Results: Browse all publications

• To investigate the costs that domestic electricity suppliers in Great Britain might face in 2030.
• To make projections on the assumption that, unless formally announced, no changes are made to the electricity market arrangements in place today
• To focus in particular on the hourly variation and seasonal shape of supplier costs

• To investigate the costs that domestic electricity suppliers in Great Britain might face in 2030.
• To make projections on the assumption that, unless formally announced, no changes are made to the electricity market arrangements in place today
• To focus in particular on the hourly variation and seasonal shape of supplier costs

• This study investigates the costs that domestic electricity suppliers in Great Britain might face in 2030
• Projections are made based on the assumption that, unless formally announced, no changes are made to today’s electricity market arrangements
• Particular focus is given to the hourly variation and seasonal shape of costs faced by suppliers
• Hourly retail cost stacks in 2030 are modelled for the average domestic electricity consumer in the East Midlands

1. National Grid Two Degrees (NG 2 Degrees): A relatively high demand scenario, with relatively high renewables, nuclear and imports, but reduced levels of CCGT
2. ETI Long-Term Role of Gas (ETI LT ROG): The highest-demand scenario modelled, with high levels of renewables, CCGT and storage, but reduced nuclear capacity
3. ETI Consumers, Vehicles and Energy Integration (ETI EVEI): With demand the lowest of the three, this scenario has the highest levels of nuclear, but the lowest levels of renewables and storage

1. Trends in supplier costs that might occur between 2017 and 2030 if market arrangements remain unchanged
2. Differences between scenarios that can be seen, reflecting different technology and market assumptions
3. Issues that could result if arrangements remain unchanged over horizon to 2030

• A word document providing interpretation of the findings in this slide deck
• A high level viewpoint for senior stakeholders summarising the work, results and insights
• An Excel workbook containing the key inputs and a
  full set of hourly outputs by scenario

• To investigate the costs that domestic electricity suppliers in Great Britain might face in 2030.
• To make projections on the assumption that, unless formally announced, no changes are made to the electricity market arrangements in place today
• To focus in particular on the hourly variation and seasonal shape of supplier costs

This paper provides an international policy review on energy efficiency retrofit in owner-occupied homes and recommendations to apply best practices to the UK.

This working paper presents a review of policy design and implementation in OECD countries for increasing uptake of energy efficiency retrofitting in medium to high-income, 'able to pay' owner-occupied households. Renovation measures to help improve energy efficiency and decarbonise homes can include loft and cavity wall insulation, heat pumps and solar PV.

The review uses a rapid evidence assessment of academic and grey literature to address the following research question: Which internationally applied, good practice policies have the most potential to accelerate quality, energy efficiency retrofits of owner-occupied, 'able to pay' households in the UK?

The review reveals that residential energy renovations in OECD countries are mostly shallow single measures, with a small portion comprising multiple measures or deeper renovations. Although some countries such as France, Germany, the UK and the US have retrofitted millions of single measures to homes, this review has not identified any countries which have delivered deep home energy retrofit at a widespread scale.

We identify various review studies on policy instruments which have been applied in different countries and are considered important for implementing residential energy renovation. Policy instruments most commonly emphasised are regulations, financial support and information provision. Most reviews also include policies to develop workforce skills and competencies, supply chains and quality assurance.

Drawing upon our review of international and UK evidence, we make a series of policy recommendations for an effective home energy retrofit policy framework in the UK, with a focus on medium to high-income owner-occupier households:

UKERC have submitted a response to the BEIS call for evidence on the future for small-scale low-carbon generation. This consultation sought to identify the role that small-scale low-carbon generation can play in the UK shift to clean growth by further understanding:

• The challenges and opportunities from small-scale low-carbon generation in contributing to government's objectives for clean, secure, affordable and flexible power; and
• The role for government and the private sector in overcoming these challenges and realising these opportunities.

In our submission we responded to the individual points raised in the call, drawing on two streams of work undertaken as part of the UKERC research programme. The first stream concerns community energy, drawing primarily on data from the UKERC Financing Community Energy project. This project has collected and analysed data from a number of sources:

• Quantitative data gathered as part of a UK-wide survey of community energy finance and business models. This dataset covers 145 community energy projects run by 48 different community energy organisations.
• Qualitative data on community energy organisations' suggestions for changes in public policy and industry practice, and their plans for the future, gathered as part of the same UK-wide survey.
• Further qualitative data on community energy organisations' views on pathways to future decentralised energy business models, gathered at workshops held as part of the Manchester Mayor's Green Summit process, and the Community Energy England annual conference 2018.
• A wide range of other data and literature, including access to the dataset collected for Community Energy England's 2017 State of the Sector Survey, covering 220 community energy organisations in England, Wales and Northern Ireland.

The second stream draws on a number of recent UKERC publications on electricity systems and networks :

• Developing low carbon networks for a low-carbon future
• Security of electricity supply in a low-carbon Britain
• The Costs and Impacts of Intermittency
• Delivering a highly distributed electricity system: Technical, regulatory and policy challenges.

• Using a systems engineering approach to the development of wave energy technologies
• Using ESME (ETI’s modelling tool)
• Least Cost Optimisation - Wave
• Least Cost Optimisation - Tidal
• Installed Capacity
• Analysis
• Conclusions

Priorities for the Energy Cost Review

This week, the government's long awaited Clean Growth Strategy will be published. Like many, we will be looking for details of how UK emissions will continue to be reduced to meet the 4^th and 5^th carbon budgets. In particular, the Strategy will need to explain how a range of increasingly significant policy gaps will be addressed.

The Strategy is likely to be closely followed by the conclusions of the Review of Energy Costs, led by Professor Dieter Helm. Ahead of the Strategy's publication, we are publishing a briefing paper that covers four key issues that are central to the terms of reference of the Review of Energy Costs - and to the Clean Growth Strategy itself.

Our starting point is that the primary issue is the cost of energy bills for consumers, rather than only the unit price of energy. It is therefore important to focus on measures that can reduce the quantity of energy required for a given level of service as well as trends that could help to reduce or moderate prices. In line with the terms of reference, our briefing paper focuses on electricity costs since UK electricity prices are higher up the European league table than those for gas.

Energy efficiency

The role that energy efficiency can play in reducing electricity bills needs to be fully addressed. Significant progress in this area remains to be made; savings of up to 10% can be achieved through well designed standards and investment programmes, and a recent UKERC report highlighted that a 25% reduction in household energy demand is possible through cost effective measures. There is a clear rationale for government intervention, to drive energy efficiency and address the policy gap left behind by the failure of the Green Deal. The case is even clearer when considering the additional economic and social benefits that energy efficiency brings.

