New Power REPORT APRIL 2019

‘We are going to be doing a crowdfunding in the next few weeks and that’s really exciting. We want people in the industry to be able to own it’ Sarah Merrick, Ripple Energy

OFGEM SOLAR Independent STEPS regulation faces More power to some existential local authorities questions SPRING STATEMENT Heat decarbonisation on the agenda

‘Ofgem should have more ‘sandboxes’ and they GAS PRIVATE should not be stuck at the Less or more? demonstration level’ Polly Billington, director, UK100 ‘We believe Ofgem could up its V game, and send a clearer signal PUBLIC on low-carbon to the companies Ownership it regulates’ Judith Ward, Sustainability First questions

Expert information for all those invested in the UK’s energy future INTERVIEW

The New Power Interview

POLLY BILLINGTON, UK100

Members of the UK100 network of local authorities have pledged to convert to using 100% green energy by 2050. Janet Wood spoke to the network’s director, Polly Billington, about taking a local approach to energy

K100 came out of the Paris agree- likely to win on your deep retroft if you are talking ment in 2014, explains director Polly about saving people money and creating warm and Billington. A large number of compa- healthy homes, than you are if you talk about saving nies made a commitment to 100% the planet.” clean energy at the time but she says: The network has connected leaders and built con- “I have been around enough cam- sensus, and at the same time “created a bit of city Upaigning to understand that if you are not careful a rivalry that has enabled us to escalate upwards”, political commitment like that can get put in a bottom she says. “Local leaders rarely leave the place that drawer and nothing happens.” She sourced funding they represent because they are very committed for a network of UK local authorities, who would repli- to it, so we have realised you have to meet them cate the Paris Agreement’s C40 network of ‘megaci- ties’ committed to addressing climate change. BIOGRAPHY From the original 66 UK100 members, the net- work has grown to 94 (Bath and East Somerset Polly Billington took a postgraduate diploma in Broadcast signed up in March) which is about a ffth of UK Journalism at the department of Journalism, Media and local authorities. “The more connections you make Communication, University of Central Lancashire. between people who are elected to make these She was a BBC reporter including for the Today decisions, the more you can increase not only their programme and the Politics Show. ambition but also their ability to deliver,” says Billing- She became a to in 2007 ton. Local leaders are better placed to do some of and was the Labour Party’s parliamentary candidate these diffcult things because “they are committed for Thurrock at the 2015 general election and a Labour to their communities, they have good relationships Party offcial. She was head of communications and with local business and they are very connected”. campaigns at Citizens Advice between 2013 and 2015. Climate change is a huge motivator for some peo- Since December 2016, Billington has been director of ple, she explains, but for others it comes alongside UK100. This network of local government leaders “seeks other practicalities, like deep retroftting social hous- to devise and implement plans for the transition to clean ing, or understanding and engaging with the energy energy that are ambitious, cost effective and take the sector. “Those things are the bread and butter of public and business with them”. It supports decision- local authorities and although these are not particu- makers in UK towns and cities in their transition to larly sexy, they are also things that deliver co-bene- 100% clean energy by 2050. fts that local leaders can talk about. You are more

