Six clear messages for UK ministers and industry leaders appear to dominate the findings of the 2018 Energy Barometer published on 19 June by the Energy Institute.
The annual ‘state of the nation’ survey, representative of professionals working across the entire UK energy system, paints a picture of progress in clean power and transport obscured by a thickening “fog of uncertainty” surrounding Brexit and policy shortcomings.
The six headline messages are:
– The “fog of uncertainty” around Brexit has intensified, despite a further year of negotiations, but possibilities for global Britain are seen on the horizon.
– Energy efficiency is seen across the board as the key to a productive economy and to cutting carbon without unnecessary cost.
– There are mixed fortunes for clean energy – renewables are surging, while key high capital projects are seen as risky business.
– Scepticism of meeting the fifth carbon budget has grown – more than 80% expect the UK to fall short, despite publication of the Clean Growth Strategy.
– Gear change on Britain’s roads – half of vehicles are expected to be low carbon even before the ban on new petrol & diesel cars in 2040.
– The benefits of workforce diversity are increasingly understood but ambivalence remains among a substantial minority, putting these benefits at risk.
Malcolm Brinded CBE FREng FEI, President of the EI, said:
“The Energy Barometer 2018 reflects the rapid pace of change in the UK energy system over the past year. With unprecedented penetration of renewable power pushing the contribution of low carbon on the grid beyond fifty percent, energy professionals rank offshore wind and solar as the least risky investments of all forms of energy production.
“But this year’s survey doesn’t allow us to say we have shaken off past uncertainties. The fog surrounding Brexit has thickened despite negotiations being a year further on. And confidence in meeting the UK’s carbon targets has worsened, despite publication by ministers of the Clean Growth Strategy. Past policy switches have created caution in many future investments.
“Answers to key questions are needed. Energy is critical to the UK’s economic prosperity and social wellbeing and must not be left to chance.”
Dr Joanne Wade OBE FEI, EI Council Member and CEO of the Association for the Conservation of Energy, said:
“The Barometer yet again ranks energy efficiency as the low risk, high return priority for building a more productive economy and cutting carbon without unnecessary cost to the consumer.
“Energy professionals anticipate a fundamental gear change on Britain’s roads, with half of vehicles expected to be low carbon before the 2040 ban on new petrol and diesel cars even comes into effect. This outpaces some previous projections and begs the question whether ministers could be more ambitious still.
“Leaders in the energy sector should heed the Barometer’s findings on diversity. Given the growing strength of evidence connecting diversity with financial performance, it is concerning to find a significant minority still ambivalent towards this agenda.”
Detail on the six headline messages that dominate the Energy Barometer 2018:
1. The “fog of uncertainty” around Brexit has intensified, despite a further year of negotiations, but possibilities for global Britain are seen on the horizon.
The most notable development identified in the Energy Barometer 2018 is the rise of Brexit from fifth to second most pressing challenge facing energy professionals in the UK, despite a further year of negotiations with Brussels. Last year’s acute concerns around skilled workforce availability and the future relationship between the UK and the EU single energy market have intensified.
Aside from this serious overarching concern, when asked about possible opportunities for the UK post-Brexit, professionals point to the ability to negotiate new trade agreements with non-EU countries, the flexibility to support new electricity generation capacity, renewable heat and transport, and greater control over UK carbon pricing policy. Professional services in energy, smart grid design and management, and renewables are singled out as potential export strengths for ‘global Britain’.
2. Energy efficiency is seen across the board as the key to a productive economy and to cutting carbon without unnecessary cost.
Right across this year’s Barometer, the findings stack up yet again to favour energy efficiency as professionals’ first port of call for the UK energy system. This applies to all groups of respondents, regardless of the particular part of the energy world they work in. Half of respondents identify energy efficiency as a priority for the UK to meet its carbon reduction targets in the most cost-effective way. And, with UK productivity 18% lower than the OECD average, progress in this area is seen as a test of success for the UK’s wider Industrial Strategy.