Innovation and technology cost reduction

The creation of new markets help drive technology cost reductions, as does patient government support. Offshore wind is a case in point - achieving much lower than expected prices in the recent Contracts for Difference auctions. If these projects are delivered, this will place offshore wind amongst the cheapest new sources of electricity generation in the UK.

Policy change is required to drive further innovation, yet with investor confidence low, this needs to build on existing policy instruments. A case has been made for moving low carbon technologies into a single competitive auction. However this technology neutral approach favours technologies close to market, failing those which are less developed. Complex technologies such as carbon capture and storage, which have significant potential but high capital expenditure and associated risk, could require a state-led approach to investment, allowing for competition to drive prices down.

A systems approach is required

The review's terms of reference clearly state that a systems approach is required. The consideration of technologies within this perspective is imperative, as is developing energy policy within this context. This is particularly relevant for electricity, where a range of mechanisms and markets are used to balance supply and demand in real time.

System flexibility is key to keeping costs down. The cost of integrating renewables into the grid vary widely, with future cost of integrating intermittent power sources, depending upon the availability of cost effective system flexibility. Incentivising flexibility and reforms to the capacity market will be required to facilitate this, and as the proportion of renewables increases, government will need to decide how to account for system costs including those surrounding intermittency.

Research, development and demonstration

Innovation is an important driver for reducing costs and bringing technologies to market. However this non-linear process exists with multiple feedbacks between development, demonstration and deployment. Effectiveness is further dependent on incentives for demonstration and market creation, and UKERC research has shown that innovation in the energy sector tends to take three to four decades from early stage R&D to significant commercial deployment.

Analysis has been undertaken by government to establish this evidence base, yet too often this has focused on discrete technologies, with less attention paid to system innovation. It is this system innovation which will be key to the low carbon transition, alongside effective evaluation, to learn and disseminate lessons.

Eye catching initiatives such as the Faraday Challenge for storage are welcome, as is the UK pledge - as part of Mission Innovation - to double clean energy R&D spending between 2015-2020. Whilst a step in the right direction, when considering the scale of the challenge posed by climate change, many argue that government support for innovation at a greater scale is required.

Download the briefing note to read the full submission to Dieter Helm.

We welcome the opportunity to comment on the findings of the Cost of Energy Review, conducted by Professor Dieter Helm. In our response, we address most of the questions set out in the Call for Evidence from BEIS. Before turning to these specific questions, we have three general observations about the Review and the Call for Evidence.

First, whilst the review title focuses on the cost of energy, this is misleading. The terms of reference and the Review report make it clear that the main focus is electricity rather than energy in general.

This distinction is important since the data shows significant differences in the position of UK electricity and gas costs when compared to costs in other countries. There are also differences between relative costs for households and relative costs for business energy consumers. UK electricity prices are higher up the European league table than prices for gas. Electricity prices for energy intensive industries in the UK are particularly high.

Our second comment is that there are important distinctions between prices, costs and bills. Whilst much of the debate focuses on prices, the costs of energy for consumers also depends on their energy consumption. Therefore, it is also important to consider energy efficiency of buildings, appliances and industrial processes since these are a key determinant of costs.

Our third comment is that costs need to be considered for the electricity system as a whole. Whilst the separate questions in the Call for Evidence about generation, networks and retail supply are understandable, costs to consumers partly depend on interactions between these components of the electricity system. This compartmentalised approach to the evidence base could mean that some of these systemic interactions are missed.

UKERCs response provides commentary and analysis on many of the wide range of topics encompassed in the consultation. This includes the overall vision and objectives, case for change, the evaluation criteria defined by BEIS, locational pricing and local markets, lessons from other countries, changes to wholesale markets and incentives for low carbon generation, flexibility and capacity.

Our response provides detailed and evidence-based analysis on each of these complex topics, drawing on UKERC research and wider outputs. We highlight some of the complex trade-offs involved and argue for a cautious and gradualist approach that builds on the progress already made in some areas.

A range of evidence supports the role of carbon capture, usage and storage (CCUS) in delivering the most competitive and productive UK transition to a low carbon future.

The UK government has funded appraisal work on several of the many offshore saline aquifers potentially suitable for CO₂ storage. As a result, our knowledge base relating to these stores is high, and some stores are 'ready for business'.

Injecting CO₂ into saline aquifers pressurises them, and since each store has a limiting pressure for integrity reasons, this can limit the storage capacity and CO₂ injection rate, and so affect costs.

This paper, delivered by Energy Systems Catapult for the Energy Technologies Institute, describes the efficacy of a simple technique to alleviate this constraint - pressure is relieved by releasing the native water in the aquifer as it is filled with CO₂. This is termed 'brine production'.

This analysis reports the savings to the UK from deploying brine production in line with that needed to deliver lowest-cost decarbonisation pathways would be at least £2 billion, but would most likely be more.

This report is intended to be an update to the first ETI nuclear insight report released in October 2015, entitled Nuclear - the role for nuclear within a low carbon energy system, and for completeness also summarises developments in the UK nuclear context since 2015.

This insight report summarises the learning from the ETI's Nuclear Cost Drivers (NCD) project which was commissioned through open competitive procurement, delivered by the organisation now known as Lucid-Catalyst, and reported in April 2018. It also reports the learning from applying the nuclear cost drivers data and associated learning through sensitivity testing in the ESME whole system modelling tool now operated by the Energy System Catapult.

The NCD project report concluded that there was strong evidence of applicable cost reduction in the UK, but collective action is required against all cost drivers by all project stakeholders, including government, to bring about the integrated programme of activities necessary to realise this potential. The benefits of such collective action are largely realised through productivity improvements in direct labour and indirect services during construction, giving shorter, more predictable schedules and repeatable engineering. This report also proposes that some FOAK (First of a Kind) commercial plants that could be operational from 2035, could offer further transformational reductions in cost and consequential growth in economic opportunity through deployment in the UK and elsewhere.

Concern about fairness in the retail energy market is clear from media headlines and the passing of legislation to impose a wide price cap in the retail energy market in 2018. Fairness in Retail Energy Markets? Evidence from the UK provides extensive evidence from a range of disciplines to inform this important debate. This report does notattempt to define what constitutes fair or unfair, since this ultimately rests in the eye of the beholder. Nevertheless, its message is clear: development of the retail energy market in the UK can only be understood by recognising the political economy around questions of distribution and fairness.

