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Energising our way to a recovery: How have priorities in the energy sector been impacted by COVID-19?

Words by:
Account Director
April 24, 2020

In recent weeks, the outlook has changed for every sector of the UK economy and energy is no exception. WA takes a look at how government and Ofgem have responded to the COVID-19 crisis, whether their priorities have changed and the emerging opportunities for businesses in the energy sector.

Where are we now?

April should have been the month that the government sold us their vision for the energy sector, yet they have been forced to postpone the release of their White Paper to focus efforts on ensuring consumers are protected during the ongoing pandemic. Similarly, Ofgem should have been actioning its work programme, but they are now working with companies to keep essential services running.

The challenges faced by the government and regulators are profound, but that does not mean that pre-COVID-19 pledges will simply fall by the wayside. Instead, they are even more important to securing the UK’s economic recovery. At some point in the near future, the government’s focus will shift towards rebuilding lost momentum. Companies should prepare to take the opportunity to shape the energy sector’s future policy environment.

COVID-19 shouldn’t be an excuse for failure by energy companies, says regulator

During a recent Utility Week webinar, Ofgem Chief Executive Jonathan Brearley stated that COVID-19 should not be used by energy companies as an excuse for failure. In particular, Brearley noted the energy sector was too timid in how it supported consumers during the financial crash in 2008, and now is not the time to repeat similar failings. The regulator is going full steam ahead with its plans to decarbonise the economy and will be delivering the new RIIO-ED2 framework as planned, though this will be reassessed if the outlook worsens. Overall, Ofgem is being pragmatic and trusting companies to do the right thing by their customers, and it’s clear they see the road to net-zero as a fundamental step towards securing the UK’s economic recovery.

In the weeks ahead, Ofgem will be reviewing its work programme in light of COVID-19. This is an opportunity for the sector to re-engage with the regulator and demonstrate what support is needed to help businesses impacted by the virus and fulfil the regulator’s plans.

Fresh ideas and a new Chair for the BEIS Committee

Keir Starmer’s appointment of Rachel Reeves as the new Shadow Chancellor of the Duty of Lancaster means the chairmanship of the BEIS Committee is vacant.

As Labour MPs compete for the role, the Committee is inviting comments on issues it should investigate over the course of this Parliament. At such an important time in our country’s history, the Committee will be looking at suggestions beyond the response to COVID-19, which will be covered by a myriad of inquiries. Instead, they will be looking to the sector to offer insights into business areas the UK needs to strengthen if it is to thrive in the new digital, carbon-neutral age.

Energy White Paper will return

We understand that the Energy White Paper, which has already been delayed on several occasions, will be delayed further as a result of the ongoing response to COVID-19.

While this is frustrating, as it will provide crucial insight into the government’s policy direction on the retail market and reaching net-zero, this presents an opportunity to influence and feed into a document which is further away from completion than widely thought. With much of the country confined to their homes, now more than ever the government will be looking to industry for answers. For example, the government’s manifesto included commitments to introduce new measures to lower bills and invest in clean energy solutions to reduce carbon emissions. While detail around these measures is light, the delay to the White Paper is a good opportunity for the industry to shape what activity in these areas should look like. This will be even more important as the government considers the role of the energy sector in the UK’s economic recovery.

So, what does this all mean for the energy sector?

We have a government with a fresh mandate and a new Chief Executive at Ofgem, both of whom will want to make a bold start to their tenures which will go a long way to securing their legacy.

As the country shifts towards its plans for economic recovery in the weeks ahead, the energy industry has an opportunity it never expected – to help the government and regulator overcome the COVID-19 crisis and help achieve their shared goal, which remains unchanged: to achieve net-zero by 2050.

Those companies able to start that forward-looking process, to demonstrate how they can protect consumers and offer solutions to support decarbonisation efforts, stand to benefit a great deal from their ability to shape the policy environment in the months and years ahead.

WA is supporting organisations across a range of sectors in their response to COVID-19 – whether it is engaging with government and regulators or helping to manage their reputation at this critical time. Please get in touch if you would like to learn more about how our experienced consultancy team can help your business.

 

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