Energy Security and Net Zero Committee
Oral evidence: Reviewing the electricity market, HC 232
Tuesday 2 September 2026
Ordered by the House of Commons to be published on 2 September 2026.
Members present: Bill Esterson (Chair); Sir Christopher Chope; Lizzi Collinge; Torcuil Crichton; Graeme Downie; Melanie Onn; Mike Reader; Claire Young.
Questions 213 – 342
Witnesses
I: Jack Presley Abbott, Director for Energy Systems Management and Security, Ofgem; Andy Manning, Head of Energy Networks and Systems, Citizens Advice; Laura Sandys CBE FEI, Chair of Ofgem & Innovate UK Networks Innovation Taskforce, Non-Executive Director SSE Transmission, Highview Power & Ohme Global, Chair of Sero Homes, Food Foundation & Green Alliance, Member of EPRI Advisory Council.
II: Steven Agnew, Head of Policy, RenewableUK; Rachel Hodges, Senior Manager, Grid and Regulatory, Cubico Sustainable Investments, representing Independent Renewable Energy Generators Group (IREGG); Rosalind Smith-Maxwell, Senior Director, Quinbrook Infrastructure Partners.
III: Michael Shanks MP, Minister for Energy, Department for Energy Security and Net Zero; Dan Osgood, Director of Heat and Business Energy, Department for Energy Security and Net Zero.
Written evidence from witnesses:
– Independent Renewable Energy Generators Group
– Department for Energy Security and Net Zero
Witnesses: Jack Presley Abbott, Andy Manning and Laura Sandys.
Q213 Chair: Welcome to this morning’s session of the Energy Security and Net Zero Committee inquiry on reviewing the electricity market, which concludes today. Welcome to our first panel. Please introduce yourselves.
Jack Presley Abbott: I am a director at Ofgem.
Andy Manning: I am head of energy system transformation at Citizens Advice.
Laura Sandys: I am a non-executive director for a few energy companies, but here on behalf of the Energy Geeks.
Q214 Chair: You are all welcome, and thank you very much for joining us; we look forward to your evidence. We will rattle through as we have three panels before Prime Minister’s questions. I will start with some questions on how we remove policy costs from consumer electricity bills. We have seen the Government recently removing 75% of the renewables obligation cost, as well as VAT, from domestic bills. Is that sufficient or should all policy costs be removed? If so, how should those costs be funded? Laura, perhaps you can give us the first answer.
Laura Sandys: We have to move policy costs off the electricity bill. We are talking about certain elements of it but there needs to be a real focus on the reform of the retail market; through that, as a result, you can then start to look at where the policy costs lie. I would say that electricity should not be taking the full weight of policy costs. If we had what you might call a rising block tariff-type system, that would put more of the policy costs on the higher-tier bands. There is a case for legacy taxpayer funding of some policy costs. There is also obviously a little of a burning platform on the historical renewable obligation legacy costs; in my view, those should go into general taxation or be repurposed around renewable PPAs. The Government could co-ordinate long-term PPAs to give them surety without hitting customers in terms of an additional policy burden.
Q215 Chair: Where should the costs be put, if not on electricity? Are you saying put them on gas or on taxation, or is there another way?
Laura Sandys: You need a calibrated piece on it, but you certainly need equality across those. You need to ensure that there are incentives to electrify as well. At the moment, we have massive disincentives. When you look at the CNI sector in particular, where we are in terms of electricity costs is absolutely shocking in comparison with our OECD equivalents. We need to have a really big rethink.
There is also something interesting about demand: the more we get electricity demand on the system, the lower the whole system cost will be. We are moving from a commodity-based system to a fixed asset-based system. As a result, we need more users on the system rather than less: that would reduce the current percentage of the electricity levies. From what I understand, when you look at the team at DESNZ, there are fewer people looking at the demand side of the system than there are looking at the supply side. We need a real readjustment to ensure that we are focused on increasing electricity demand, and CNI is one low-hanging fruit that we need to focus on.
Q216 Chair: Do you mean a change in the way that DESNZ is operated, then?
Laura Sandys: I just mean a change in focus. I know Chris Stark has been talking a lot about demand, but we really need to increase that demand to ensure that whole system costs are spread over a much wider group of commercial, industrial and domestic customers.
Q217 Chair: Andy, should the Government commit to ruling out new policy levies on electricity bills? If so, why should they do that, or why should they not do it?
Andy Manning: The first step is to rule that out, as doing so assists towards affordability; that is a good first step.
If I can just go back to pick up on some things Laura was saying, interventions made so far by the Government—on the renewables obligation and VAT—are certainly welcome and have had a good impact in keeping some people from going into fuel poverty, but they are definitely not sufficient. If you look at what prices have done, they went down by 7% in April—a good chunk of that is down to the RO—but they then went back up by 13% in July and will go up again in October. What those interventions have been doing is offsetting other increases driven by wholesale costs, so we need further action. In terms of policy costs, we think that the remainder of the renewables obligation could be moved off bills and become feed-in tariffs. An important aspect is that those should be permanent changes that carry on beyond 2029. In terms of where that money would come from, we think it needs to come through general taxation. We have estimated the additional cost at about £1.3 billion, and would expect it to bring down household bills.
Q218 Chair: Is that realistic given that taxes are already so high and we have a cost of living crisis? Are we not just moving the problem somewhere else for people?
Andy Manning: We would be of the view that it is necessary that this support is given, and therefore the money needs to come from somewhere. You are left with the choice of it being through energy bills or through taxation. As it is progressive, we think taxation is the better choice.
Q219 Chair: Do you agree with the block tariff suggestion?
Andy Manning: Thank you for raising that. I will politely disagree with the rise in block tariff. As Laura was saying, you could end up with policy costs charging higher unit rates for higher usage. There are several issues in that. One is that we have low-income households who have high energy usage, such as people on traditional electric heating or people with a medical dependency. The people who are most likely to be in fuel poverty would end up paying more through a rising block tariff. It can make heat pumps more expensive and EVs more expensive, so it does not particularly align with our wider policy aims either.
Q220 Chair: How about moving levies on to gas?
Andy Manning: If you are going to do that then you need to accompany it with actions that look after those gas users who would be worse off. As we go through the energy transition, the scenario is that more affluent households will be the first to move with heat pumps—again, those left on with gas tend to be poorer households. If you are going to move things on to gas, it would be absolutely necessary to have some targeted bill support, which we think is needed in any case, to make sure that those who are in vulnerable situations and in need of support get support to offset any increases through moving to gas. It is contingent on that extra help for consumers.
Q221 Chair: Just going back to you, Laura, on the comment about the problem with the rising block tariff—that sometimes people in fuel poverty have high energy needs; there is a similar point with gas—what is your solution?
Laura Sandys: Can I make a broader point? I hate the term vulnerability because I do not think it gives any texture to where we are, but fundamentally we are all vulnerable in the energy market. It is a market that was designed 35 years ago. I do not know any other market that has stayed static in that sense. We are absolutely putting risk on to customers, who have to take risks that they have no levers to deal with. We are selling them kilowatt-hours that they are not interested in. We are not designing it around different customers. At the moment, we have competition between different coloured logos; that is more or less where the competition lies. Fundamentally, however one does it, there needs to be a very serious focus on the retail reform agenda. We are always talking about system reform, but we must ensure that customers are getting what they want, which is outcomes, not kilowatts.
When it comes to the block tariff, the New Economics Foundation has done a huge amount of work on this. Some 83% of low-income families would fit within the essential service, the so-called first block. That would be highly regulated, very similar to the broadband market, where you have a highly regulated essential service with all the social support that goes into that. Beyond it, you would have a more competitive market that would allow for a lot more tailoring around different people’s needs.
Andy is right that around 18% of low-income families would fall out of that. The work that has been done shows that you can have energy on prescription, which you should certainly have anyway. If you have a dialysis machine, it is ludicrous that the NHS gives it to you but does not give you the money to plug it in. You have a whole cohort there. You can then provide particular support for people on pension credit; you have a group there. You then get to a very small group whose needs have been alleviated by the removal of the two-child benefit cap. So you start to get to a very small number of people who, of course, we have to focus on. But currently, nobody is benefiting from the retail market; it is opaque and not much fun.
Chair: We will return to these questions in the next 45 minutes, but that is a very helpful discussion and counter-discussion on how we address the fundamentals.
Q222 Torcuil Crichton: We will return to that subject in just a minute. Social tariffs—different price scales—are essentially what we are talking about here. Jack, we have not heard from you yet. Should it be done and how can it be done?
Jack Presley Abbott: The introduction of a social tariff is something that we absolutely stand ready to implement through the regulatory processes, but it is ultimately a decision for Government. On the previous conversation, it is just worth pointing out that we are thinking deeply about where the costs fall. We are undertaking a cost allocation and recovery review within Ofgem about how we allocate those costs effectively, balancing the trade-offs between affordability, efficiency and driving electrification. It can be done, but ultimately it is a decision that sits with Government.
Q223 Torcuil Crichton: The decision is on how it should be funded—basically, where the money should come from.
Jack Presley Abbott: Indeed. If you have a social tariff that fundamentally provides a lower unit cost or standing charge, that money would need to come either from other consumers or other sources, but that is for Government.
Q224 Torcuil Crichton: Andy and Laura, I like this debate on block tariffs but as well as decarbonising energy, I want to de-jargonise energy. For viewers at home—by which I mean me—can we just have an ABC explanation of this? A rising block tariff, as I understand it, is that you pay more if you use more—is that right? Andy, maybe you could give me an ABC and explain why Laura is wrong? If I understand it right, Laura’s prescription would leave one in five people who are in poverty still in poverty.
Laura Sandys: It is very similar to the broadband model where you have a highly regulated essential service; the actual amount of what we need for functioning, the essential piece, has been specified and everybody would have it. In many ways, it would be a universal benefit and a decarbonisation benefit. We think that you can create that by looking at the current network costs, not future network costs, because that is the consumption that is in existence today. You would look at ensuring that it was highly regulated, possibly with a pass-through that DNOs— distribution network operators—can deliver. If you go above that, you start to come into the competitive market where a lot of tailoring is needed. Currently, the energy sector divides 60 million people into six archetypes; Amazon divides us into 150,000 archetypes. We are not delivering tailored propositions, but that essential service would take away a lot of the pressure on low-income households. It is also an unbelievably useful way to drive efficiency; the current incentives in the system are all about selling more rather than getting more from less.
Q225 Torcuil Crichton: Does anyone else do this?
Laura Sandys: Yes, lots of countries around the world do it. There is an interesting example in Dubai. Everybody in the higher tiers buys energy efficiency services because they are trying to stay below the next threshold. As a result, Dubai has reduced its total consumption by 4.5%. That is a lot of energy that the whole system then benefits from because the incentives line up.
Q226 Torcuil Crichton: Andy, what is your vision on this?
Andy Manning: I have a few observations on rising block charges, but we do not think it is the solution. We have touched on low-income households with high energy consumption, so I will not go over that again. We are on the path to electrification, and this is a change that is likely to distort the incentives and increase costs for people looking to put in heat pumps or EVs.
Q227 Chair: Can you explain why it does that?
Andy Manning: There are higher rates for higher usage. If you have a heat pump, that will mean your electricity usage is high, so you will go into that higher path.