A multi-disciplinary perspective

The publication reports research conducted at the Centre for Competition Policy, University of East Anglia, as part of the UK Energy Research Centres programme. The research is multi-disciplinary, drawing together researchers from a range of disciplines: economists, legal scholars, human geographers and a policy analyst. This range of specialisms provides a rare opportunity to consider fairness and retail energy markets in the round. The research team is both unusually broad and academically independent. The reports five main chapters present findings from different disciplines and methodologies to stimulate consideration of evidence which is rarely encountered together. In assembling this evidence the researchers are grateful to our partners Broadland Housing Association, Cornwall Energy and Ofgem, as well as to the Parliamentary Archive and all our interviewees.

The report presents findings under five broad themes: (i) how long-term outcomes contextualise the retail energy markets political salience; (ii) how distributional objectives feed into institutions; (iii) the multi-faceted nature of engagement with energy; (iv) the detailed experiences of those at risk of FP; and (v) how data/statistics can be improved.

Key issues highlighted

Together the evidence raises fundamental issues for the future governance of the market. The traditional focus of economics on efficiency has never claimed that markets are effective tools for delivering equitable outcomes, and the traditional framework of pure economic regulation is challenged by the focus on fairness. Can the market ever escape political intervention when energy prices rise substantially? This question is particularly relevant when key affordability support policies the Winter Fuel Payment and the initial Fuel Poverty Strategy were introduced as energy was approaching its mostaffordable level over a 30-year time horizon.

Energys political salience has meant that the independence of the market regulator, Ofgem, has evolved in a way not originally envisioned. Government has increased the number and complexity of Ofgems statutory duties. The resulting ambiguity regarding how to prioritise the regulators different duties has led to increased government-regulator communication and the potential for government to exert pressure on the regulator through less formal channels.

We present evidence indicating that there are problems with implementing the main frame used to address energy fairness in the UK, namely fuel poverty. We suggest that the approach to analysing fuel poverty, and the associated policymaking, would benefit from a change of direction, towards a focus on the directly observable real-world phenomenawhich underpin this complex problem, rather than on the official fuel poverty statistics. Such an approach would help to recognise that energy efficiency interventions are unlikely to solve all the energy affordability challenges facing households.

Commencing in 2016, the Financing Community Energy project provides a comprehensive quantitative and qualitative analysis of the role of finance in the evolution of the UK community energy sector. This report presents the final of our four case studies of UK community energy organisations, exploring how these organisations have sought to finance their projects against a backdrop of diminishing government support for grassroots sustainable development.

Established in 2013, Brighton and Hove Energy Services (BHESCo) primary focus was to develop both renewable energy and energy efficiency projects, whilst also ensuring people have equal access to energy. BHESCo is rather unlike our other community energy case studies in that it operates very much like an Energy Services Company (ESCo), where they accept some degree of responsibility to provide the energy service that its customers ultimately desire (e.g. lighting, ambient temperature), rather than the straightforward supply of heat or electricity.

This report presents a case study of Edinburgh Community Solar Cooperative, exploring how it financed the project against a backdrop of diminishing government support for grassroots sustainable development.

This report presents the first of four case studies of UK community energy organisations, exploring how these organisations have sought to finance their projects against a backdrop of diminishing government support for grassroots sustainable development.

Edinburgh Community Solar Cooperative (ECSC) is a Community Benefit Society (BenCom). Its objectives are a combination of environmental and social, with an explicit focus on reducing emissions, alleviating fuel poverty, improving energy security and promoting sustainable development education.

ECSC quickly settled on renewable power generation as a means of delivering this combination of environmental andsocial value. Today it operates 1.4 MW of solar PV panels on the roofs of 24 council-owned properties in Edinburgh, including schools, leisure centres and community halls.

Commencing in 2016, the Financing Community Energy project provides a comprehensive quantitative and qualitative analysis of the role of finance in the evolution of the UK community energy sector. This report presents the second of four case studies of UK community energy organisations, exploring how these organisations have sought to finance their projects against a backdrop of diminishing government support for grassroots sustainable development.

Green Energy Mull (GEM) is a Community Benefit Company (BenCom) that owns and operates Garmony Hydro; a 400 kW run-of-the-river hydro scheme on the island of Mull, off the west coast of Scotland.

Commencing in 2016, the Financing Community Energy project provides a comprehensive quantitative and qualitative analysis of the role of finance in the evolution of the UK community energy sector. This report presents the third of four case studies of UK community energy organisations, exploring how these organisations have sought to finance their projects against a backdrop of diminishing government support for grassroots sustainable development.

Gwent Energy (Wales) was formed in 2009 to deliver environmental benefit and cost savings to its local community. It aims to help local consumers save money on their energy bills through a combination of renewable energy, efficiency, storage and electric vehicle charging interventions, whilst simultaneously generating a surplus to fund local community initiatives.

Local Authorities role in the energy transition and working with their citizens in doing so, has been recognised as crucial to paving transition paths. Material collated within this report is intended to better inform Energy Cities and its partners, Local Authorities and Municipalities, civil society groups and others interested in how citizens can be supported and encouraged to participate in energy system developments as a part of the energy transition. The findings in this report are therefore intended to directly help Local Authorities across Europe in implementing more participative approaches to their governance practices in energy systems.

Delivered as part of the Energy-PIECES project, this report was developed during a secondment with Energy Cities.

The issue: a need to better understand the models that inform demand-side energy policy-making

Under the UK Climate Change Act 2008, the government is legally bound to reduce greenhouse gas (GHG) emissions by 80% by 2050 relative to 1990 levels.

Historically, the focus of energy policy in the UK has been on supply-side policies, such as decarbonisation of electricity generation through greater use of low carbon technologies like wind and solar. Increasingly, however, demand-side energy policies are being recognised as having important contributions to make to achieving emission reduction targets, through reducing energy demand or by making energy demand more flexible and compatible with variable renewable energy sources. Such demand-side policies can seek to promote a wide range of technologies and behaviours, for example improved buildinginsulation, reduction in the use of energy intensive materials and increases in teleworking to reduce commuting.

To fully realise the potential of demand-side energy policies, it is important that they can be adequately represented in quantitative energy models, because such models play an important role in informing UK energy policy. However, we do not currently have a good understanding of how well the different energy models that inform UK government energy policy represent energy demand and demand-side energy policies.

Therefore we have undertaken a Rapid Evidence Assessment (a constrained form of systematic review) to examine the energy models that have informed energy policy documents published by the UK government between 2007 and 2017. The overarching question this review seeks to address is:

How suitableare the energy models used toinform UK government energy policy for exploring the full range of contributions that demand-side energy policies can make to climate change mitigation?

Main findings: strengths and weaknesses in existing modelling

Our Rapid Evidence Assessment reveals that the core strength of current energy modelling is the detailed representation of technologies, with many models featuring information on hundreds of potential technological options for increasing energy efficiency. Although uncertainties exist around these technological options, these models allow us to gain a coherent and realistic understanding of how different combinations of technologies could satisfy our future energy service demands under different low-carbon scenarios.

