By Keith Anderson, ScottishPower CEO
Our CEO, Keith Anderson, opened the Frontier Energy 2050 Summit by discussing the need to unlock growth and move faster in the renewable energy industry and why we need to stay focused in this energy transition.
We’re at that point in the year where people’s attention turns to reflecting on the progress that’s been made over the last 12 months.
In the energy sector, you could be forgiven for thinking 2022 has been less about moving forward and more about being stalled. Or worse, steps that seem to take us backwards.
In retrospect, this time last year was probably the closest we’ll get to Peak Net Zero for some time to come. The public remains concerned about the climate change crisis, but for many, the desperation of our cost-of-living crisis is a much more immediate source of anxiety.
Last week, we heard from the Chancellor on how the Government plans to tackle recession and the cost-of-living crisis. I welcome the measures the Chancellor set out to support customers, particularly the most vulnerable, and his reference to moving over time to a system that embeds fairness and affordability, through a type of social tariff which we have long argued for.
That being said, we need to be careful about the unintended impacts of some of those choices on the energy transition. That’s why, as the first UK integrated energy company to go 100% green we were deeply disappointed that low-carbon assets were singled out for a windfall tax to help plug the fiscal gap.
The way I see it, in times of national crisis everyone should play their part. Yet there are contradictory messages in the Autumn Statement about who should put money into the pot. The polluter pays principle certainly doesn’t seem to apply. It seems this is a recession made by gas but a recovery to be paid for by renewables.
Some renewables assets are to be taxed at similar levels to oil and gas – and those oil and gas businesses are being given added financial incentives to invest in even more fossil fuels. At the same time, money has been left on the table with gas generators left out of the policy despite making huge profits even after you factor in their high fuel costs. Spark spreads are at decade-long highs. But apparently, it’s a reach too far to apply the tax to CCGT in the same way as to wind turbines and solar panels.
There will be no knee-jerk reaction from us warning on investment - for all the reasons I set out above about the need to be pragmatic and do our bit. But the lack of a level playing field and the duration of the planned tax will inevitably cause investors to ask more searching questions about the future regulatory environment.
The simple truth is that renewable power is the cheapest form of generation and in an affordability crisis you want to be encouraging companies to build more of it and faster. And you want to be encouraging investment in low carbon resources up and down the country.
As a business leader you need to see through the short-term noise and hold on to the longer-term signal: we know we will need to electrify the hell out of everything over the course of the next two decades. Electricity demand is set to double by 2040, renewable generation will need to multiply by five or six times, and we will need massive investment in networks to make this all possible and facilitate the shift to electric transport.
The future is coming faster than you think. And the quicker that governments and regulators – not just in the UK, but across the world – recognise they need to go beyond eye-catching targets and actually put the hard yards in to speed up planning and introduce frameworks to make all this happen, the better. It can’t come a moment too soon.