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Q&A on Industrial Strategy White Paper

Maria Connolly, head of energy and renewables at TLT, says the focus on ‘clean growth’ should see renewable
and flexible technologies becoming the ‘backbone of the modern energy system’.

This interview was first published on Lexis®PSL 'energy analysis' on 14/12/17. Maria Connolly was interviewed by Grania Langdon-Down.

The Business Secretary Greg Clark has released the government's ‘ambitious’ Industrial Strategy White Paper for the UK, containing the Prime Minister’s plans to ‘boost the country’s economy, build on its strengths and embrace the opportunities of technological change’. The Industrial Strategy challenge fund will invest £725m into new challenge fund programmes. However, industry leaders are reminding the government it must move quickly with the strategy, with Confederation of British Industry (CBI) director general Carolyn Fairbairn stating, ‘the announcement must be the beginning of a strategic race, not a tactical sprint’.

Looking at the Industrial Strategy White Paper, how do you see the overall outlook for UK renewables (electricity) across onshore and offshore technologies?

Clean growth plays an important part in the UK's industrial strategy, and clean technologies such as solar, on-shore wind and energy storage are set to become the backbone of the modern energy system. The sector has undergone a period of intensive change following the end of renewable subsidies, and the White Paper provides further impetus for growth.

We are already seeing a new wave of energy storage projects including those used for grid balancing, behind-the-meter and on a co-located basis, and the first large-scale subsidy-free solar projects are being scoped out. This is an exciting time for the sector and it will be interesting to see how clean energy can help power the UK's industrial growth moving forwards.

There is no doubt that off-shore wind and tidal energy can play an important role in developing a carbon neutral infrastructure that will support industrial growth. However, the issues around planning, funding and for tidal energy, technology, remain the same. That said, as the costs for developing these projects come down, we will see less risk adverse investors looking to take an investment stake, often as part of a consortium. In addition, as more projects become operational, we would hope that the concerns around planning and environmental impact lessen.

What is your prognosis for renewable heat projects in the coming months or years?

With local smart energy systems singled out as a priority for development in the industrial strategy, we would expect to see an uplift in the number of renewable heat projects–particularly when you couple this with the announcement in the Budget that the government wants to encourage the building of 300,000 homes a year.

There is already a huge amount of interest among social housing providers and private developers to create new developments that put energy use back in the hands of consumers and generate, store and distribute energy at a neighbourhood level. Nottingham's Trent Basin development is currently setting the trend, but community energy hubs that combine technologies including renewable heat, storage and solar to create a new way of generating and supplying heat and electricity to homes will become the norm over the coming years.

What do you see as the short/medium-term consequences of the government’s focus on ultra-low emission vehicles and charging infrastructure in the White Paper?

Electric vehicles and charging infrastructure have become an increasingly hot topic over the last couple of months. The roll-out of electric taxis in London from 1 January 2018, which is likely to be followed by other major cities in the UK, has already drawn interest from investors.

In addition, behind-the-meter models that combine storage, solar and EV charging stations are garnering interest from high users of energy, because they present an opportunity to create their own socially responsible infrastructures. These could also provide future benefits through the provision of discounted charging rates to employees, or on a consumer scale, their retail customers.

At the moment, these schemes may look good on paper but are probably some way off becoming a reality. The delivery model will need some further consideration before more developers are ready to go to market with a solution.

However, the focus on innovation in electric vehicles and associated charging infrastructures means that it may be years rather than decades before our traditional petrol stations are replaced with EV charging stations-and before you drive to your workplace, which is itself powered by solar energy and storage, and plug in your electric vehicle to charge.

Do these tie in with other recent announcements in this area?

This year has seen the government make a considerable push to ensure that the UK has a carbon neutral future. We have had the announcement of £246m investment in battery technology to help power the country's industrial strategy, and the allocation of £500m to encourage motorists to buy an electric car and help improve associated electric vehicle infrastructure.

The White Paper has reinforced this message by placing clean growth among the four ‘grand challenges’ that the government is aiming to solve. The strategy also describes decarbonisation as one of the ‘greatest industrial opportunities of our time’, and discusses the government's intention to ensure that the UK is at the forefront of it.

These are all positive messages, and will help drive continued growth in the clean energy sector.

Do you expect to see a growth or focus on any other energy sector project type(s) or sub-sectors in the medium term?

The industrial strategy doesn't make many specific energy-related commitments. But that may be because the government has already published its Clean Growth Strategy, which outlines these policies in more detail. It does however discuss the need to remodel the current electrical infrastructure so that it can cope more easily with the different kinds of renewable generation that are coming on-stream.

This is likely to lead to further deployment of energy storage as a grid balancing mechanism, the establishment of local, smart energy grids and more pressure on large scale energy users to reduce their impact on the grid.

The move to take large-scale energy users off the grid may be the boost that the behind-the-meter market is waiting for. What is, at the moment, for many a watching brief will become a need to act, especially when businesses who rely on the lights staying on consistently realise the benefits that having their own energy generation systems can bring.

From an energy sector perspective, what else stood out for you from the Industrial Strategy White Paper?

The government's intention to embrace new technologies and the role that these technologies can play in enhancing the storage of electricity and enabling demand management, will continue to drive forward research into energy innovation projects. Energy storage will in turn drive down cost and see commercial batteries become smaller and more efficient.

The commitment to implement a Smart Systems and Flexibility Plan (Plan) in full by 2022 stood out as a key differentiator. The Plan will use smart meters to enable a more flexible approach to energy. This commitment is particularly interesting given the call from energy companies to relax the roll-out programme to save costs, and sends the sector the message that the government is committed to its wider clean growth strategy

What else is in the pipeline affecting the renewables and energy sector?

National Grid's plans to reform the grid balancing services market has seen a slowdown in certain parts of the market, as some developers look to reduce their exposure. However, this is likely to be a pause as the market re-evaluates, rather than a significant downturn.

Alongside this, we are seeing further engagement in the areas of co-location, behind-the-meter, whereby energy storage is combined with solar, carports and EV charging, and large scale solar+storage subsidy-free models.

Ofgem's indication that co-locating storage with an existing project, where a grid connection is shared, will not affect existing subsidies has opened up a potential new market for storage, and an opportunity for developers to maximise the returns from their existing projects.

We are also seeing developers looking to storage and variations to existing leases that allow for the addition of storage. Extending the lease beyond the traditional 30-year term is becoming increasingly common.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at December 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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