Q228 Chair: I thought you said it was the installation costs that were increasing.
Andy Manning: No, sorry, it is the running costs of the heat pumps that will impact on your choices when installing. There is a fairness question as well, and I will pick out a couple of examples.
First, if you are someone who splits their time between two properties, you could have quite a high energy usage, but because it is split over two properties, you will avoid those higher rates. There is a question about whether that is fair.
Secondly, people with solar panels will naturally be offsetting some energy so, again, they could be avoiding that higher rate. Such households are more likely to be affluent.
Q229 Torcuil Crichton: Middle-class and upper-class people would benefit from it more than poor people, is that what you are saying?
Andy Manning: Potentially, that’s right. I have a final point on practicalities as well. To implement this will require a functioning smart meter, but the smart meter rollout is not complete. We are not expecting 100% coverage, and we know there are issues as to whether all smart meters are operating properly, so there are practical issues with implementation.
Torcuil Crichton: I must march on to give Laura the last word on that.
Laura Sandys: The way it has been designed is on total energy consumption. You can shift your allocation from gas to electricity, therefore you would not have that problem with electrification.
My very last point is that the retail market is not working. It is not functioning, and I would urge the Government to set up a six-month taskforce to look at all these options and start to reconfigure around a 21st-century experience for customers.
Andy Manning: I agree on the need for innovation in the retail market.
Torcuil Crichton: It is good to end on a point of agreement.
Q230 Chair: Jack, do you have a view—Ofgem are very good at not having views on these things—on the pricing block?
Jack Presley Abbott: We do not have a view—that is for Ministers to decide— but it is worth pointing out that either the base block is lower and therefore you have to make sure that costs are covered from the higher bands with elevated rates, or it is, in effect, the same current rate. The design is very interesting: you could either bear down on that base block—you would have to consider where that funding would come from—or it looks a lot like today’s unit rate with some additions. The design is very important.
Chair: There is also the problem of higher costs for EVs and heat pumps.
Jack Presley Abbott: Indeed, and we are considering the rump of network costs more broadly as well.
Chair: I am sure we will return to that multiple times.
Q231 Melanie Onn: Jack, do you think that Government are giving enough attention to the retail and demand side of the system? Is there enough focus? Do you think Ofgem has enough direction from Government to try to accelerate action in this area?
Jack Presley Abbott: There is a real focus on delivering the investment and the generation that we need. At the same time, we absolutely understand and agree that to deliver a low-carbon system and a clean power system you need a well-functioning, well-participating demand side, with consumers who can actively participate in the market and more services to help provide flexibility as well.
We are seeing a focus on demand with regard to ensuring there are flexibility services. We have seen participation of 1 million in demand flexibility services. We are seeing greater offerings with regard to the available tariffs—the Sunday saver, for example, where people get a free hour on the Sunday because they have been reducing their demand at other times of the week. There is a focus. Demand side is understood and agreed to be a really important part of moving to that clean power and net zero system. It is key to making sure that we bear down on the overall cost of that system. We are making sure that there are all the right signals.
Q232 Melanie Onn: Do you think it is sufficient? Are the Government going at a suitable pace and are you are under enough pressure?
Jack Presley Abbott: We have a joint flexibility road map, and we are ensuring that we are driving there with a lot of focus on the retail side, so yes.
Q233 Graeme Downie: I will resist the urge to carry this on and let colleagues pick it up later.
I want to develop some themes around consumer participation and tailoring outcomes around flexibility in the system, where that is and how we can make it work. I will start with you, Laura. Realistically, what proportion of households can expect to benefit from increased flexibility on the retail side in the next, say, five to 10 years?
Laura Sandys: First, everybody benefits from flexibility. It is not a zero-sum game. Strangely enough, there are some exciting business models out there that are starting to capture what you might call the low-income/people with disabilities market, but there are a lot of barriers to energy service provision. We are going to look at the future as being more about energy services rather than commodities.
Q234 Graeme Downie: Can you give an example of what you mean?
Laura Sandys: I have two examples, from companies I am involved in. The first is Sero Homes, which turns social housing into power stations. Everyone’s bill gets reduced by about a third—these are people in social housing, low-income families—and there is long-term revenue from solar, batteries and heat pumps. Once you start to understand that you can create these portfolios, you really start to move forward. The second company is Ohme, which delivers EV charging and flexible charging for Motability, serving people with disabilities. We need to ensure that so-called vulnerable people are not left out of the market. We need to design things around all sorts of different characteristics.
Q235 Graeme Downie: Rather than relying on the middle-class person who says, “I have an EV, I have a heat pump, I know how to use this system,” you think there should be more measures concentrated on groups, where the onus is not placed on an individual household or person to access that flexibility, but someone accesses it for them. Would that be a fair characteristic?
Laura Sandys: Absolutely. In the energy sector we have been trying to turn customers into electrical engineers for years. They really do not want it. What they want is services. You do not know where the data is coming from on your mobile phone; you do not care. You have your package and you have clarity and control over when you start to get to your ceiling. That is the provision. It is not about selling units of something people do not understand and do not know how to control.
Q236 Graeme Downie: To pick up on the point that Melanie made, this is probably happening on quite a low scale at the moment, but it is an option that is available. How much pressure are Government putting on you to accelerate that and make it happen very quickly? On what timescale are they saying that this is the kind of solution you should be helping to deliver?
Jack Presley Abbott: There are a set of actions, and we are driving them forward. As I said, we are working in conjunction with the Government on a flexibility road map. It sets out a series of actions to make sure that we are not only deploying the smart meter technology, but regulating the aggregators—those parties that are not suppliers.
Q237 Graeme Downie: Can you give us a sense of timescale and market penetration for when that can happen? So many times where there are great solutions—whether in energy or any other sector—we say, “Oh, it’s wonderful, it works here,” but the pilot never becomes more than a pilot. How are we trying to push and accelerate this so that it is not just a nice-to-have, but becomes something verging on a requirement?
Jack Presley Abbott: That is entirely the point of having a key road map for the actors. We need to drive through regulatory frameworks and roll out flexibility across the board both at system and consumer level so that we can deliver a significant amount of flex in the next few years.
Q238 Graeme Downie: Will a few years mean three, five, two?
Jack Presley Abbott: The road map sets out actions that are coming this year and next year. In terms of penetration, I can defer to—
Q239 Graeme Downie: What is a realistic level of market penetration for that kind of solution? I am not sure which one of you is better to pick that up, Laura or Jack. I can see Andy champing at the bit.
Laura Sandys: There are business models out there, but there are quite a few historical regulatory barriers that are not the fault of Ofgem. We need to get rid of them.
Q240 Graeme Downie: What are those barriers?
Laura Sandys: If you are in social housing and your local authority is buying the energy as a service, you cannot benefit from the warm home discount. We have 800,000 people in this country who are eligible for the warm home discount but because they are going through a buyer—say an organisation such as a local authority or a housing association—they cannot access it because it is regulated that you have to be the bill payer. There are lots of these things that stack up. I can share about five different areas with the Committee that would really unlock that social housing piece.
Q241 Graeme Downie: It would be very helpful if you could write to us.
Laura Sandys: I will do that.
Q242 Graeme Downie: Andy, I can see you wanting to jump in. How do we make sure we have the market penetration for consumers who are as active as they need to be?
Andy Manning: I have a quick general observation, and then I will try to give some specifics. Consumers definitely have an appetite to save money. As an example of flexibility, our surveys show that 68% of people who are not on a smart time-of-use tariff would be interested if it would save them money. The appetite is there, and I agree entirely with Laura that we need to see this as an opportunity but not a necessity. People should not have to turn their life upside down to get an affordable bill, but if we get this right, even if they do not engage, they will get a lower bill than they would have otherwise.
In terms of barriers, the big benefits from flexibility are about having tech and assets that you can be flexible with. The warm homes plan committed to setting out further detail about the new locally delivered fuel poverty scheme in spring 2026. That is a key plank in helping people get assets more broadly, and we are waiting for that.
On the automation point, we agree that the key thing is to get automated solutions. There has been good progress with the people who are going to provide those solutions being put under what is called a “load control licence”. We need to make sure that is not delayed.
On innovation in the retail market, there is currently what is called a universal service obligation. That means that if you want to act as a supplier, you have an obligation to service everyone. That prevents specialisation, which is slowing down innovation. That is another area where there could be further consideration.
Q243 Chair: We heard from the Association for Decentralised Energy that the only solution to lower consumer bills by the end of this Parliament was to use, incentivise and activate consumer-led flexibility. Jack, do you agree with that?
Jack Presley Abbott: The key point is that we have to deploy a significant amount of network build, which we are doing, and that is a key part of the energy system. As I have said, consumer-led flexibility and rolling that out alongside the system flexibility we will get from batteries is a key part of that. I completely agree that consumer-led flexibility is a key part of running an energy system at the lowest overall cost. Flexibility benefits everybody because it lowers that overall cost. You also have more empowered consumers actively participating in the market—not only those with the assets, EVs, etc, but also just generally with appliances. More engagement in the market is a very positive thing.
Q244 Chair: Andy, is there any way of doing it in this Parliament? The ADE is probably saying that all the stuff on the previous two sets of questions around levies is just window dressing. Do you agree with that?
Andy Manning: I do not agree. The levies are an important way of making bills more affordable. As we were saying earlier, consumers are interested in ways of saving money. It seems to me that consumer-led flexibility gives that opportunity, so we should be trying to optimise that. I agree with Jack that it is part of the picture we still need—we still need to be building network. Regardless of whether we describe it as the most important thing or the only thing, it is just a good thing. We should be doing everything we can to encourage it.
Q245 Chair: That is at a network level and consumer level. Laura, do you have anything to add?
Laura Sandys: I come back to this essential service, where we really regulate that piece. The NEF is saying that if we do that there will be a reduction of over £500 on bills for low-income families.
Q246 Lizzi Collinge: I want to keep going on the flexibility thing for a moment. We have had a lot of discussion in this Committee about consumer-side flexibility. Andy, you mentioned automation. I suppose this question is for Jack. With the direction we are going in, are we relying on consumers having to actively decide, or are we trying to build systems that automate flexibility to make it cheaper for them? Which direction are we going in?
Jack Presley Abbott: It is important that we maximise the participation of consumer-led flexibility. The more consumers who participate, the lower the overall cost.
Q247 Lizzi Collinge: By participating, do you mean an individual consumer taking an interest and playing with apps and solar panels like my dad does? Or do you mean just being part of a flexible system?
Jack Presley Abbott: There are three options. First, for those who can participate, there is being part of the flexible system. Either they choose to through whizzy apps or they actively go to an aggregator or party that is willing to automate this energy service provision for them. At the same time, we need to make sure that we maximise that flexibility, that we do not set up a system that unduly penalises those who cannot or will not participate. It is about choice and the ability to participate, making sure the technology is rolled out so that as many people can participate as possible, then giving the choice of, “Yes, you can participate on your own,” or, “There may be benefits or it may be easier for you to participate in a different set-up, be that through aggregators or suppliers.”
Andy Manning: Regardless of how you do it—as your question was getting at—the consumer needs to make a choice at some point. Even if you automate, at some point you are making a choice. What our research has shown is that there are significant gaps in the information and advice that is available. How are people making informed choices? We know that people want independent, tailored, expert advice.