Although policy uncertainty overall is seen as the biggest challenge facing the energy industry, this uncertainty is seen to have the least impact on investment risk within energy efficiency. Energy efficiency policy is in any case rated one of the better performing areas, perhaps reflecting measures contained in the Government’s Clean Growth Strategy to improve efficiency in homes, commercial properties and heavy industries. That said, respondents continue to rank policies around fuel poverty and energy taxation simplification as some of the least effective, despite plans by ministers to cap energy prices and streamline energy and carbon reporting.
3. There are mixed fortunes for clean energy – renewables are surging, while key high capital projects are seen as risky business.
After a year during which renewables generated 30% of electricity for the first time and costs in solar and offshore wind continued to fall, the Barometer shines a positive light on progress in clean power. Support for renewables is seen as one of the top 3 areas where policy is having a positive impact. Similarly, the investment risk associated with offshore wind and solar is the lowest among the various forms of energy production.
The reverse story applies to some of the less proven or high upfront capital-intensive technologies that nevertheless need to be seriously considered if energy and climate goals are to be met. Investments in nuclear power, tidal power, hydrogen and carbon capture, usage and storage (CCUS) are seen as the highest risk due to policy uncertainty. CCUS continues to be seen as the most precarious, suggesting efforts by ministers to restart UK efforts in this area are yet to be seen as credible. Respondents view a stable policy framework, funding for demonstration projects and a sufficiently high carbon price as prerequisites for success in this area.
4. Scepticism of meeting the fifth carbon budget has grown – more than 80% expect the UK to fall short, despite publication of the Clean Growth Strategy.
The jury is out on the overall impact of the Government’s flagship Clean Growth Strategy. Despite its publication in October, the UK’s ability to meets the fifth carbon budget – equivalent to a cut in emissions of 57% on 1990 levels by 2032 – is now seen as less likely than a year ago. Five times as many respondents in the 2018 Barometer say they expect the UK to fall short of the target than expect us to meet it.
This reflects a lack of confidence in energy policy, which is once again ranked as the single biggest challenge facing the industry. Looking at the Clean Growth and Industrial Strategies specifically, the Barometer finds shortcomings, with half of respondents seeing them as addressing just some of the most pressing issues in energy, and 1 in 10 seeing them as not addressing their priorities. A third of respondents are not sufficiently aware of what the strategies include, suggesting more work is needed by ministers to bring them to fruition and communicate them.
5. Gear change on Britain’s roads – half of vehicles are expected to be low carbon even before the ban on new petrol & diesel cars in 2040.
Government policy supporting the development of low carbon transport ranks number one in terms of effectiveness in the 2018 Barometer. Energy professionals are confident that major changes in road transport fuels are closer than some previous projections have suggested. Half of the vehicles on the road are expected to be low carbon – even before the UK Government’s proposed 2040 ban on new petrol and diesel cars comes into effect. Breaking with more than a century of automotive convention, electricity, hydrogen and biofuels will, according to UK energy professionals, take over as the majority share of the road fuel mix.
The UK Government has yet to set out the detail of its policy for 2040 and beyond, but the Committee on Climate Change’s recent report to Parliament has said the UK will need to reach near zero emissions from road transport by 2050.
6. The benefits of workforce diversity are increasingly understood but ambivalence remains among a substantial minority, putting these benefits at risk.
The benefits of a diverse workforce are understood by most respondents, with two thirds believing a diverse workforce is very or somewhat important for their company’s or sector’s future success. This rises to more than three quarters among younger professionals in the first 5 years of their careers. The top 3 benefits identified are an increase in skills and capabilities, the introduction of a wider perspective and an increase in the ability to attract and retain staff. This supports recent findings from McKinsey that companies with the most gender diverse leadership teams are 21% more likely to experience above-average profitability than their less diverse competitors.
However, 1 in 10 respondents to the Barometer survey continue to see diversity as unimportant and a further 16% are ambivalent. Furthermore, 30% of respondents do not believe there are any obstacles to diversity in their company or sector. This is hard to reconcile with the recently published findings from the POWERful Women initiative that women account for only 13% of boardroom positions in the top 80 UK energy companies – and half of those boards have no women on them at all.