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where they are already. We convene at party con- and other funding that has supported solar panels ferences and local meetings and that’s where you and storage on social housing. So they are trying a see this competition and learning from each other… whole lot of ways of transforming a city,” she says. it’s almost always the need to say ‘we are doing Given recent failures, I ask about the view of the something better than someone else’, and that’s supply company as less problematic and Billington the nature of politics.” explains: “It’s not so much that the regulations are easier, as the attractiveness of being able to badge ENABLE OR REGULATE? it as your local energy supply. Being able to be seen How can local authorities best engage with the to provide a good deal for your local residents often energy industry? Billington says UK100 sees a high looks like a good way into the energy market.” level of ambition among its members but “there is a But on energy generation: “They have very high long way to go for local leaders in understanding the ambition – but the regulatory systems don’t work in rapidly changing energy landscape and how they many peoples’ favour.” can formally engage with it”. Regulatory structures Nevertheless, Billington sees a need to invest and at the moment don’t favour the rapid decarbonisa- that extends to dense cities that cannot follow the tion of energy and heat most popular local authority option of solar farms: and transport required, “It’s being driven by austerity, let’s be honest, they Engaging with she says. need to fnd other ways of generating income.” But The important thing they are developing an ‘enabler’ role – Leeds has Ofgem and the about local leaders is that invested £17 million into a district heating scheme DNOs is so “they have levers across providing systems ahead of need. “That’s hard, challenging for all their vectors” in deliv- Ofgem doesn’t like you doing it, but they said: ‘If we ering local services, she are going to have system commercially the market local authorities says, so, even if they don’t will never provide, so we have to do it if we want to have control over transport, decarbonise our city.’” they still have control over plan- Do cities have the understanding – and the free- ning – where and how you put car charging points in. dom – to make such investments commonplace? On heat they have levers in the social housing and the Billington admires government’s approach to heat. private rented sector, and “you have planning regula- “There is a lot of work to be done on the fnancial tory powers to say you can’t build houses unless they side and that’s why they [BEIS] have the Heat Net- meet high energy standards”. work Development Unit. District heating won’t hap- Local authorities have become energy suppliers pen without a certain amount of upfront develop- and many “are still attracted to following the lead ment capital provided by government,” she says. of Bristol Energy and Robin Hood Energy in saying More broadly: “You need to make sure that the we can shift towards a cleaner energy offer through regulatory environment is one where the fnances creating an energy company ... it means they can stack up. That’s why Ofgem and the shift from DNOs provide for the residents to DSOs are so important. They have to understand in a better way than the the local authorities as partners, not just customers, You need to big players in the mar- and that the fexibility market can be quite important.” make sure that ket,” Billington says. Generally, electricity generation locally is diffcult The attraction of the and that puts local authorities off, she says. First, the regulatory supplier space is, she “they are not instinctively entrepreneurial”, and environment is says, “partly because second, they are in a Catch 22: authorities borrow one where the engaging with Ofgem money at a low interest rate from the Public Works and the DNOs is so chal- Loan Board (PWLB), but that body will not lend to fnances stack up lenging for local authori- “interesting” projects supported by the sustainabil- ties. There are signifcant ity team – those with higher risk. “The fnance team barriers to [authorities] doing pushes the project back towards PWLB to save what is really necessary.” borrowing costs ‘and you get a ‘business as usual’ Her ideal approach would be comprehensive: development,” says Billington. generating power, facilitating storage, creating the To break out of that cycle, UK100 members “have environment for smart EV infrastructure, having to fnd other forms of development capital and reas- high levels of energy effcient homes and generat- sure their fnance team that this is worth taking a ing electricity to be able to cross-subsidise retro- slight hit on the cost, or fnding cheaper capital”, she fts. Supply can lead that and “some of the most says interesting things that Nottingham is doing might be related to Robin Hood Energy but include com- WHAT CAN BE DONE? munity energy, retrofts on the Energisprong model I ask if it is about building a pipeline of projects and

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Billington says that is where UK100 can help. elsewhere, too. Land Securities, for example, joined In a recent meeting, UK100 brought investors, with Oxford City Council and came up with a set of developers and local authorities together so they sustainability criteria for a shopping centre. “They could start to replicate projects and exchange have created a template that can be applied to their notes on what works. shopping centres elsewhere,” Billington says. There are pathfnder projects: Swindon initially set up a solar farm and now it is doing solar with GETTING INSIDE ENERGY storage. “They are able When it comes to energy provision, what can regu- to do it because they lators do to help authorities that want to take local set up a wholly-owned control? she believes Ofgem should have more Ofgem should have arms-length company, ‘sandboxes’ (projects where temporary deroga- so they can effectively tions are permitted) and they should “not be stuck more ‘sandboxes’ de-risk it for the pri- at the demonstration level – get them bigger”. and not stuck at the vate sector and sell it Devolving some energy regulations to local author- demonstration level on,” says Billington. ities has been suggested in the past, but raised con- Plymouth has a simi- cerns over lack of consistency. Billington’s solution is lar approach, whereas simple: “What we’d like to have eventually is a ‘drop for some local authori- down menu’, so we can say we would like to go for ties owning it would be an this regulatory framework, because we think it will intrinsic part of what they do. enable us to go for renewables and EV, and develop UK100 is “pretty agnostic on that. We aren’t going a smart grid infrastructure in our new-build. Or that to dictate an ownership model.” framework, to do it with CHP district heat and com- I ask whether there are standard models avail- bine it with energy from waste. able ‘off the shelf’ yet. Billington says: “It’s early “Ultimately the problem is that Ofgem still is about days and that is one of the problems. Fundamen- keeping the price down for consumers now rather tally it’s often about standardisation of contracts. than for consumers in the future. We need to change It’s standardised paperwork and it’s about having the way Ofgem judges distributed energy. It requires a developer who will roll up their sleeves and say: Ofgem and the DNOS and the new DSOs to spend ‘You need wayleaves here’. more time on understanding local authorities.” “Local authorities are good at doing that in the Billington notes that regional energy ‘Hubs’ – fve normal way but everyone wants it de-risked. So are being set up – will be able to collect experience, how do you make sure someone is prepared to but they cover very large areas. But “you really need take the risk – and get paid for it properly, which is a ‘critical friend’ to be able to guide you through”, really the role of develop- she says. ment capital – or do you To make projects ‘investor-ready’, Billington pro- say that government poses a ‘crack team’ in BEIS. The HNDU is her should be prepared to model, providing the contacts and expertise and The regulatory do that?” linking up government support. “They have to go to framework has Local authorities BEIS and DFT and OLEV and DNOS – there is plenty probably run out “have lots of powers of grant funding that you could potentially stack up to do this stuff, but into more than just funding feasibility studies. It starts of road they didn’t know how to become interesting when you have a range of to exercise those pow- pots of money being put into a project,” she says, ers and they don’t have because that ‘stack’ makes it clear to private inves- the internal capacity. Your tors that it has the backing of government. planning department won’t Billington adds: “It’s important that when you have been thinking like this before, nor will your have that crack team they start gathering insights fnance department or your legal department,” Bil- into what does and doesn’t work and can effec- lington says. tively engage with Ofgem, government, National Where the network is making progress is the Grid and the DNOs about how to change the regu- ability to set a ‘ground-up’ agenda, she says, for latory framework and speed it up.” example on housing standards. Working with Does Billington think change is needed at the organisations such as the Green Building Coun- regulator? She says: “Some people would like to cil, means several large councils can agree a foor have all those functions put under one regulator. level. That helps smaller towns that “won’t have the There are arguments for that. What I do see is that muscle in front of a developer who is arguing that the lack of regulation around heat is really problem- tougher standards put build costs up and it’s not atic. My hunch is that the regulatory framework has viable at lower land values”. Standardisation works probably run out of road in terms of being able to