Take time-of-use tariffs, for example. We found that if you researched before going on a time-of-use tariff, you were a lot more satisfied with the experience; 86% compared with 54% who went on a time-of-use tariff without researching. That is a big area. We have to fill that energy information and advice gap so that consumers are properly empowered to make the right choices.
Q248 Lizzi Collinge: I also wanted to talk about fair risk allocation. We have been told by E.ON and others that customers are treated as the default cost-recovery mechanism. [Interruption.] Laura, it sounds like you agree with that. What would a fairer allocation of risk look like between consumers, generators, suppliers and Government? You have talked about various mechanisms for how you would structure the bills. Are there any other comments you would like to make about how we allocate that risk fairly?
Laura Sandys: E.ON is absolutely right: so much risk is socialised. I have no lever to manage that risk; it just gets smeared across my bill. I am sorry to bang on about this essential service, but if you had that as a regulated entity, and a supplier went bust in the competitive market—although a supplier would not go bust because it would be regulated—that is the supplier and shareholders’ problem, not my problem.
Currently, we have a system where there is no risk allocation to businesses making the right choices. We pick up the pieces. The essential service helps with that because it takes the so-called risk and puts it into the marketplace but, fundamentally, we are going to get to a stage where customers are going to be paying £100 for overall debt. We have all sorts of issues around the capacity market, the balancing market—all these things that we, as customers, are taking. Why is it not the responsibility of the system itself— the actors, the developers—to balance their systems? Let us push the risk back into the system and not socialise it.
Andy Manning: I have a couple of observations. A big part of getting the risk allocation right is the work that Ofgem is doing on consumer outcomes. This is about putting responsibility on the companies to ensure there are good consumer outcomes—for instance, with fair value—and that products are appropriate for consumers, not just when they sign up to them but throughout the length of the contract. We have long talked about having a consumer duty to do that, but if Ofgem can get the right outcomes specified and find an effective way to be able to enforce against them, that should help with the balance.
A separate point is about risk and return. I am concerned that a lot of investment is needed in the energy system. Regulators can quite rightly look at where that risk sits, but if you are going to move risk from the companies and sit it on the consumers, then the level of returns those companies are making need to adjust for that as well. When the retail market was under pressure, Ofgem was quick to intervene to make sure that the retail price cap allowed extra money for the suppliers to cover bad debt costs and extra wholesale costs. That never rolled on to, “Okay, we’ve given you all this support, we’ve managed the risk for you, we now need to look at the returns you’re making to reflect that lower level of risk.” That never flowed through into the returns. If you are going to de-risk companies, you need to make sure the returns are lowered to manage that.
Q249 Lizzi Collinge: That brings me to my next question, which I am going to aim at Jack. If windfall gains are arising from market conditions rather than anything that a company does, should there be stronger mechanisms to either prevent or recoup them?
Jack Presley Abbott: We can think about the entities that we regulate, and network companies would be a good example. It is absolutely right that we focus our regulatory regime to bear down on costs and make sure that they are given regular and consistent scrutiny. The example we are alluding to is the regulated asset value of network companies increasing with inflation. That occurred and was recognised, but it is the equivalent of your house price going up. You only realise that value if you then sell it. We went away and rightly tested whether we should reopen that price control process. It was deemed that that was not the appropriate thing to do, and most people agreed. We have taken action for the next price control to bear down and make sure that it cannot happen again, both in our transmission price control and our distribution price control.
Coming back to the point about risk allocation, that is absolutely something that we consider when we take decisions at an upstream level. When we take decisions, we must think about where the risk is best allocated and can be managed as well. We bear down on the costs that occur, but we then think about how they are allocated.
Q250 Lizzi Collinge: Is it true that currently almost all the risk lies on the consumer?
Jack Presley Abbott: Ultimately, the costs have to be recovered, and they are recovered on bills. If you allocated them, for example, on the generators, would that result in an increase in the cost of capital? Would that ultimately feed through to bills, to contracts for difference, to the capacity market or other mechanisms? These costs have to be recovered. We have to think about the best way to allocate and bear down on them, and, ultimately, whether parties are able to manage them. They should be allocating that risk to those that can manage them.
Q251 Claire Young: I have a very quick question. Andy, you mentioned increasing complexity. We saw a massive increase in switching from the late 2000s to the early 2010s because websites were increasingly able to do comparisons. That becomes much harder in the current environment, where there is increasing complexity. If you have flexibility, you have to know not just how much electricity you use but when you use it and if you could feasibly move it. Do you have any thoughts on how we ensure that this increasingly complex environment is not just used to cover up passing more of these costs on to consumers?
Andy Manning: At its simplest, we have to make sure that there are comparison tools available that consumers can use to get the information they need. A key part of that is data. There is work going on with this. We have to make sure that consumers are able to share their data so that they can get these comparisons but always maintain the agency, so they have clear control on who is using their data and for what purpose. Getting that bit right as a key enabler is the first step, and then comparison tools— making sure consumers are always in control of who is using their data and for what purpose.
Laura Sandys: Could I just add one thing? There is a really interesting model in Estonia, where you put your profile out to the market, and the market comes to you to say, “I can deliver this or that package,” or whatever, rather than this other way around where we are having to understand the overall structure. It is a lovely way of feeling in control. You are giving your data and then you are choosing from the people who come to you.
Q252 Torcuil Crichton: Estonia is also the model for digital ID as well, is it not?
Laura Sandys: Yes, it is. I am pro digital ID.
Chair: Before we go on to the digital inclusion action committee’s session on Estonia’s bold handling of ID, I will move on to Mike.
Q253 Mike Reader: DESNZ rejected locational marginal pricing on the basis of a number of concerns, including investor certainty, fairness to consumers and cost. There is already a regional variance in the energy market, and we see that in standing charges and unit rates. Jack, what level of variation is fair? Should there be caps or cost redistribution within the system?
Jack Presley Abbott: There are regional variations that reflect, for example, the differences between the networks that exist in each area. Part of the cost allocation recovery review that we are undertaking—I have mentioned it a few times—is to consider whether there are appropriate differences between different regions, and whether it would be appropriate to levelise, or flatten, if you like, across the different regions. The stakeholder engagement we have had so far has been inconclusive about the solution. It starts to move into the conversation we were having before about whether redistribution needs to be social policy, and that is a question for Ministers. There are questions about incentives as well. For example, if you are levelising or changing regional disparities, how do you maintain the incentive on network companies in each area to manage their network most effectively if, when those prices get higher, they get levelised out?
Q254 Mike Reader: Do you think we are moving quick enough to address the unfairness in the system? If you are in the highlands, you are in a renewable energy generating area, so you have higher amounts of transmission and state infrastructure, and you are paying the highest costs. Surely this is something where the Government and Ofgem should be moving a lot quicker.
Jack Presley Abbott: Yes, and there is specific support in the very north of Scotland, which is run by Government. I recognise that with that structure, it feels a bit counterintuitive, but the way we have the system is that we need to make sure that where you build the generation, the electrons can get to where they are most needed. Building it in north Scotland is a further distance and the costs have to be recovered.
Q255 Mike Reader: Andy, we have talked about this kind of difference in some charging. We have also now seen the turn up trials where people will get low or free energy on demand where there are constrained areas. Do you think the Government are consistent in how they are approaching this?
Andy Manning: In terms of locational charging, my reflection is that we need to think about what is a useful signal and what is not a useful signal. In some parts of the world, the system is at its peak when you have an air-conditioning load in the middle of summer in the afternoon. The traditional winter peak is around tea-time. We need to make sure that those signals are reflected to consumers to get the most efficient answer, which means that we need locational charges and we need to return to that discussion as we go into the 2030s. That is a slightly different point; it does not mean the typical bill has to vary, but it is important that we make sure the time-of-use signal works on a locational basis, so we probably need to return to that.
Q256 Mike Reader: When the Government approached this review of the energy market, do you think they weighed consumers versus industry enough? There was a lot of talk about investor confidence and clean power, and the risk, if we move to regional locational pricing, to the investment needed to deliver Clean Power 2030, but do you think there was enough focus on the impact on consumer bills?
Jack Presley Abbott: That choice was genuine and it was a difficult trade-off. To get specific about where we are now, the programme that has replaced it—the reformed national pricing programme—should have more of a focus on consumers. There are four accessibility criteria, one of which is investor confidence, which you alluded to, but impact on consumers is not one of those criteria—it is embedded in one of the other criteria. Certainly, as we sit here today, the reformed national pricing programme should have more of a focus on consumers.
Q257 Mike Reader: Laura, should areas that are net exporters of low-carbon energy have bill reductions or other financial benefits?
Laura Sandys: Yes, absolutely. Anyone who takes infrastructure on is part of the system and needs to have some benefits. Picking up on what other people have been saying about locational pricing, if we are to scale business models—that is where we are going to have to get to, whether through social housing, home ownership packages or whatever—we are going to have national cost to consumers. What happens behind the scenes is a different matter. They might have to manage their business models across different locational pricing systems. The Government have made the right choice about locational pricing. We need to get a stable, settled system, and then let us revisit it. Currently, I do not think we necessarily need to have so much variation between, say, Newcastle and Penzance.
Chair: Thank you all very much indeed. It is 10 am and we need to move on to our next panel. Thank you for your evidence.
Witnesses: Steven Agnew, Rachel Hodges and Rosalind Smith-Maxwell.
Q258 Chair: Welcome back to this morning’s session of the Energy Security and Net Zero Committee on reviewing the electricity market. Welcome to our second panel. Please introduce yourselves.
Steven Agnew: I am head of policy for RenewableUK.
Rachel Hodges: I am senior grid and regulatory manager at Cubico Sustainable Investments, but I am here representing the Independent Renewable Energy Generators Group. I have a list of the members: they are BayWa r.e., Boralex, CWP Energy, ERG, Fred. Olsen Renewables, Nadara, OnPath Energy, and RES.
Rosalind Smith-Maxwell: I am the senior director at Quinbrook, an energy transition infrastructure investor. We invest globally, particularly in the US, the UK and Australia. We have built the largest solar park in the UK at Cleve Hill, which is five times larger than the next operating solar project, and America’s largest solar and battery storage project at Project Gemini.
Chair: Thank you very much indeed. Being responsible for America’s largest solar park as well as the UK’s is definitely a very impressive part of your CV.
Q259 Sir Christopher Chope: Good morning. Under the revised national pricing structure, we have the opportunity to make some radical changes. Would you agree with a radical change that would ensure we would no longer pay producers of renewables for their electricity output when that output was not needed?
Rachel Hodges: No, I would not. The way that renewables are built is that there is a huge amount of capital cost and then very little marginal costs involved in that. You need to give investment signals and make those financeable and buildable, then you need to have some sort of security of what return you are going to get on that investment. A network that operates that efficiently should have a level of constraint in it, otherwise you are overbuilding your network. We already have generators that are not paid when they are turned off under active network management in the distribution system. In some ways, they have some control over how much curtailment they are willing to accept when they make their financial investment decision.