However, the modelling landscape reveals two key limitations with regard to the representationof non-technological drivers of energy demand:

• Firstly, economic, social and behavioural drivers of energy demand, such as thermostat settings, are rarely explicitly included within the models. As a result, changes in such drivers risk being overlooked as potential levers of climate change mitigation. In addition, the economic, social and behavioural assumptions that are included into the models are often not presented in a transparent manner.
• Secondly, while many of the models provide a wealth of detail on different technological options, they are not well-equipped to model how behavioural, social and economic changes impact on the use of technology. This makes it difficult to investigate how technological change comes about and how it could be steered into the right direction using different policy instruments. In many models, the uptake of different technological options is specified exogenously by the user, or is determined within the model by cost optimisation, which does not reflect the many non-cost factors influencing technology diffusion.

Key recommendations for future modelling

• Develop consistent and transparent processes for estimating and presenting the fixed inputs to energy models, such as energy service demands and socio-economic drivers.
• Quantify the potential of demand-side policies and include them as explicit options in energy models to make such policies more visible.
• Improve the representation of economic, social and behavioural processes in energy models where feasible and useful. This endeavour can build on existing research in the academic literature, which is currently not well represented in policydevelopment.
• Research further the potential implications of interactions between different drivers of energy demand and make sure they are consistent. An example of such an interaction would be the impact that a modal shift from cars to cycling would have on the growth and energy demand of the automotive industry.

This response provides recommendations on the reform of the energy supply market, based on research on “energy retail market governance” undertaken within UKERC.

• Overall, we recommend that reform of the retail energy market should not be considered in independence from the work on ‘systems flexibility’, energy transitions, ‘whole systems’, network charging reform and wholesale market policy.
• We recommend that the evaluation of energy retail market success should explicitly include an assessment of its compatibility with a low-carbon transition. Specifically, the retail market should allow for long-term investment recovery in low-carbon solutions .
• We also provide an overview of approaches to organising default energy commodity supply in some US energy retail competition states.
• We suggest that Ofgem (and Government) consider improving the potential for intermediaries and assess the likely implications of resale of commodity energy by a wider range of eligible players, subject to customer protection requirements.

The UKERC response to the ofgem consultation 'Getting more out of our electricity networks by reforming access and forward-looking charging arrangements'

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Under the UK Climate Change Act 2008, the government has committed to reduce greenhouse gas emissions by 80% by 2050 relative to 1990 levels (Climate Change Act, 2008). This will require a large shift in the UK’s energy system, ranging from energy production, across transmission to consumption.

The public are implicated in the transition process as energy users, increasingly also as energy producers and as active members of society who might support or oppose energy projects and policies. Previous research (Demski et al., 2015; Parkhill et al., 2013) has shown that there is widespread public support for transitioning to a low-carbon, affordable and reliable energy system – however, this change is associated with costs and it remains to be seen how these costs will be covered.

This research explores the views of the British public on how the energy transition should be financed. Drawing on a survey of 3,150 respondents and focus groups in 4 locations across Great Britain, it investigates what responsibility members of the public assign to government, energy companies and the general public for financing energy system change.

Research findings

The results highlight widespread support for an energy system that ensures affordability, reliability and low carbon energy sources. Energy companies and the government were assigned primary responsibility for contributing financially to energy transition, as they were seen to have the structural power and financial means to implement necessary changes. Respondents also indicated that the general public ought to contribute as well, although the public was perceived to be paying over the odds already (through bills to the energy companies and levies to the government). Nonetheless, research participants expressed willingness to accept between 9-13% of their energy bills going towards environmental and social levies.

Distrust in energy companies and government

Willingness to contribute financially towards the energy transition was also found to be dependent on the perception that energy companies and government are contributing financially and showing real commitment to energy system change. It was also notable that this condition was not currently thought to be met; distrust in this regard was particularly evident in focus group discussions.

Distrust in companies: People believe that the majority of energy companies are driven primarily by profit motives leading to inadequate commitments with regards to energy transition goals such as investing in low-carbon energy and ensuring energy affordability.

Distrust in government: The government, and politicians in particular, are seen as too closely connected to the energy industry, leading to inadequate and ineffective regulation of energy companies and their opaque practices.

Examining what underlies people’s distrust, it is evident that the public has a number of justice and fairness concerns that need to be addressed. In particular, beliefs concerning distributive justice (i.e. how costs are distributed across society) and procedural justice (i.e. respectful treatment, transparent practices and decision-making) are important for public acceptance of responsibility and costs.

Key recommendations

Addressing the issues underlying the trust deficit will be challenging, but this is nonetheless important if we are to ensure that there is to be broad societal consent and engagement with the low-carbon energy transition. To begin this process, the briefing includes the following recommendations:

1. Government and energy industry must show strong and clear commitments to low-carbon energy system change
2. Greater transparency and accountability regarding costs, decision-making and practices in relation to financing energy transitions
3. Greater clarity and justification for how money is spent by government and energy companies
4. Innovative thinking on how to distribute current and future costs in a fair manner across society
5. Finding ways to credibly show that energy companies are not driven by profits alone
6. Robust and consistent evidence of clearer separation between government and the energy industry

• A LCOE in 2020 in the range of £100/MWhto £110/MWh can be achieved across most of site conditions encountered in commercially exploitable UK waters.
• Cost-effective access to high-wind-speed sites is enabled, thereby driving down the levelised cost of energy below £100/MWh at these sites.
• High-wind-speed sites yield the lowest LCOE, even after the increased capital expenditure (CAPEX) associated with accessing such sites is considered.
• The LCOE shows little variation across the range of conditions encountered in commercially exploitable UK waters.
• This LCOE is forecast to drop by over half by 2050 in today’s currency, due to expected learning curves and economies of scale achieved in the PelaStar system when paired with larger (10 MW) wind turbines.

• whole life emissions from the vehicle parc (including the achievement, or otherwise, of target reductions). The whole life emissions are also subdivided into emissions associated with usage and emissions associated with production and scrappage;
• Exchequer spend and revenues;
• the sustainability of the market for PiVs; and
• the deployment and sustainabilityof public charge points

• An outline of the new research undertaken
• An overview of the modelling and analysis methodology
• The key results from the modelling and analysis work.
• Key observations and insights emerging from the modelling and analysis together with top-down confirmation using key supporting data; and
• The overall conclusions and recommendations, with reference to implications for particular stakeholders.