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deliver, especially when you need to decentralise.” Not just that one, says Billington: “We need more But she adds: “Say what you like about Ofgem, if decisions, more quickly, especially with no regrets there is one sector that has been able to decar- stuff.” The ‘no regrets’ are things like district heat bonise ahead of others it’s the one that Ofgem is in on new-build. The things that drive those could be charge of.” a package quite quickly. “The sensible thing for gov- ernment to do would be a response to the CCC net WHAT’S THE DIRECTION? zero report, which is going to come out in a couple Discussing the current shift away from a central- of months’ time. The government should accept ised system, Billington looks back at the decision that recommendation.” made decades ago to invest in a national electricity Are there other ‘no regrets’ options? Billing- grid: “Government said electricity is a public good, ton names super-rapid EV charge points, and for and we are going to make it available for everyone heat, high standards in new-build and retroft pro- by a big national piece of infrastructure.” That has grammes on the existing stock. She wants to use affected thinking, she says. “We have been used state programmes to leverage volume. “The great to one thing that provides everything to everyone… thing about social housing is that it creates a supply It also means we are used to everything being the chain. Local authorities can de-risk [the industry].” same everywhere. That standardisation, which we That also means that when the ‘able to pay’ want know is important for scale, is one of the great to fnd providers, they are there. beauties of how we managed to industrialise.” The future will have less reliance on a single grid NETWORK SUPPORT? and that is “a massive deal”, she says. Nor do we Surprisingly, given its interest in heat, UK100 has know yet how which smart systems will be trans- not had much contact with gas networks. But “we formative for Britain’s energy, but we will only fnd it have been talking a lot to DNOs because there is and get it to scale “once you de-risk it and try it in lots to do there, and their shift to DSO means they quirky ways in different areas”. have an imperative to engage with local authorities”, Billington says: “We don’t really have the regula- Billington says. tory framework to facili- I ask her view on that shift to DSO and she says: tate a ‘thousand fow- “I’m not convinced that the DNOs/DSOs know ers blooming’ at scale”. what their business model will be yet in the new I’m not convinced Local authorities want environment, so they are trying lots of things out. It’s that the DNOs/ freedom to act but they a big philosophical shift for them. Flexibility services DSOs know what don’t want to have to is one of the things they offer and local authorities make the decision on are the kind of institutions that can help them with their business whether to back a par- that, but local authorities are not used to thinking model will be ticular technology – they of themselves in that way. So understanding each want government help other is a really important part of the way we recon- on the right models. fgure the energy system.” In a decentralised system There are going to be a lot of different relation- that may mean different models in different places, ships between existing and future organisations, but “it’s very diffcult for us to get into our heads that she says. Some will disappear “but local authori- Stoke may not have the same future as Birming- ties are always going to be there. Whoever is the ham. What does that mean and what does it mean regulator, whoever owns the pipes and wires, for equity? Is it still fair? Understanding that it’s all whoever supplies the electricity, they are going going to be a bit different feels very weird. to have to deal with local authorities who have to “We are a deeply centralised country anyway empty the bins, people out of poverty and keep the – I totally support offshore wind, and it’s a mas- lights on,” she says. sive industrial opportunity and consistent with our What’s the next step for UK100? Billington says a national resources, but it also fts a system that is key issue is connecting local authorities with busi- dumb, national and at-scale.” How does that work nesses that can help solve their problems, and alongside smart, local energy systems? with fnanciers. The plan is to launch a sustainable Billington admits that local authorities are a long fnance All Party Parliamentary Group in order to link way from this debate yet. local leaders to policymakers and parliamentarians. But she thinks her ‘crack team’ and connecting it to DECISIONS PLEASE the rising energy hubs “will send a very strong signal We speak very soon after the chancellor’s spring that government wants this to happen and that will statement, which included a key announcement reassure local leaders. We need to transform local on ending new gas domestic connections. How [development] plans into ‘net zero’ plans by 2050. important is that decision? That’s the way we should be living.” NP

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