You are talking about generators that are potentially constrained on the transmission system. They would have less control over that turned-off-ness because they do not have control about how much transmission network capacity is built, how much more generation is connected, and who is turned off when. That would bring a level of risk that they would have no control over. Risk should be allocated where risk is best able to be managed, and that is not a risk that investors in renewable energy would be able to manage.
Steven Agnew: We have the Irish market next door, where I spent six years working. Generators are not paid back there, and it has really inhibited investment. If we look at Northern Ireland, renewable investment has been very poor as a result. That increases the cost of capital so that ultimately you end up increasing the cost of investment or, even worse, deterring investment altogether, which itself increases costs for consumers because you are not availing of the potential renewable investment.
Q260 Sir Christopher Chope: Can I encourage you to be a bit more imaginative? At the moment, the producers of this renewable electricity have no incentive to build their own storage facilities when it is not needed, and to operate on the basis of waste not, want not.
Rachel Hodges: They do, actually.
Q261 Sir Christopher Chope: If they were not paid for the electricity we do not need, then they would have an incentive to store that electricity and get themselves an income from it, whereas at the moment that income is guaranteed.
Rachel Hodges: No, I get that, and I believe you asked that question in a previous panel. I agree, there actually is an incentive for them to build batteries, but it is not straightforward because co-location of renewable energy and batteries has not been something that was within the regulatory framework for the last few years. It is starting to change now with things such as hybrid metering, rules about co-location and how they are treated, but it might be too little too late.
A huge amount of stand-alone batteries are being built and they might not be in the exact place that you need them. Putting a battery on a wind farm in Scotland might not actually be the best place for the overall network. What we want is the most overall-efficient network, which includes the right amount of transmission and generation—not over-build, not under-build—and the right incentives to operate that system effectively. I do not think making wind farms, particularly offshore wind farms, put batteries next to them would necessarily be the most cost-effective way of doing it.
Sir Christopher Chope: Okay, you articulate the producer interests in this.
Rachel Hodges: Yes.
Q262 Sir Christopher Chope: I have another challenge question. For most of the production in this country, the producers do not get subsidised for the costs of transmitting their production from the place where it is produced to the place where it is used, whether for aggregates or, in the old days, coal. What is happening at the moment with electricity is that the costs of transporting that electricity on the grid from the place of production to the place where it is needed and is used are borne not by the producer, but by the consumer. Surely that is all topsy-turvy, is it not?
Rachel Hodges: No, half of the costs are borne by the producer.
Sir Christopher Chope: Half?
Rachel Hodges: The transmission network use of system charges—and transmission loss multipliers, which are the electrical losses on the system—is paid for by generators based on a calculation called “transmission network use of system charges”. I could talk about that all day, and I am very happy to answer questions.
Q263 Sir Christopher Chope: Time is short. I have one more radical question. One of the constraints upon the grid is if there is too much produced and not enough is being used, then we end up paying the producers and so on. Would an alternative not be for the end user to receive free electricity when there is overproduction? We know that if electricity is free then the consumption goes up by as much as 30%. Would that not be a way of ensuring that, instead of paying the producers for the overproduction and getting nothing in return, the consumer would actually be able to benefit directly from free electricity when there was this overproduction?
Rachel Hodges: That is already being considered, and within the market there are already times of negative price. When a renewable energy generator does not get paid, their CfD does not give them payments when the market is negative. That is true, isn’t it?
Rosalind Smith-Maxwell: It is true. When you want an operating project to build a battery storage project, we cannot get access to a grid connection for that. The whole point of the grid connection reform has actually been to reduce a large number of battery connections, and it is now nigh-on impossible to put in an application to ask for an import because there is still such an over volume of BESS in the system. Therefore, while you might want to put batteries in—we do not have an operating wind farm in Scotland—we cannot get a grid connection to do it.
Q264 Chair: We are going to move on, but before we do—as this was not quite where Christopher was heading in his questions—if there were no curtailment fees being paid, would it make it attractive for investors to build gas, coal or other fossil fuel forms of electricity generation?
Rachel Hodges: Some 80% of the constraint payments that are paid are actually paid to gas generators in the south. A lot of the focus is on the amount that we pay for wind in the north, or in East Anglia, to be turned off.
Q265 Chair: What is the direct answer to my question?
Rachel Hodges: Can you repeat it?
Q266 Chair: Would it make it more attractive for investors to put their money into fossil fuel generation if we removed curtailment costs?
Steven Agnew: You would then disincentivise renewables so that you then need to find that from somewhere else, so yes, you potentially open up the market for other generators. I certainly do not think that is a favourable goal.
Chair: Yes, that is a different point.
Rachel Hodges: I do not believe renewables are being built so that they can be turned off and paid; that is not their aim. If we build the grid that is planned in the short term, those constraint payments would be significantly reduced at just a small amount of a targeted grid. The aim under Connect and Manage, which was the policy that was introduced about 10 years ago, was that renewables would be built, then the grid would be built. What has happened is the grid has not kept in line with renewables. Renewables did not get built to get constraint payments.
Q267 Chair: That is very helpful. Finally, Rosalind, would it make it more attractive for fossil fuel investment?
Rosalind Smith-Maxwell: One of the key concerns with fossil fuel investment, if you were to do it, is lead times for a gas turbine, which are five years. If you put in an order for a new gas turbine it is not going to arrive until nigh-on 2031, but we can build you a solar farm of the equivalent scale in that timeline.
Q268 Melanie Onn: Rosalind, I wonder if you can just explain how much the current output-based CfD distorts market signals, if you think that it does, and if there are any costs to consumers and the overall system efficiency?
Rosalind Smith-Maxwell: It is important to bring out how much the CfD has been subsidising bills this year. If you look on the LCCC’s website, I can tell you that AR4 projects have subsidised bills since July 2025 and AR5 has subsidised bills since October 2025. The latest but one auction, AR6, has subsidised bills since April 2026. That is new-build renewables subsidising consumer costs that have been driven high by the cost of gas. If you are saying they are distorting the market, what they are doing right now is protecting consumers from gas prices. Since we built that project at Cleve Hill, we have been charged £1.9 million and received £0.18 million, so the CfD is very much in the money.
We want to build more projects that are able to benefit from the long-term price certainty of a contract for difference. The key barriers we face are the fact that with grid connection reform we do not have a connection date in order to build the next Cleve Hill. We have a theoretical commissioning date of 1 January 2028. It takes more than two years to build a solar park of that scale, and we still do not have a grid date.
Q269 Melanie Onn: On that basis, are CfDs working for you?
Rosalind Smith-Maxwell: They are working very well.
Q270 Melanie Owen: Not necessarily for you, but you would say so for consumers?
Rosalind Smith-Maxwell: They are working well for us because we have long-term price certainty. That enables us to get project finance at tight margins.
Q271 Melanie Onn: It is all completely pointless, is it not, if you do not have grid connection? It is not so wonderful to have price certainty if you cannot build anything, make any money or deliver any energy. What is the point?
Rosalind Smith-Maxwell: When the grid connection offers are coming through to projects, they are coming through with significant cost increases. You are getting projects that have already submitted to AR7, AR6, to build, but they are now finding themselves uneconomic because of the grid connection revised offer. I know of one project that had a nine times price increase. That project is going to be uneconomic and will not be delivered.
Q272 Melanie Onn: The clearing out of the dormant projects that were sitting with this latent grid connection offer has not necessarily sped up or made access to new projects being built any easier?
Rosalind Smith-Maxwell: It really has not. We are the only project sponsor to have broken ground on a nationally significant solar park. What is delaying us from breaking ground on our second one is the lack of a grid date.
Q273 Melanie Onn: Where are the costs associated with grid and that revised offer coming from?
Rosalind Smith-Maxwell: The cost of copper has gone up by 47% in the last 12 months. The cost of labour goes up with the cost of inflation. We are not able to get into contract to be able to lock our prices in with our suppliers because we are still waiting for a grid date. We are at the point of negotiating grid as being a force-majeure event to enable us to try to go forward.
Q274 Torcuil Crichton: Are transmission companies charging you nine times more?
Rosalind Smith-Maxwell: Yes. When you get your revised offer, you are told your connection charge has gone up by that much. Some go up five times; not everyone has had the ultimate bad news of nine times.
Rachel Hodges: It is the lack of news as well, isn’t it? People are waiting such a long time.
Q275 Melanie Onn: Rachel, the Government decided not to proceed with capacity-based CfDs. Do you think there is any evidence that would justify revisiting that decision?
Rachel Hodges: Both capacity and deemed CfDs have pros and cons and can be delivered in a way that is possible, but the devil is in the detail. There was quite a lot of concern about both because of the way that they could cause issues if they were not laser focused. Our view was that the current system is generally working well, and ironing out the bits around the edges is better than ripping it up and starting again.
Q276 Melanie Onn: Steven, do you think the current CfD model reinforces efficient siting, flexibility and system operation? Do you think consumers can see resulting and tangible value in the benefits that are coming back, which Rosalind mentioned?
Steven Agnew: Yes. Essentially the CfD is a hedge on behalf of consumers and the most effective hedge we have in the market. If you compare CfD prices to corporate PPA prices, it is around about £10 per megawatt more for a corporate PPA price than you get in the CfD, based on analysis and what we anticipate for the AR8 prices. If you actually go merchant, that kind of break-even price is up to £20 to £35 per megawatt more. We have this mass consumer base that we are going to hedge on behalf of; it is incredibly effective and has driven the best prices that are available in our market.
In terms of locational signals—I am being careful with my words—the best locational signal for the wind industry is wind resource, and that often gets missed out in the debate. The CfD has pushed you to the best, most economic and efficient sites in terms of generation. We also obviously then have seabed leasing and land pricing. There are so many locational signals already in the market that are sometimes not sufficiently acknowledged when we have that debate, so those locational signals are there.
As you have touched on capacity and deemed CfDs we perhaps need to move the conversation on. We have a model that has been about getting more and more generation, which is what we needed. We are now moving towards more system needs. We still need more renewables but a reform of the CfD is the right approach rather than a tearing up, as some have discussed, and that is a conversation we would be keen to have.
Q277 Melanie Onn: Has the system change come too late? The race to build on renewables as the price has come down and the incentivisation has been there from Government, but we have seen everything else lag behind. It comes in all forms, whether it is skills for the industry or connecting projects so consumers can use it. Has that been too late?
Steven Agnew: The grid has definitely come too late. We have been arguing that we need anticipatory investment in industry for 20 years. Just as we are starting to move towards that there are people saying, “Maybe let’s not build the grid.” All that does is push the problem back, just like we did in the last decade when we just connected and managed. That maybe made sense in the context of the time, but we did not build the necessary grid in the last decade, which we are paying for through constraint costs and the inability to connect new projects that Rosalind has referred to.
We cannot keep kicking this can down the road; we need to invest in grid now. NESO produced a report just yesterday that said that for each year’s delay in grid investment the cost is about £7.5 billion, and that is year on year. The more we debate whether we need grid, the more we push costs on the consumers, the more we delay.
Grid takes time, and in the interim, we absolutely need to look at those flexibility services. Looking at the demand side and industrial electrification, which was touched on in the last panel, is where the conversation needs to be going. The framing of the conversation is around how we better utilise the renewables we have, rather than whether renewables are the right solution. We have had that conversation, we have had consensus on it, and every Government has agreed on that over the last 14 years. We need to keep that as the framing of the conversation, moving on to how we utilise them better, how we electrify industry and maximise the investment the consumer has already made in the mass renewables rollout.
