstart the economy again after the second lockdown.
Q: In our recent report, ‘Your Business Blueprint - The road to Net Zero’, businesses told us they needed clarity on where best to focus and invest in sustainability measures. Will we see some clarity on technologies?
AG: We will definitely get more clarity on that, but businesses need to lower their expectations slightly - they will probably not get the absolute clarity they are looking for.
Several things remain uncertain - the technologies needed for decarbonisation, consumer behaviour response and the impact of innovation.
Going back to the speech by Greg Clark, the emphasis is on ‘no regrets’ technologies - basically technologies that the government needs to support under any scenario that leads us to net zero.
So that’s what the Energy White Paper is going to set out. Whether that gives the clarity to business - in terms of what they expect, probably not, but, it will certainly give more of an indication of what the government expects and where we are heading by giving more certainty around where initial investment is going.
Q: What other policy announcements can businesses expect to see to aid their sustainability plans?
AG: Well, there are two other things that I am involved in - first is the Spending Review. Due to the impact of Covid-19, it’s not a three-year process this year, it will more or less be a one-year Spending Review, but it will go into policies as well.
Secondly, it’s very likely that alongside the Spending Review, or very shortly after that, that the Treasury will publish its interim Net Zero Review, with a final report published in the Spring.
We’re also working on the Industrial Decarbonisation Strategy, and that has links to CCUS, hydrogen, as well as industrial energy efficiency, for example, around decarbonising industrial clusters. That’s due to be published in Spring as well.
And, there are further strategies coming up on building and biomass. Ultimately they’ll all lead towards the Net Zero Strategy before COP26.
Q: When we spoke to businesses in our recent report, they raised concerns about the potential economic impact of funding the low-carbon transition on their business. Will this be addressed in the Energy White Paper or interim Net Zero Review?
AG: As with the Energy White Paper, probably not to the extent that some businesses expect but it (the interim Net Zero Review) will set out the context and the economics and the assessment of where current costs fall.
The question on who should actually pay for decarbonisation - whether it’s consumers or business - is likely to be set out in the final report next year.
Q: Has the Covid-19 pandemic had an impact on the content of the Energy White Paper?
AG: We have done various modelling internally on the various scenarios to see what impact this might have on zero carbon.
What we’ve had to do was look at the impact of much lower electricity consumption, so particularly the lower energy consumption from businesses and industry because of the pandemic. And, with the same kind of generation capacity and with wind coming on, looking at what kind of long term effect it will have on the operation of the system.
Q: Does net zero and sustainability present an opportunity for businesses to gain a competitive advantage?
AG: Yes, although with every new technology there are certain issues, and that, such as with CCUS and hydrogen, is where the government needs to accept some of the risk.
But, there is plenty of opportunity in energy efficiency to lower the cost base and therefore become more competitive.
With new technologies, if companies are already leading in areas such as digitalisation, they probably have an opportunity, although I tend to be a bit careful around any new technology providing an advantage.
There’s a first mover advantage but there’s also a second mover advantage - the second mover can learn from the mistakes of the first mover and can therefore improve its function and outperform the first mover. It’s all about learning about the new technology and the application of the new technology and finding a business model on it that’s competitive.
One other thing of note - all our modelling shows that the carbon price will go up over the years up to 2050. So this is another factor to take into account - this is going to happen.
Q: How can businesses, government and other stakeholders work better together to deliver net zero?
AG: Difficult question and I don’t think we’ve cracked that nut yet, but it is partially about us in government understanding commercial considerations and continuing to prove how policy must back business and business decisions.
But, businesses must also take action - a lot of companies already do. They look at what they can do themselves to decarbonise, what investments they need to make, potentially be less risk-averse, and put in a more long-term approach.
One thing that I do want to raise - I think the Chancellor flagged up as well - is that climate finance reporting will become mandatory in the future. That will be important for banks and other investors when taking into account how they will lend to companies.
That’s going to be an increasingly important driver and you can see big multinationals slowly but certainly reacting to that. And that’s not only the kind of strategy that big multinationals need to think about, but also mid-sized companies as well as smaller companies.
Q: How can businesses get more involved in shaping policy, making sure their voices are heard?
AG: Keep talking to us, and provide us with information that is useful for policy making. That’s the very simple answer!
If you’d like to find out more about the Energy White Paper, or the help and support we can offer on your decarbonisation journey, please Get in touch or contact your Client Lead if you’re an existing customer.