• Generic Business Models
• Scenarios Development Final Report
• New Revenue Streams
• Detailed report on Computer Modelling
• Energy Scenarios Comparison Report

• The installed generation capacity in the chosen UKERC scenarios was not sufficient to supply demand once the loads from plug-in charging modelled within this project were applied: the adopted method of increasing plant capacityby scaling up the capacity ofeach plant category was chosen so that the scenarios conform as closely as possible to the initial mix in the UKERC scenarios.This scaling was found to be critically important to the outcome of the modelling.
• The modelling show sthat choice of scenario (i.e. combination of capacity mix and commodity price) and its evolution through the years are much stronger drivers of modelling outcomes than are the different charging profiles
• Cost of electricity and carbon intensities should only be taken from the No EV demand scenarios. We do not recommend using figures from scenarios with EV charging overnight or at peak times;
• Within day profiles (including regressions) for cost of electricity and carbon intensity should only be used (if at all) for low levels of EV demand (say, less than 2 GW). For larger levels of EV demand, we recommend using a single annual average figure;
• We recommend using average carbon intensities when evaluating the carbon intensity of EVs as these provide the best approximation to the true impact;
• The observed grid emission factor for 2009 should be used as an estimate of 2010 rather than the model output
• The charging regime adopted for electric vehicles has little impact on annual average electricity wholesale prices;
• Under some, but not all, choices of mechanism for incentivising investment in low carbon electricity generation overnight charging would result in lower emissions than would after-journey charging and the magnitude of this benefit is highly dependent on other scenario conditions;
• There are benefits from overnight charging in the transmission and distribution sectors of the electricity industry and it seems unlikely that there are credible scenarios in which there is a dis-benefit from overnight charging in the generation sector, so there seem to be adequate grounds to encourage this behaviour.

• 3.1 Scenario Development
• 3.2 Revenue stream analysis (including the role of value added services)
• 3.3 Economic sensitivity and carbon offset analysis

• Methodology - this section describes the methodology, defines the business models considered, and outlines the scenarios used in the business model assessment.
• Business viability summary - this section summarises the viability of the business models for each scenario highlighting the main reasons behind each assessment, taken from the more detailed analysis.
• Business model analysis - this section gives detailed analysis of each business model in a consistent format that describes current and analogous experience, enablers, barriers, socio-economic benefits, strategic risk, political risk, subsidy, and legislation
• Appendices - including take-up forecasts, sources, a list of interviewees, analysis of the differences between BEVs, REEVs and PHEVs, and a summary of relevant subsidy and legislation
  
  This project was undertaken and delivered prior to 2012, the results of this project were correct at the time of publication and may contain, or be based on, information or assumptions which have subsequently changed.

• New revenue streams arising from the integration of vehicles and charging infrastructure could affect the development of the PIV market
• Desktop research and information from interviews with industry stakeholders informs the assessment of new revenue streams
• Only one new revenue stream, infrastructure hosting, is likely to significantly impact the development of the PIV market
• Strong substitutes and legislative barriers make four of the business models unviable
• Expected low demand for public charging makes two of the business models unviable

• T0 Base (in which all variables are set to their base levels)
• T1 All circumstances are maximally favourable to PiV sales
• T2 All circumstances are minimally favourable to PiV sales
• T3 Government incentives as announced and all other factors are maximally favourable to PiV sales
• T4 Government incentives as announced and all other factors are minimally favourable to PiV sales
• T5 High rate of growth in UK GDP
• T6 Low rate of growth in UK GDP
• T7 High rate of growth in global economy
• T8 Medium rate of growth in global economy with a green emphasis
• T9 Medium rate of growth in global economy with high oil price
• T10 Medium rate of growth in global economy with oil price spike
• T11 Low rate of growth in global economy
• T12 Minimised carbon emissions

With these challenges in mind this report uses UKERC research findings on local and regional energy system development to make recommendations for effective local planning to accelerate net zero energy systems.

Energy is a crucial element for development in almost every aspect of community life such as education, health, food, and security, and it can contribute to farming productivity, income generation, and the creation of networks that enable youth to work from their villages. Despite this, around 1 billion people globally do not have access to sustainable energy sources, and 80% of those people live in rural areas across 20 countries in Asia and sub-Saharan Africa. To decrease this energy access gap, and to improve rural livelihoods and increase economic opportunities in rural areas, Productive Uses of Energy (PUE) offer an untapped opportunity: examples of PUE include irrigation and post-harvest processing.

Despite the benefits of PUE, they are often not considered in the planning off-grid rural electrification developments. This may be partially attributed to a lack of capital; riskyframework conditions; and a lack of clear policy guidelines available on the subject. The latter of which was the focus of this research project.

Delivered as part of the Energy-PIECES project, this report was developed during a secondment with Practical Action.

• Vehicle electrification
• Users and Vehicles
• Energy supply
• Project aims
• Project structure
• Modelling framework
• Narratives (scenarios)
• Stage 1 initial analysis
• Stage 1 research with consumers
• Stage 1 research with fleets
• Stage 2

• Substantial challenges associated with widespread roll-out of low carbon vehicles; shift from a “problem for the network” to an “opportunity through integration of vehicles as part of a wider system” can yield benefits for all actors in the system, including:
  • increased uptake of low-emission vehicles, managing charging and refuelling, and optimising the system design
• Analysis and solutions must be holistic (considering all parts of the system together, including users)
• Robust trials in Stage 2 will generate data to test solutions and inform analysis, and will add unique value:
• Trial with mass-market users (i.e. people from the majority of the vehicle user and fleet operator markets)
• Addressing widely-applicable plug-in vehicles (BEVsand PHEVs) suitable for wide range of users
• Holistic system design

1. The transition to net-zero will affect the whole economy. Investment and policy decisions by all government departmentmes need to be compatible with this transition.
2. Policies to support renewable electricity generation should be more ambitious, building on deployment and cost reduction successes. Action is also needed to ensure electricity market rules are fit for a fully decarbonised power sector.
3. Decisions by the energy regulator, Ofgem, should also be compatible with net-zero. This includes enabling investment in local electricity networks to facilitate heat and transport decarbonisation, and ensuring more active use of existing networks.
4. Local energy systems could play a significant role in achieving net-zero, particularly in the integration of electricity, heat and transport. More resources and greater powers for Local Authorities will help to ensure the potential for local action is realised.
5. A clear plan is required for upgrading the UK housing stock. A heat and energy efficiency White Paper must include policies for widespread deployment of low carbon heat (including demonstrating hydrogen at scale) and for prioritising low income households.
6. Whilst the decarbonisation of industry is receiving more attention, policy initiatives are not joined up. Funding for specific projects and industrial clusters should be complemented by market creation policies, including for carbon capture and storage.
7. Our analysis shows that achieving net-zero requires the phase out of fossil-fuelled vehicles to be brought forward to 2030. Immediate action is also required to counter the rapid increase in sales of larger cars (including SUVs).
8. Plans to meet net-zero should maximise environmental co-benefits. Potential negative impacts on ecosystems should be assessed and mitigated.
9. Continuing uncertainty about the UK’s changing relationship with the European Union has already affected decarbonisation plans. Whatever the outcome, close co-operation with the EU is likely to make it easier to achieve net-zero.
10. The transition to net-zero should not compromise energy security. In light of the events on August 9th, responsibilities for ensuring system resilience need to be clarified and applied in a more rigorous way.