Q278 Melanie Onn: Just one final question from me. The Sustainable Energy Association has suggested that we extend CfDs to cover 25 years, potentially maybe 30 years, repower in maybe 50 years—who knows? It said 25 years for CfDs to cover the lifetime of projects. Does the panel think that is something that would be welcome, and would it work?
Steven Agnew: It is worth considering, but the extension to 20 years met a lot of need. The wholesale CfD idea is useful in looking at potentially providing a route to market for repowering, if designed in that way. We need to look at mechanisms for late life and repowering. I am not sure whether an extension of the CfD to 25 or 30 years is necessarily the best approach but again, it is the right kind of conversation to be having.
Rachel Hodges: Repowering is a really important thing to be considering and something that has slipped through the cracks in this strategic spatial energy plan, and in a lot of the other reforms and thinking. We have a lot of renewables that are going to be coming to the end of their life. How do we keep them, allow them to extend, or replant so that we do not start from scratch and have them fall off a cliff?
Rosalind Smith-Maxwell: I would like to be very specific, though, that there is a distinction between a solar farm and a wind farm that benefited from a 20-year ROC commissioned in 2008. It would have assumed a 20-year asset life, and it received a 20-year ROC to support a 20-year assumed asset life. If it is going to continue to operate, it will have lower feedstock costs because the sun and the wind is free. However, a landfill gas or biomass project have high operating costs. If we want to keep that renewable baseload capacity running, those will need some form of support in the form of re-contracting on a new CfD, as they are uneconomic to run. We will lose that stable base load renewable power if they do not have some support.
Q279 Claire Young: That actually leads nicely into the questions I was going to ask about the assets that were supported by ROC. Rachel, do you think we are at risk of losing large volumes of existing renewables generation, or it is about specific types of generation, as Rosalind has just suggested?
Rachel Hodges: We are not going to lose it, but it is really unclear. One of the IREGG’s members, Nadara, has quite a large fleet of onshore wind and is looking very closely at repowering all those projects, but the rules and regulations about grid connections and planning consent are a minefield that has just been lost and forgotten about.
Q280 Claire Young: Is it more about fixing those issues than having a replacement for the renewables obligation for those projects?
Rachel Hodges: There will always need to be a route to market and investor confidence. When you were talking about the 25-year CfD, that would be welcomed by some because the extension to 20 years gave a really good sense that this country was serious and that it wanted to provide that hedge and confidence in the market going forward. Something that deals with the tail or the repowering, and gives that confidence that “We want you and we want you here to stay”, would be really welcome.
Rosalind Smith-Maxwell: I want to make the distinction between running a current built project for longer—by that I mean solar and wind—versus decommissioning, where you take down the old turbine and take out the old foundations to put in new foundations and a new turbine. There is significant new capital expenditure in order to repower a wind farm and to repower a solar farm. While it might be in the same place, it will be a very different project, but you might find you can get permission to have a grid import connection, if you are lucky, and get some co-location storage there.
As I was saying, if you want to run an operating plant for longer, it has to distinguish between those that have high operating costs that provide thermal base load renewable power, and those that have much lower operating costs in the form of solar or wind.
Rachel Hodges: Something that is really important to say is that projects that are getting towards the end of their ROC life are actually seeing different things in the markets than what happened when they made their investment decision. The main thing to come back to is the transmission network use of system charges, which have increased astronomically in Scotland.
Projects that made the financial investment decision 10 or 15 years ago, those costs have increased by £20 per megawatt-hour, and their ROC costs have not increased. Those projects are now uneconomic to run and they will be decommissioned, not because they do not work but because they cannot afford to run them.
Q281 Claire Young: What do you think the Government should do about that?
Rachel Hodges: A fix to the TNUoS charge is part of the package of reformed national pricing, but that might not come in until 2029. There is meant to be a transitional move between what is currently in play and what will be under reformed national pricing, but we need something now. Without it, even projects that are bidding into AR7 and AR8 are having to guess what might be there in the future. The volatility of TNUoS across the country and across projects is a risk that investors cannot manage. It is what it is, but when you build, you do not know what it will be because that will be dependent on what transmission network or other generation is built, and we cannot influence that. The risk should sit with the people who can influence that risk.
Q282 Claire Young: Steven, do you support the principle of a voluntary CfD or pot zero for existing supported assets? In the previous session, we heard the suggestion about transitioning to PPAs. What do you think about either of those options?
Steven Agnew: The wholesale CfD that is currently being discussed and potentially expanded to more of a pot-zero-type model is a very useful approach. A lot of the focus at the minute is obviously around cost. The reason why costs are high in the GB market is because of the amount of time that gas sets the price. Moving to a wholesale CfD for projects that are currently receiving the wholesale price is a real opportunity to reduce the number of hours when gas sets the price. The build out of renewables is already doing that, but this helps to accelerate it. I see that as the right approach.
As I referred to previously, corporate PPAs are definitely an important part of the market for those who are not successful either in the mainstream or the wholesale CfD, if it is established. It is as an alternative route to market that sees projects getting built, and it is actually a good hedge for those industrial consumers who need a way of fixing their prices. There is a role for corporate PPAs, but it is complementary to a CfD rather than a replacement.
If you look at the Republic of Ireland, 22% of the power demand is from data centres that have that big industrial demand load. It has a target for 15% corporate PPAs by 2030. Certainly, when I was working in that market, nobody believed that was going to be achieved, so there is a ceiling. Corporate PPAs are quite difficult to negotiate.
Q283 Chair: It would be helpful to know what needs to happen to make them easier.
Steven Agnew: Some larger industrial users will have their own energy managers who can negotiate these things. For a lot of smaller actors where creditworthiness may be an issue, the Government could offer a form of underwriting where you almost have template contracts, at least to start the discussion with, particularly to help bring down that cost of capital. That could help those who are not as experienced in this corporate PPA market get into it and get up and running.
Chair: Thank you very much. We will move on because we have 11 minutes left and two people still to ask questions.
Q284 Graeme Downie: I want to talk about the capacity market and what it looks like in the future; Steven, you touched on this earlier on. We have heard evidence that the current format of the capacity market is expensive and provides distortive market signals, and in particular that it should be reformed to look at hybrid assets such as solar and storage. Steven, what does a successful capacity market look like in the 2030s from your perspective, and how do we get there?
Steven Agnew: It procures a lot more flexibility and starts to get that deliverability of flex; we are currently seeing high termination rates of storage projects in the capacity market, so it is clearly not working as things stand. I could probably tell you the problems of today better than the solutions, but that is something we are working on.
We have developed a problem statement for the capacity market. In terms of where we need to get to, we almost need to set the exam question again: what is the capacity market trying to do today as opposed to when it was established? For me that is about procuring more flexibility and, yes, it is about ensuring we can get deliverability of those storage projects—again, to go back to the question of maximising the renewables we have.
Q285 Graeme Downie: Are there steps in particular to get away from unabated gas in the capacity market?
Steven Agnew: One thing we need to look at is that we need gas, but is the procurement mechanism for new gas or even gas lifetime extension the same procurement mechanism you need for storage? I suspect it is not. While it is presently technology-neutral, the design actually means it works for certain technologies and not for others. We need to tailor it more for the technologies we want to incentivise rather than this so-called technology-neutral approach, which is not working for clean technologies.
Q286 Graeme Downie: Rosalind, how do we move the capacity market so it incentivises or essentially puts a bias in favour of something like solar battery? What looks like an incentive, from your perspective?
Rosalind Smith-Maxwell: Steven’s point about resetting the exam question is a brilliant way of framing it. At the moment, the capacity market is trying to do a lot of things and is becoming a very tortured beast. Whether to encourage the new-build gas and how on earth we work out how to underwrite an economic case for 35 years of running a gas plant, or to encourage new-build solar and storage, addressing how we view de-rating factors is a key thing to do. We have just seen interconnectors now be treated far more cautiously than they ever were, and yet battery storage is still given very aggressive de-rating factors. That would be something that could then be adjusted when we see how batteries are operating and can do the absorption that we need.
Just to bring out the rate of change in terms of energy storage capacity, energy storage in the form of batteries grew from 9 GWh to 13.6 GWh in the last 12 months. That is a 50% increase in battery energy storage capacity, and the capacity market is the only mechanism that incentivises build. Effectively, batteries have been built with a merchant risk. Now we are faced with battery uncertainty in the form of what long-duration energy storage will do to the battery market, and with addressing, how that will impact volatility.
Thinking through, a capacity market adjustment might help mitigate those investor concerns and then continue encouraging build-out and storage. Right now, I know of sponsors who are pulling out of the UK completely. They are off to go and invest in Germany because they trust the German market for supporting storage more than they trust the UK.
Q287 Graeme Downie: Are there reforms we should be making to the capacity market that are in line with a country such as Germany and how it approaches the problem? Has it answered or set the exam question better?
Rosalind Smith-Maxwell: I do not know if it has set it better. It has just been clearer, and we can respond to the question more easily.
Q288 Graeme Downie: So there is clarity around the issue. Rachel, what should the purpose of the capacity market be?
Rachel Hodges: The capacity market is not really my specialist skillset. I agree with a lot of what Rosalind was saying, particularly if you are looking at hybrid projects and co-location, and thinking more beyond co-location of solar and storage, but where should storage be? Storage has not been given any location or signals at all.
Under the connections reform there were zones of storage allocated as to how much we needed where. The way that it then came out in the wash meant that we have actually ended up with “wherever it can be”, and I still do not think the signals are there on what we want it to do and where we want it to be. Co-locate using the grid capacity that is there rather than building new grid for it, and use the SSEP to have a really good think about what we need and what we want it to do.
Q289 Graeme Downie: Steven, to come back to how we frame the exam question, would a fair framing be that, if gas still requires unabated support in the mid 2030s, say, will whatever reforms we tried have failed? Is that a measure of success or failure?
Steven Agnew: It depends on what you mean by gas. Gas plays a useful role. If you are talking about hydrogen-ready CGTs, that is where we need to be moving to. If we are talking about clean gas, we should be starting to incentivise that. If we are starting to see that transition, we will have succeeded. Just taking gas out of the system creates other problems, so the question is more about what gas we are using and how clean it is, rather than whether we need gas.
Graeme Downie: That will be a very different and separate inquiry, which we are about to open.
Rosalind Smith-Maxwell: On what gas we are using, one of the things I have heard people say so often is, “Drill the North sea for its oil and gas.” It must be recognised how mature a gas basin the North sea is. I recall seeing that, if you base it on 2023’s abstraction levels, there are 11 years left of gas in the North sea. If we are asking what a project in 2036 would run on, and we have maintained our drilling levels, it would not be North sea gas; we would be importing it from overseas.
Q290 Torcuil Crichton: Thank you all for coming in. I will limit myself because time is short. Steven, you talked about purchase agreements. We used to think they would save the world for smaller generators, but you say there is quite a bit of uncertainty there and you mentioned underwriting. Is there room for GB Energy, for example, to come in as an underwriter for this?
Steven Agnew: The European Investment Bank does that in the European market, so whether is it GBE, the National Wealth Fund or something of that ilk providing that underwriting, it would bring down the cost of capital significantly.
Q291 Torcuil Crichton: Does it bring down the risk then as well?
Steven Agnew: Yes, because that is a big deterrent on the generator side. If your off-taker does not have creditworthiness, which may be the case for a lot of smaller companies, having that protection in place is useful. It will also start to reduce the margin that I talked about between the CfD price and the corporate PPA price.
Q292 Torcuil Crichton: Rosalind, do PPAs work alongside CfDs to finance clean power?
Rosalind Smith-Maxwell: Very much so. We signed the UK’s largest ever corporate solar PPA for Cleve Hill, and that was with Tesco for 65% of the generation. We have 35% of the generation under a CfD. To echo everything Steven said, we select that counterparty because of its creditworthiness, and that has improved our ability to secure bank financing for the project. It also gave us a nice diversification from being exposed to the CfD, which does not give protection for negative prices.
Q293 Torcuil Crichton: We have examples in our constituency of community-owned power companies doing PPAs with Navantia.
Rosalind Smith-Maxwell: It also gives the corporates protection. I noticed the Business and Trade Committee were talking about how corporates and industry that had long-term hedging were withstanding the recent price spikes very well. Power prices this afternoon are going to £200 per megawatt-hour for one of the 4 pm to 5 pm-type slots. If you view a power purchase agreement as a long-term hedge, then those who are in the money are going to be protected from that cost spike.
Q294 Torcuil Crichton: Okay, so PPAs will save the world?
Rosalind Smith-Maxwell: I hope so.
Chair: Thank you all very much for your evidence and for your really good recommendations, which we can now pass on to Government. In fact, we can do so in a few minutes’ time. We will suspend the session while we wait for the Minister to join us. Thank you again.
Witnesses: Michael Shanks MP and Dan Osgood.
Q295 Chair: Welcome back to this morning’s session of the Energy Security and Net Zero Committee and our inquiry on reviewing the electricity market. Welcome to Minister Michael Shanks again, who is joined by Dan Osgood, the Director of Heat and Business Energy at DESNZ. You are both very welcome. We look forward to your comments. We have had some brilliant sessions this morning and previously, which you will have seen, and I am sure have inspired my colleagues to ask lots of follow-up questions.
I will start with this. The £45 off VAT on domestic bills is undoubtedly welcome from the new Prime Minister and Chancellor, but we still see the cap going up and then going up further, if predictions are correct. What are you advocating to reduce bills overall?
Michael Shanks: Thank you, Chair. It is good to be with you all again. First, the Prime Minister was very clear when he announced the VAT reduction that it is not going to solve everyone’s energy bill problems, but it is about giving people some breathing space on the cost of living and to demonstrate that we are taking action on that. I frequently have conversations with people who say, “What difference does £45 make?” I can tell you from meeting a lot of constituents that it makes a huge difference in making the pay packet reach the end of the month. It is not the solution to the overall problem, and we have been really honest about that. We took action in the Budget last year to take £150 off costs and we are now working on what targeted support could look like to make sure we have all the mechanisms in place for data sharing, and so on, which I know this Committee has talked about on a number of occasions, to make that happen. It is obviously for the Chancellor to make further announcements.
There are two other things. First, the last two price caps have demonstrated more clearly than anything that our exposure to fossil fuels continues to drive people’s bills up, entirely driven by what is going on in the middle east. As much as we absolutely have to do the short-term support, we cannot separate it from the fact that every day we remain exposed to fossil fuels, we risk bills going up further and further. If the Government do not do the long-term strategic thinking on how we break that link, we will constantly be here talking about what short-term sticking-plaster measures we can take to bring down people’s bills. We have to do that in the short term, but we are also making the long-term change that gets people off this volatility.
It is worth remembering that a few years ago you were having the same conversations here when we spent tens of billions of pounds bringing down people’s bills because of our exposure to fossil fuels. The Government then did not learn the lessons that they should have. We are now in the second of these fossil fuel crises in four years. We are determined to learn the lessons. Short-term work is under way to support people. People should be confident that we are doing that and that the long-term work is happening.
Q296 Chair: Thank you for giving the same answer that you have been giving for the last two years. People need help now, and two years in, what is the top priority for you that can reduce bills in the next few months?
Michael Shanks: The Secretary of State has outlined our absolute commitment to looking at what short-term bill support there is. The VAT cut was done very, very quickly when Andy Burnham came in. I am sure the Minister for Energy Consumers would happily come and have a longer conversation with you about these matters. You are right to say that I gave the same answer two years ago, but since that time we are now in a crisis in the middle east, and we have been protected in some part by the fact we have deployed renewables on to the system, which has saved us millions of pounds every single week in gas that we have displaced. This crisis could have been a huge amount worse if we had not been doing what we have been doing for two years. Yes, my answer is the same, but we are making progress.
I will come back to this point unashamedly: there are no shortcuts to the absolute long-term work we need to do to protect us, and the short-term work is what the Prime Minister, the Chancellor and the Secretary of State are working on. We have done all the work in the background so that if we are introducing targeted support, for example, we have many more mechanisms—the data sharing and everything that has not been in place before—to be able to do that. I am sure my colleagues would happily come and give you more detailed evidence on that.
Q297 Chair: You are representing the Department and the Government, so we are going to ask you these questions and we are going to keep asking them. Something that has been proposed, where I have had evidence, is that success of salary sacrifice in EVs has been instrumental in their uptake and in creating the roll-out of electric vehicles in the UK market. There are advocates for it in solar battery storage and heat pumps who provide evidence that bills could come down net by something like £400 to £500 on average for those involved. Is this something you are advocating?
Michael Shanks: I have had a number of meetings with people in this space who are looking at what could be done around not just solar but batteries and other technology through salary sacrifice. It is a really interesting idea. Rightly, salary sacrifice schemes are regulated very carefully and introduced by the Treasury because there is a risk that we end up with all sorts of things that people might want to buy in their daily lives through salary sacrifice schemes, which of course come off people’s pay before tax. There is obviously a very clear process that they have to go through with this. I am interested in all these ideas. The faster we can roll out the deployment of this technology, the better.
We have obviously announced a number of schemes, not least the £15 billion warm homes plan, which is technology-agnostic and is about supporting households to buy whatever technology is suitable for them. We are doing everything we can to roll out cheaper technology to people. Plug-in solar is now legal in the UK for the first time and is very popular in the rest of Europe. We are doing everything we can. I am open to all ideas from all places on how we can do this even faster.
Q298 Chair: The fact that you mentioned the warm homes plan—the £15 billion—in an answer about salary sacrifice sounds like you are very positive about the idea of using salary sacrifice. Is that fair?
Michael Shanks: I am positive about all sorts of things, Chair, genuinely. We do not rule things out in principle. I am up for any suggestions that come forward about how we can deploy these things faster. Obviously, it is not as simple as me just saying I like the sound of something. The Treasury will be pleased to know I understand that salary sacrifice schemes have to be regulated very carefully. There are good examples of where it works, such as bike-to-work schemes and all sorts of things where it has made a huge difference to changing the behavioural approaches to these things. I am open to any and all ideas.
Q299 Sir Christopher Chope: Minister, a suggestion that came up in the last session was that one way we could help hard-pressed consumers would be to provide electricity that is available but not needed when it is overproduced on a renewables basis. We could provide that electricity free at the point of use. We know from evidence that would increase demand by some 30%, reduce the balancing costs and prevent that unused electricity, which has already been paid for under the contracts for difference, from just going to waste. Why can we not introduce free electricity at times of peak supply of the renewable energy?
Michael Shanks: It is a great question. At risk of me just saying I am in favour of all these things, I am in favour of looking at how we do that. We have launched a pilot scheme which UKRI is taking forward in some areas of Scotland to look at how we deploy excess wind in the system. Instead of paying to turn it off, how can we turn up demand to use it and take some policy costs off, so that people can genuinely increase their domestic demand and make use of that power? It helps the system out. That seems to me an entirely much more fair way of doing it rather than just turning off the wind and not getting the opportunity from that. We obviously want to quite carefully study the mechanics of how that would work.
There are a number of things in this. It goes to the heart of the overall flex strategy that we have, which is that we see a really important role for people, through their own choices, not forced by the Government, in being able to choose when to turn up their demand to help the system out and to get cheaper bills as a result. We need to do a bit of a pilot to see how that behaviour actually shifts and whether the systems can cope with it. We are still at a relatively early stage in the deployment of smart meters and market-wide half-hourly settlement, and the tech for people individually to have control over these things. There are some really good schemes out there already, but there are not many, so this is part of how we get that to the place where most people can take advantage of it. We want to do that experiment and it will be starting later this year.
Q300 Sir Christopher Chope: Will we have the results later this year?
Michael Shanks: No, we will start the pilot. I have not seen the exact design of the study yet, but we will start to get some data quite quickly. Some of this is about consumer behaviour, understanding exactly how people can engage with it, and then also measuring if the system benefits are what we think they are—I have seen the same data you have. It seems entirely reasonable to assume that is how it would work, but we obviously need the evidence to do that.
Q301 Sir Christopher Chope: When you were answering the Chair, you were talking about the policy costs and the raw material costs that are only a small proportion of the costs that consumers are paying. The policy costs are going up significantly and are projected to increase much more because of the costs of balancing. What are you doing to reduce those costs in the context of the Government's policy of reducing the burden on consumers? Linking in with that, why are we subsidising the expansion of the electricity grid to this enormous extent when we are also facing the need to apparently eliminate the gas grid? Eliminating the gas grid is going to add enormous costs to the gas consumers as that process goes on.
Michael Shanks: These are fantastic questions, Sir Christopher. If the Chair will just give me half an hour, I will go through them both—they are really important.
First, I really dispute this characterisation of policy costs as just covering everything that is on the bill that actually is the generation of electricity. If you look at what people include in that bucket of policy costs, it includes the contracts for difference that are actually right now generating 40% or 50% of our electricity. In my mind, that is not just some sort of abstract policy the Government have decided to pursue. It is the generation of electricity, which is the whole point of it being in the bill.
Secondly, the grid is absolutely essential for every single part of our lives. The generation that gets power to our homes and businesses and the demand that we use every second of the day, frankly, if the grid is not invested in, it falls over and we all pay the price. Also, there is an opportunity cost of us not investing in the grid now. There are demand projects that could deliver economic growth that are not able to connect because we have not invested in the grid for decades. We have to invest in the grid. This is partly my answer to the Chair's question about there being no shortcut to this.
The constraint payments are an appalling indictment of the fact that we have not invested in the grid properly for decades. If we had strategically planned where we were building renewables projects and connected them properly, we would not have the same degree of constraints and people would have cheaper bills as a result. The answer now is not for us just to say, “Well, we’ll just put that off for another couple of decades, hope the grid can be patched together and keep paying billions of pounds in constraints.” The answer is to invest so that we save money in the long term. All the calculations are that, by investing in the grid now, we will reduce constraints to the degree where people’s bills go down as a result, but there is an up-front cost to people, and I have been really open about that. There is a net saving from doing this investment.