In this issue of UKERCs annual Review of Energy Policy, we discuss some of the effects of COVID-19 on the energy system and how the unprecedented events of 2020 might impact energy use and climate policy in the future.

Focusing on electricity demand, transport, green jobs and skills, Brexit, heat, and societal engagement, the Review reflects on the past year and looks forward, highlighting key priorities for the Government.

Key recommendations

Electricity

The scale of investment in the power system required over the coming decade is huge. A big challenge is market design. We need a market that can incentivise investment in low carbon power and networks at least cost whilst also providing incentives for flexibility. Output from wind and solar farms will sometimes exceed demand and other timesfallto low levels. The right mix of flexible resources must be established to deal with variable output from renewables, with the right market signals and interventions in place to do this at least cost.

Mobility

The end of the sale of fossil fuel cars and vans by 2030 must be greeted with enthusiasm. Yet if this is to play its part in a Paris-compliant pathway to zero emissions, it must be one of many policy changes to decarbonise UK transport. Earlier action is paramount, and we recommend a market transformation approach targeting the highest emitting vehicles now, not just from 2030. Phasing-in of the phase-out will save millions of tons of CO2 thus reducing the need for radical action later on. The forthcoming Transport Decarbonisation Plan has a lot to deliver.

Green jobs and skills

COVID-19 recoverypackages offer the potential to combine job creation with emissions reduction. A national housing retrofit programme would be a triple win, creating jobs, reducing carbon emissions and make our homes more comfortable and affordable to heat. However, UKERC research finds that there are significant skills gaps associated with energy efficient buildings and low carbon heat. UKERC calls for a national programme of retraining and reskilling that takes advantage of the COVID downturn to re-equip building service professions with the skills needed for net zero.

Brexit

As the UK leaves the EU on the 1st January it will lose many of the advantages of integration. With new regimes for carbon pricing, trading, and interconnection yet to be agreed, there will be a high degree of uncertainty in the near to medium term. Given upward pressure on energy costs,delays to policy, and this uncertainty surrounding new rules, the overall effects of Brexit are not positive for UK energy decarbonisation.

Heat

UKERC research calls for action on heat to deliver the net zero technologies that we know work - insulating buildings and rolling out proven options. We need to end delay or speculation about less-proven options. Analysis is consistent with recent advice from the CCC that heat policy should focus on electrification whilst exploring options for hydrogen. We need to break the pattern of ad hoc and disjointed policy measures for heat and buildings, and develop a coherent, long-term strategy. This would be best achieved as an integral part of local and regional energy plans, involving local governments as coordinating agents. The aspirations for heat cant be realised unless we also take actionon the skills gap.

Societal engagement with energy

Achieving net zero in 2050 will entail significant changes to the way we live, what we eat and how we heat our homes. The COVID-19 pandemic has shown that when faced with a threat, society can change rapidly. Engaging society with the net zero transition also needs to change, it needs to be to be more ambitious, diverse, joined-up and system-wide, and recognise the many different ways that citizens engage with these issues on an ongoing basis.

With a focus on gas and the UK continental shelf, industrial decarbonisation, heat, mobility and the environment, we look at developments both at home and internationally and ask whether the UK is a leader in decarbonisation, and if the transition is being managed as well as it could be.

As we reach the end of 2018, the scorecard for UK energy policy is mixed. Optimists can point to rapid emissions reductions, cost falls in renewables and the centrality of clean energy within the Industrial Strategy. Ten years after the Climate Change Act was passed, UK greenhouse gas emissions have fallen by 43% from the level in 1990. The UK is on the way to meeting the first three carbon budgets, and a transformation of the power sector is well underway.

However, if we turn our attention from the rear view mirror, the outlook is more pessimistic. As the Committee on Climate Change pointed out in June, there are an increasing number of policy gaps and uncertainties. If not addressed promptly, meeting future carbon budgets will be much more challenging. For some of these gaps, there is a particularly clear and immediate economic case for action.

Key recommendations:

The government needs to take urgent action to ensure that the UK continues to meet statutory emissions reduction targets, and goes further to achieve net zero emissions. This not only requires new policies to fill looming gaps in the portfolio, it also requires much greater emphasis on sharing the benefits and costs of the low carbon transition more equitably. Our main recommendations are:

1. We repeat our call for a heat and energy efficiency White Paper, and recommend that the Industrial Strategy mission to reduce building energy use is extended to existing buildings.
2. A better, more targeted approach to the energy needs of low-income households is required. Energy efficiency investment for these households should be funded via general taxation.
3. Urgent large-scale trials of heat decarbonisation using hydrogen are required to understand whether it could be technically, economically and socially viable.
4. A dashboard of indicators is needed to monitor gas security during the energy transition. The current one dimensional approach is not sufficient.
5. Future electricity policy should build on the Electricity Market Reform policies that have worked well, and adapt them in the light of changes in technologies and costs.
6. Changes in incentives for ‘black start’ and other ancillary services are necessary to ensure that the electricity system remains resilient as it changes.
7. The target for phasing out conventionally fuelled vehicles is inadequate and does not fit with our emissions targets. The 2040 date should be brought forward and linked to accelerated investment in networks and charging.
8. The Industrial Strategy needs to be strongly linked to market creation policies for low carbon technologies. Carbon capture and storage is in particular need of such policies to progress beyond its current holding pattern.
9. To ensure widespread support for the energy transition, there needs to be more focus on equity and justice. The UK government should consider setting up a process similar to Scotland’s Just Transitions Commission to achieve this.
10. Continued vigilance is required to mitigate any negative impacts of Brexit, particularly those that could affect integration with European energy markets.

UKERC welcomes the Scottish Government's energy and climate policy ambition, and applaud the valuable lead it is taking on energy. This has the potential to bring economic and social advantages - for example, the development of low carbon industrial capability with export potential and jobs, and improved air quality with associated health benefits. However, it is also important to ensure that the scale and pace of the transition minimises the additional costs for consumers. This can be achieved by supporting technological innovaiton that further reduces the costs of low carbon technologies and by maximising investments in energy efficiency.