Finally, on the gas point—with your indulgence, Chair—we published a response to our security of supply consultation just a few weeks ago. I was really clear in my foreword that the gas grid is one of this country’s most important assets. Unlike the electricity grid, the gas grid has been invested in quite significantly over the past few decades. It is very resilient—as is the electricity grid—and it will continue to be important for decades. Some 80% of homes have a gas boiler. We are not going to shift overnight to a different position. We want to look at what happens as people start disconnecting, as they are, from the gas grid. How do we maintain the overall grid until the very last customer has come off? I am not closing down the gas grid; it is a really important asset and will remain so for decades. While I absolutely hope I will be back at this Committee 30 or 40 years from now to answer questions on this, I suspect I will not be, and the grid will still be doing the role it will be in that time. but it will change over the coming years.
Q302 Claire Young: I will start with a nice, uncontroversial question: why has RNP been chosen over LMP, and under what circumstances would the Government consider revisiting locational pricing?
Michael Shanks: It is fair to say we have agonised over this, although maybe not as much as Dan has, as he has done this work under various Governments. The reform to our energy markets has been a long-standing programme of work. We have tried to answer some really difficult questions as part of that, and the debate publicly and within the industry came down to zonal pricing or national pricing. Actually, there was a whole series of other things under that around constraint management and balancing and settlement reform and everything else that just did not quite get the same attention.
Our conclusion on why we went for reformed national pricing really came down to the fact that building the system we need in the coming years is absolutely critical to bring down people’s bills and deliver our energy security. All the evidence we saw was that zonal pricing had a much more significant risk to that investment. It would have been a decade of uncertainty, of trying to unravel exactly how the market would work, who would be in which zone, what they would pay, a whole series of really complex changes that would have taken a decade, and in the interim the evidence pointed to an increase in the cost of capital, difficulty building things, and investor flight from the UK. As always, there is a judgment call about how much we believe some of that but the view we took was that it was more important to build the infrastructure rather than do a reform that would have really had an impact on that.
We also think that reformed national pricing is the opportunity for us to have a fair system across the whole of Great Britain. I speak as a Scottish MP; if my self-interest were purely at stake, zonal pricing, on the face of it, would have been good for my constituents, but the evidence I saw was that it was actually quite mixed. The cost could have increased and projects that we are building for renewables would have been much less investable in parts of the country where they are currently being built. There would have been a real trade-off in terms of investment/jobs, and some of the calculations where bills might well have stayed the same or gone up. We chose reformed national pricing as the option to reform the system without changing the overall mechanics of one single market across the whole of Great Britain, I suppose.
Q303 Claire Young: What are the circumstances around revisiting it?
Michael Shanks: We have no plans to revisit it. Obviously, we do not rule out looking at the whole market again in the future. The Prime Minister has been very clear over the last couple of days that markets in this country generally have not worked well enough for people. They have not delivered the things that people claim they have delivered, and so we are constantly looking at how we can reform markets to make them work for people. Equally, we want to get on with the reforms we have currently agreed to and deliver them so that people can feel the benefit. There are no plans to reopen the REMA process.
Q304 Claire Young: I will come back to the fairness question in a minute, but to deal first with the “getting on with it” question, the whole debate led to quite a long period of uncertainty. Have you learned any lessons from that? Are you going to be publishing any further analysis to restore confidence in the Government's decision-making?
Michael Shanks: You always learn lessons from processes that, on the other side of them, you wish could have been more efficient and faster. REMA was a particularly complex piece of work that went on for a number of years. Dan would be able to give you more of the backstory than I can, certainly about before we came into Government. There were a number of different iterations of that. There were some really significant questions about it, and credit to the previous Government for engaging in the discussion on some reforms.
I am not sure there was a particular way we could have come to a conclusion much faster but I am sure there were ways we could have been more efficient. It threw up that any time we talk about market reform, there are clearly interests across industry that will try to shape the debate. It became a very binary debate; in reality REMA was about much more than just the binary debate of zonal or national pricing. Constraints management, the strategic spatial energy plan, all these things were important regardless of which model we went for. They got blown out of proportion by this quite binary debate. There are ways we can do these processes in the future, but we came to a conclusion as quickly as we could.
Dan Osgood: To pick up the second part of your question on next steps, in April we published the delivery plan setting out our plans on the detail of reformed national pricing. That included a consultation on how we are going to reform the different policy levers that affect where and when investment happens across the power system to address some of the historic misalignment problems the Minister set out. We are looking at the responses to that consultation at the moment, and our aim is to set out next steps later this year.
Q305 Claire Young: Do you think that the fact that the key reforms have been delayed, such as the strategic spatial plan you mentioned, undermines your case for choosing RNP?
Michael Shanks: No, I do not think so. The work is moving forward as quickly as possible, and indeed we will start to see the outcomes of that in the coming months. It is worth just remembering how significant the strategic spatial energy plan is as a piece of work. This is a first-of-a-kind attempt across the entire country to come up with a series of pathways from which the Secretary of State will choose what our energy system will look like to 2050. It is not a one-time process; it will be an iterative process, but it is the first time we have sat down to do this.
Underneath that is also really important work around regional energy plans, which look more at the demand side. These are really important pieces of work, and it was right that we took the time to get as much consultation from stakeholders as possible to shape them. We commissioned it alongside the Scottish and Welsh Governments because that partnership is obviously absolutely critical, so we made sure that relationship got it moving forward. We have done the right thing by taking time and doing it methodically, and the team that NESO has set up to do this work has been moving as quickly as possible. Once it is published it will be clear just how much we have been lacking any kind of strategic plan to cite decisions for the past 20-plus years in this country.
Q306 Claire Young: Turning to the fairness aspect of it, which is one of your other reasons for rejecting locational pricing, regional disparities already exist. The demand turn up trial is going to provide cheaper electricity in some areas, so how do these things fit in with your position or argument on fairness?
Michael Shanks: It is a really fair challenge. I hate to say that we want to get the balance right because I know that sounds like an answer with which I am trying to tell you both sides of this, but for me the reason for national pricing is that we make the mistake of thinking that the cost to a consumer is separate from the investment cost of building it in the first place. I make this argument often with SNP colleagues. All this infrastructure is built in Scotland, funded by bill payers right across Great Britain. It does not just exist in Scotland by magic because it is in Scotland. If we want to have a coherent Great Britain energy system, where we pool and share energy from different parts of the country, with nuclear increasingly used in Scotland when the wind is not blowing, then we need to share the fairness across every bill payer as well. That was right at the heart of the decision.
As I was sort of saying to Sir Christopher, with the demand trials we want to see how this works in practice, partly because if there is a system benefit of being able to turn up demand in Scotland that specifically helps those consumers and has a benefit to everyone in the system, which is a win-win. There are trade-offs, and I want to look at the evidence to decide it all. As much as possible I am keen to see that we do not have disparities in pricing across the country, but where there are opportunities for people to take advantage of flexible approaches then they should be able to do that. It just happens to be focused in Scotland now, but it will be increasingly true across the whole country.
Q307 Claire Young: I have a couple of other quick questions. You argued that policy costs include the cost of generating, and that you cannot remove any policy costs, but you are removing 75% of renewables obligations and VAT from electricity bills. Why stop there?
Michael Shanks: I am not saying we cannot remove those policy costs. My argument was just that people—to make an argument—say all these costs on bills are policy costs, as if our desire to tackle climate change is somehow putting up your bill. It is not; it is generating electricity. That is the point I make. We have said that where we can we will take some of those costs off bills. The renewables obligation was the way we were able to take £150 of costs off bills. The renewables obligation will start to phase out from next year for a 10-year period, so that will start to diminish. We are having conversations across Government about what more we can do to take costs off bills, but as always there is a balance between the costs that taxpayers can pay and the costs of building the future energy system. We look at all those costs.
Q308 Claire Young: Finally, do you support introducing a social tariff, or a rising block tariff, which was discussed earlier, where a lower block—the essential block—would be cheaper? If so, how should either of those options be funded?
Michael Shanks: Again, I know a former member of this Committee is now leading on this work in the Department and would love to come and talk to you. This is what I was saying before: we are looking at all options about how we can target support to people who need it the most. A social tariff is raised often, but people have very different ideas about what it means, who would be part of that group, how we would define that group, and what the bill discount would look like. We want to look at all these options. In the meantime, we have been taking all the action across Government so that if we were going to introduce any kind of targeted support--unlike when the invasion of Ukraine happened, when we had no levers to target support—we are now able to share data across Government to be able to reach those people who need it most. We are doing all that work but rightly it is for the Chancellor and the Treasury to announce in the Budget what more might be done.
Q309 Mike Reader: Minister, despite the reformed connections queue, we still see long delays. Some 62% of projects for 2026-2027 are delayed. Who is to blame and when will we see faster connections?
Michael Shanks: I said to this Committee before that I really share the frustration about this programme. I have been very open and said it to industry, NESO and the transmission owners. It has been an extremely complex piece of work, and we should reflect on the fact that we had a queue that had 700 GW waiting to connect that had got completely out of control, with no mechanisms for bringing it under control. We implemented those changes, and as a result 300 GW has been kicked out of the queue. The connections process that then followed has been painful, and I have reflected my frustration with that, but it has been essential.
I understand why people are frustrated if their connection date has shifted from what they thought it would be, but the truth is that because the process had got so out of control, the connection dates people had before were a work of fiction in most cases. It was never going to happen. People had connection dates a year from now when not a single piece of civil engineering work had been done to actually build the connection. We have sought to get the process going as fast as possible and then make sure that the engineering assessments about building those connections are accurate, so that people can get connected when their offer tells them it will.
Q310 Mike Reader: Where does the buck stop for this problem? Is it the Department? Is it NESO? Is it Ofgem that should be holding NESO to account?
Michael Shanks: Ofgem regulates NESO, so Ofgem has a role in this. We have sought to create a partnership on how we manage it. I can write to the Committee with the exact dates, but several months ago, when it was clear the process was off track, we as a Department took much more central management of the governance of it. We set up a series of structures, a gold command, which is chaired by the Department, to really manage the strategic level, and then weekly meetings on the detail of individual connection offers to try to speed up the process. That has had an effect. I will be really honest: we have learned a lot from this first window about what to do differently in the next one, not least on communication with people and how people engage with the system. NESO and the transition owners have learned a lot from it. We will have another window of connections; this is not a one-time process.
Q311 Mike Reader: Is NESO or the Department ultimately responsible for this?
Michael Shanks: NESO is in charge of the connections process, but I am the Minister for Energy, so I am not shirking the responsibility for it.
Q312 Mike Reader: In a letter to Railpen, you said, “There are currently no regulatory levers available to require NESO and NGET to allocate additional resources or provide redress,” which was frustrating. That was quite a while ago in relation to Bicker Fen. Are you taking steps to make sure the regulator has the teeth to force NESO to address these problems?
Michael Shanks: The regulator is working with NESO to address these problems, and actually the problems have been addressed. The offers are going out the door. We can give you the most up-to-date data that is publicly available on how many connections have gone out. They are now almost entirely with National Grid, Scottish Power and SSEN to get those assessments done and the offers out the door. The process is now working; it has just taken longer than we would have liked.
Q313 Mike Reader: Developers have told us they price in risk into CfDs and PPAs in relation to connection risk, which is a cost borne by the taxpayer. Has your Department quantified what that cost has been to the taxpayer?