UKERC have submitted a reponse to the Scottish GovernmentFinance and Constitution Committee's call for evidence on the Financial Memorandum that accompanies the Climate Change Bill.

This bill was introduced in May 2018 andamends the Climate Change (Scotland) Act 2009 to make provision for setting targets for the reduction of greenhouse gases emissions and to make provision about advice, plans and reports in relation to those targets.

• Negotiations over the terms of ‘Brexit’ are likely to be lengthy, complex and difficult. Energy is one policy area in which it may be easier for the UK and future EU27 to find common ground

• Energy cooperation over the past decades has helped European countries to enhance their geopolitical security, respond to growing climate threats, and create a competitive pan-European energy market. Maintaining close cooperation in this field, and the UK’s integration in the European internal energy market (IEM), will be important for the UK and the EU27 post-Brexit.

• Strong UK–EU27 energy cooperation could help ensure that existing and future interconnectors – physical pipes and cables that transfer energy across borders – between the UK, Ireland and the continent are used as efficiently as possible. As European economies, including the UK, look to decarbonize further, interconnectors will help minimize the costs of operating low-carbon electricity systems, and help lower electricity prices for UK consumers.

• The UK and the EU27 have identified the special relations between the UK and the Republic of Ireland as a priority for negotiations. Any future agreement needs to maintain the Single Electricity Market (SEM) across the island of Ireland, as failure to do so could result in an expensive duplication of infrastructure and governance.

• EU funds and European Investment Bank (EIB) loans account for around £2.5 billion of the UK’s energy-related infrastructure, climate change mitigation, and research and development (R&D) funding per year. Replacing these sources of finance will be necessary to ensure that the UK’s energy sector remains competitive and innovative.

• The UK intends to leave Euratom, the treaty which established the European Atomic Energy Community and which governs the EU’s nuclear industry. This process – dubbed ‘Brexatom’ – will have a significant impact on the functioning of the UK’s nuclear industry, particularly in respect to nuclear material safeguards, safety, supply, movement across borders and R&D. Achieving this within the two-year Brexit time frame will be extremely difficult. The UK will need to establish a framework that it can fall back on to ensure nuclear safety and security.

• Remaining fully integrated with the IEM would require the UK’s compliance with current and future EU energy market rules, as well with some EU environmental legislation. The UK government, British companies and other relevant stakeholders will need to maintain an active presence in Brussels and European energy forums, so that constructive and informed engagement can be sustained.

• Without a willingness to abide by the jurisdiction of the European Court of Justice (ECJ), and in the absence of a new joint UK–EU compliance mechanism, the UK may be required to leave the EU Emissions Trading System (ETS) – an instrument in the UK’s and EU’s fight against climate change. Leaving the ETS would be complicated, even more so if the UK leaves before the end of the ETS’s current phase (2013–20). To maintain carbon pricing in some form outside of the ETS, the UK would need to either establish its own emissions trading scheme, which would be complicated and time-consuming; or build on the carbon floor price and introduce a carbon tax. Either of these potential solutions would need political longevity to be effective.

• It is in both the UK’s and the EU27’s interests for the UK to continue to collaborate on energy policy with EU and non-EU member states. The best way to achieve this would be to establish a robust new pan-European energy partnership: an enlarged European Energy Union. In particular, such a partnership could offer a useful platform for aligning EU policies with those of third countries, including the UK, Norway and Switzerland, while allowing them to fully access the IEM and push forward common initiatives. Experience suggests that the EU27 would be more receptive to working within an existing framework or multilateral approach (as with the European Energy Community) than to adopting a bilateral approach (as the EU currently does in its energy relations with Switzerland).

It argues that, since its emergence in the UK in the late 1990s, community energy has grown through finding opportunities for smaller scale, decentralised energy activities in the UKs highly centralised energy system. The combination of development of renewable energy technologies, and the launch of the governments Feed-In Tariff Scheme (FITS) in 2010, produced a boom in the sector, especially around solar electricity generation.

Recent cuts to FITS rates and other policy changes place community energy at a crossroads. Some renewables activity will continue, but groups are exploring a wide range of activities, partnerships, and business models. We are engaging with the sector around outputs from our research, which include a survey and case studies, to co-develop recommendations and pathways for the future.

The wider impacts of energy policy on the macro-economy are increasingly recognised in the academic and policy-oriented literatures. Additionally, the interdependence of energy and economy implies that a (policy) change in the non-energy system impacts on the energy system. However, such spillovers on the energy system have not been extensively researched. We begin by analysing the impacts of export promotion policies - a key element of the UKs Industrial Strategy - on the energy system and energy policy goals. As the impacts of such policies are, in large part, transmitted via their effects on the economy, we adopt a computable general equilibrium model - UK-ENVI - that fully captures such interdependence. Our results suggest that an across-the-board stimulus to exports increases total energy use significantly. This does not come directly through energy exports, but indirectly through the energy sectors linkages to other sectors. Export led growth therefore impacts on energy use - and significantly so. This in turn is likely to have an adverse impact on emission targets. Policy makers should be aware of the fact that a successful implementation of the Industrial Strategy may create significant tensions with the UKs Clean Growth Strategy, for example, and with the goals of energy policy more generally. The importance of this effect will in practice depend upon: the mix of goods and services that are exported (an issue that we shall address once the export strategy is published); the success of low-carbon policies. Ultimately, a knowledge of the nature and scale of these spillover effects of economic policies on the energy system creates the potential for more effective and efficient policy making

UKERC research highlights ‘lack of a clear vision of the future role for gas’ in the UK’s energy system, and cautions that, without CCS, a second ‘dash for gas’ could compromise decarbonisation ambitions. Please download the report using the button above.

The UK Energy Research Centre (UKERC) is in its fourth five-year phase of research and engagement activities, which will run until April 2024. In addition to the core programme of research, a number of mechanisms have been put in place to ensure that participation in UKERC is broad, flexible and addresses the needs of the wider UK research community.

A Flexible Fund of around £3m (valued at 80% FEC) has been set up in order to commission new research and facilitate the integration of the existing programme. The Fund is overseen by UKERC’s independent Research Committee. The key aims of the Fund are:

• To allow the research programme to develop flexibly in the light of new scientific insights or external developments, e.g. in energy policy;
• To bring a wider range of researchers and disciplines into UKERC’s research programme, including researchers from outside the ‘traditional’ energy community;
• To promote integration in the UKERC research programme, and to fill gaps where needed;
• To build collaborations between the UKERC research community and other research communities – including other energy researchers, groups and centres; and
• To scope and develop new research agendas in partnership with funders, the research community and other stakeholders.

This report presents the outputs of two key consultation activities on potential Flexible Fund topics :

• Section 2 of this report sets out the outcomes of a workshop held on the 12th February with attendees from across the UK research community. This presents the research areas and ideas that were the most popular in the voting exercise, the key issues that were discussed in each of the breakouts and a record of the full list of ideas in each breakout group, as well as the outcomes of the voting exercise.
• Section 3 presents the results of an online survey.

• There are extremely ambitious technology deployment rates (for example for CCGT, heat pumps and electric vehicles) within some scenarios that could be challenging in reality and should therefore be subjected to stress testing.
• In addition to the need for appropriate investment signals, analysis should address the incorporation of a very active demand side and if the current arrangements can handle large amounts of intermittent generation supplying an elastic demand side.
• UKERC recommends that Ofgem consider a stress test that examines the loss of Norwegian gas supplies.

• Energy Outcomes, and a hybrid including additional storage;
• Energy Mutual;
• Community Energy, and a hybrid including Energy Outcomes; and
• Power Buffer.

• Why customers are more likely to take up interventions with relatively short payback periods
• Whether business model providers can help overcome these constraints
• This analysis is primarily focussed on household-level interventions (HEMS,cavity, internal and external wall insulation, and heat pumps). District heat also has long payback periods, and we briefly consider the issues for this technology. While the nature of district heat means that individual consumer contracts might prove less of a barrier, systematic uncertainties are likely to require risk-sharing with government.
• Quantitative modelling from BMET is used to examine the likely payback periods of different types of low-carbon interventions for different customer groups, and look at what might be required to bring these to within a 5-10 year window.

Overall, we find that HEMS and cavity wall insulation are the only interventions which are likely to have payback periods within such a window given BMET default assumptions.

This document was prepared at the time to contribute to ETI internal thinking and planning only.

• Businesses can be well placed to make it easier for consumers to choose low–carbon interventions.
• Policy support is also required to tackle the fact that some low-carbon interventions currently cost more and in some cases provide fewer benefits to consumers, relative to the incumbent options.
• Whether subsidies in excess of the carbon price would be justified, depends on the extent to which we believe:
• there are wider benefits from low-carbon heating interventions, such as improvements to health and wellbeing;
  • the costs of heat pumps and solidwall insulation will be driven down by the growth of the UK market (rather than global growth); and
  • there are no alternative, more cost-effective options across the energy system for meeting carbon targets.
  These issues would need to be examined further,before a case could be made.
• District heat will also require policy support.

• Annex 1a: Case studies
• Annex 1b: Analysis of existing policy
• Annex 1c: Energy efficiency and low-carbon heating in Germany
• Annex 2a: Qualitative policy analysis
• Annex 2b: Cost benefit analysis of policies
• Annex 3a: Modelling customer uptake (including attitudes to risk)
• Annex 3b: Payback period drivers
• Annex 3c: Factors affecting intervention take-up order
• Annex 3d: Elements of business model offerings
• Annex 3e: Assumptions on current and future levels of insulation

We welcome the Welsh Government's interest in locally owned renewable energy. Our response draws on a range of research undertaken by the Heat and the City research group at the University of Edinburgh, including a UK-wide study of local authorities and energy; and on the Financing Community Energy research project being led by Tyndall Manchester.

In our response we made the following general comments, before responding to individual points raised in the call:

• We suggest that greater attention should be paid to city/town/settlement scale infrastructure for a low carbon energy system, including area based upgrading of the built environment and low carbon heating infrastructure. Heat and energy efficiency for a low energy building stock are crucial to meeting Welsh and UK Government legally binding targets for carbon abatement.
• At national scale, Wales has opportunities for sharing risk, costs and benefits of energy developments - i.e. the direct benefit to the citizens of Wales through public ownership and the aggregate costs across society of decarbonisation.
• Local Authority planning and ownership could be considered further as key components to securing greater local control and accountability, and achieving Welsh Government objectives. Our research indicates that further developing specific roles, powers, resources and responsibilities of local institutional actors in energy planning and ownership, especially Local Authorities would also add value to Welsh society and economy.

The prices paid for electricity by domestic customers in the UK has been a regular discussion point in both policy debate and the media. A particular concern is the contribution that policies to incentivise low-carbon generation and energy saving make to the bills paid by householders. In response to these concerns, the UK Energy Research Centre’s Technology and Policy Assessment team examined in detail the data available on prices in the UK and other countries to address the question: How do the impacts of government policies funded through consumer electricity bills differ between countries?

This report reviews evidence on electricity prices paid by household (i.e. domestic) consumers with a focus on the UK and selected case study countries (Germany, France, Sweden and Australia), supplemented by consolidated EU-wide data to provide a broader context. Gas prices were not examined in detail because to date, policy has generally had a much greater impact on electricity prices, and UK gas prices are in the lower quartile of the EU range for all domestic consumers and almost all commercial and industrial consumers.

Key findings

• UK domestic electricity prices are higher than many EU countries - but not amongst the highest. They are around the median of those in Western Europe.
• Countries make different choices over which categories of consumer bear which costs, for example how costs are shared between industry and households. Countries also differ in terms of resources, the mix of power stations, and network costs. As a result caution should be exercised when comparing electricity prices between countries. There are significant differences in price breakdown between countries, even for those with broadly similar total prices.
• Wholesale energy and supplier costs together make the biggest component of UK domestic electricity price.
• UK policy costs are the lowest amongst the study countries, and total UK low-carbon policy support costs per MWh are below the EU average, despite an above-average share of electricity that receives support. Policy has contributed to increases in domestic electricity prices in the UK and other countries over the past five years but UK domestic electricity bills have not increased at the same rate as prices, due to the effects of energy efficiency policies designed to reduce overall consumption.
• There are a plethora of policies (both current and past) and taxes. This, together with a conflation of social policies and low-carbon policies, and of policy impacts with concerns over market structures, charging regimes and supplier profit margins, creates a very complex overall picture.
• The evidence for policy impacts is largely well understood but complexity creates the opportunity for differing interpretations or selection of the facts. This may help to explain some of the continuing controversy in the area since it allows different stakeholders to interpret and represent the facts differently, or select different subsets of those facts, to suit vested interests or political positions.

Electricity price formation is complex and affected by policies in the UK and all of the case studies considered in this review. Different policy approaches, geographical factors and mixes of power generation mean that comparison requires considerable caution, avoiding over-simplification. Nevertheless there is no evidence to support the contention that policy costs are either the principal source of high domestic power prices in the UK or are high compared to the country case studies or indeed the majority of Western European nations.