Michael Shanks: No. It is very difficult for us to quantify what developers choose to put into their bid. They will make different calculations based on different factors. Coming back to a point I made a minute ago, developers were also pricing in the risk that the connection offer they had was never going to materially happen, and were often kept having developed a project but not being connected to the grid when they hoped it would—projects that are waiting, ready to generate electricity but without the grid connection.
Q314 Mike Reader: Do you think it is fair that taxpayers have had to pay for NESO's poor performance?
Michael Shanks: I do not think that is what is happening; I would dispute that. We are reforming a process that did not work to reduce the risk that people price in those costs going forward. I do not accept the fact that the taxpayer is paying that cost at the moment.
Q315 Mike Reader: Would it be easier for developers to build their own private networks to a specific specification to be later adopted by the grid?
Michael Shanks: We think it should. I want to see much more innovation in this space. We are seeing some already. Some independent DNOs are doing more of this work. We have a real interest in looking at what more innovation could be delivered, thinking creatively around how we build some of these things. If it is faster and more efficient for someone else to build it and then either hand it back to one of the TOs or continue to operate it, we are interested in those ideas.
I want to be really clear around some trade-offs in this. It is about how we have system access to connect these projects. At the end of this decade, we are going to face some significant challenges around grid upgrades that need to connect into the existing grid and will require a series of outages and management of the system to allow that to happen. If we have lots of independent development going on, it cannot happen in isolation from the rest of the grid. It all has to be coherent. Again, I am open to ideas in this space. One of the things the Prime Minister has said in terms of public control of these things is that we want to see the public—in the general sense—being able to shape these decisions and benefit from them. We should not be looking at private companies as the only ones that can operate in this space. If there are more efficient ways of doing it, we should be all for it.
Q316 Mike Reader: In that vein, do you think the Prime Minister is suggesting that some private organisations that have a role in this—NESO, DNOs, and so on—should be publicly operated?
Michael Shanks: To be fair to the previous Government—although I am sure they regret it now—they nationalised NESO and it is now publicly owned. Credit to them for that. Partly what the Prime Minister said yesterday is that if we go back over the past 30 or 40 years, I am not sure you would design a system with three transmission owners that are private companies and have a monopoly in their locations, but it is the system we have.
Q317 Mike Reader: Will we see your Department address this push from the Prime Minister?
Michael Shanks: We are pushing for a much more efficient service and the delivery of a significant amount of upgrades that particularly National Grid but all the transmission owners are driving forward in the public interest, holding them accountable for the costs and delays, which ultimately result in constraint costs that bill payers pay. We are pushing for much more direction and for public benefit to be right at the heart of the work they are doing.
Chair: I am going to move on because we have so many more people wanting to ask questions.
Q318 Melanie Onn: I just wanted to follow on from Mike’s questions around grid, because we have just heard evidence about grid costs and the acceleration of costs, with projects reaching up to nine times the original expectations. Have you given any consideration to Government intervention, or to an assessment of how much it is holding back new energy development in the country?
Michael Shanks: It is quite a mixed picture. I have heard some quite extreme examples of significant increases in costs. I have also heard of other examples where offers came in at exactly the price people were expecting. There is a mixed picture across the country.
Q319 Melanie Onn: How can that be? If we are talking about labour costs and inflation and the price of copper, which are the examples, surely that is universal?
Michael Shanks: It is universal, but obviously projects are of different sizes and scopes and sometimes the engineering assessments of a particular connection have resulted in a more efficient way of delivering that connection by not building a new substation or something. I am not giving specific examples, but I am sure we can share that with the Committee. There is no doubt that costs are increasing; the nature of building right now is that it is more expensive. Connections are not immune from that. We expect costs to be kept to an absolute minimum wherever possible. Ofgem is looking at what more it can do to bring down those costs and has been doing a review of some of that work. We will do whatever we can to keep those costs to a minimum and get things built. That is good for bill payers and it is also good for developers that are paying that cost for connection.
Q320 Melanie Onn: We tend to focus on grid connection when it relates to energy projects and generation, but businesses generally struggle to access grid connections for new enterprises. What assessment has there been by your Department of how grid connections are holding back inward investment into the country? Do you have any specific examples? Do you use that with National Grid, Treasury or BIST? Do you use that for any conversations about it because it is a recurring frustration for businesses that want to relocate and expand? It is a real challenge.
Michael Shanks: You are absolutely right. We focused primarily on the generation queue to begin with because it was so out of control, but the demand queue is now our focus as well and has been increasing significantly, not least with a huge number of speculative data centres that, in our assessment, are never going to be built but are taking up the space in the queue. We have consulted on how we will reform the demand side. It is obviously more difficult than the generation side, where we can be fairly objective about the types of generation we want and where. Clearly, there have become trade-offs around different businesses, housing developments, and so on that might need power, but we are determined to do that.
It also feeds into the wider question around the regional energy system plans that are being developed, which will look at a much smaller part of the country and what demand projects are coming forward. You are right about the economic growth opportunities that we are missing because they cannot get a connection on time but we also now know that electrification is likely to be the key route to decarbonisation for most of industry. The only way that will work is if there are sufficient connections, so we are working on all that.
One of the most successful things, which I think I spoke to this Committee about before, is the connections accelerator service, which is a Government initiative that works with transmission owners and NESO on a select number of projects to help them get through the system faster. It does not guarantee them a faster connection or give any special treatment but it tries to move the system much more efficiently in planning all these kinds of things. It has been successful to date, and we will continue to roll that out on more projects across the country.
Q321 Lizzi Collinge: In a moment I want to go back to the conversation that Sir Christopher started on flexibility, but first I have a couple of quick questions about plug-in solar—solar kits that are legal to plug in without an electrician’s sign-off. They are now on the market, but there are also kits where you still have to get an electrician’s sign-off when they are put in. Do you think consumers are aware of the difference?
Michael Shanks: The roll-out of this has partly been about making sure we have the highest safety assessments completed before we agree to roll these out, and then partly about working with retailers to make sure that the retail offer covers all those risks in the way that any of these suppliers have to do with any electrical products that they sell in the store. There is a range of different options. Our advice has been that these will work in most domestic settings, but most people should get an electrician to do some kind of assessment of the impact it has on their particular property. They will not work for everyone, but the evidence from across Europe is that a significant number of people are able to take advantage of it, and it will bring down people’s bills if they do it. Obviously, safety should be everyone’s top priority.
Q322 Lizzi Collinge: For a consumer going into a retailer looking at the different kits that are on sale, some of which you legally need to have signed off by an electrician and some of which you do not and it can just plug straight in, do you think that is clear to them at the point of sale? Do you think that information is there at a retail level?
Michael Shanks: I would have to come back to the Committee on the specific guidelines that we have issued. I am not responsible for plug-in solar, but I am happy to write to the Committee. It is obviously for retailers to look specifically at how they are retailing the product, but I am happy to send more details.
Q323 Lizzi Collinge: I would appreciate that. Do we have a timeline for when plug-in batteries will be available?
Michael Shanks: No, but we are really interested in this and want to go through another set of safety and regulatory procedures, particularly for batteries, but it seems the most sensible outcome is to be able to pair the solar with the battery to deploy the solar power at the peak demands when we need it.
Q324 Lizzi Collinge: That leads me back to the question of flexibility. Witnesses have almost all agreed that flexibility should be a strategic priority, not least because it reduces constraint costs. However, Octopus Energy told us that “Flexible assets are incentivised to support the system less than a third of the time.” What is the Government’s strategy to close that gap? What is the Government’s strategy over the next few years to increase the use of flexibility in the system and reduce constraint costs?
Michael Shanks: It is a really good question. This is genuinely such an exciting part of what is possible if we deliver on the flexibility road map. There is a huge consumer benefit and it helps the system. We were really ambitious in the clean power action plan. We set a target for how much would be delivered by flex. We have appointed a commissioner for flexibility, Cathy McClay. There is a team now working to deliver on all of that, so there is a huge opportunity to do so.
The second part is how the system then makes use of those flexible assets. Ofgem has announced the 7.5 GW of long-duration energy storage in the first window of the cap-and-flow scheme. My direction as part of that was to be as ambitious as possible; it was an Ofgem decision, but I wanted to really emphasise that we wanted as much as possible. NESO then has to really work on how it uses those assets strategically on the system to get the flex that we want. The whole system has to work in a much smarter way. There is work under way within NESO to do that but a lot of the actions in the flexibility road map are around us being even more efficient at that.
There is a whole series of options, such as looking at smart local energy systems and a much more regional focus on flexibility and dispatch. I am really ambitious about this. Some of it comes down to basics. We still have not 100% delivered market-wide half-hourly settlement, although we are a lot closer, and the roll-out of smart meters is going to be critical for people to really take advantage—that work is under way. The strategic work is happening as well, and when we deliver on the plan there is a real benefit to the system and consumers.
Q325 Lizzi Collinge: In a response to Sir Christopher, you said people should be able to choose what sort of level of flexibility they are into. In a practical sense, from our constituents’ point of view, how are we going to enable people to get the benefits of flexibility when they do not have the knowledge, time or inclination to get nerdy about solar panels and batteries and things like that?
Michael Shanks: It is so critical. We have said throughout that the whole thing is voluntary, partly to try to tackle the nonsense headlines in The Telegraph about Michael Shanks forcing you to turn your dishwasher on at a certain time, which is just nonsense. People should get some economic benefit from it to drive their decision-making, which then helps the system. Partly, it has to be as straightforward as possible. Where people do these things already is because the app on their phone or the system they have is really efficient, or in fact completely automated so that you plug your car in at night and it just runs without you having to do anything. It has to be as straightforward as possible.
The other thing we have really been clear on, which the warm homes plan outlines more than anything, is we really want to focus on those households and families who can gain the most from this but who are often the most distant from being able to take up that technology, often because they have just got a million other things to be thinking about. It has to be accessible to everybody to get the real benefits. We will require suppliers to be really effective in how they deliver this, but the systems and processes are also about trying to make the time-of-use data and everything as efficient as possible for consumers. I have some statistics here that give the scale of this: the number of domestic customers using these time-of-use tariffs has grown by 68% in the 12 months to July, so we are already seeing a really significant increase in consumer take-up. We have just got to do even more of it.
Q326 Lizzi Collinge: It grew 68% from what?
Michael Shanks: From 497,000 households to 835,000 households in 12 months.
Q327 Lizzi Collinge: You can increase something by a lot, but if it is a small number to start with it does not really matter. On reporting and data, some witnesses have proposed annual reporting on gas use, renewable curtailment and flexibility. Do you think that would be valuable, and will you consider introducing it?
Michael Shanks: Some of this data is already published. The clean power unit is considering which additional dashboards could be made available to the public in terms of our delivery of clean power. There are a lot of tools out there that other people have developed around what our real-time energy use is as a country. I have a thing on my smartphone that tells me every two minutes how much low-carbon energy we are using versus the others; I am sure others are as nerdy as me at these things.
We want to see if there is more data we could make available to the public to tell the story that this is already working for consumers—contrary to some of the right-wing media stories—and so that people can take advantage of those opportunities and see that if they were part of it, maybe their bills would come down as well. We will look at what options there are to publish. We are obviously conscious that the minute you publish data it is out of date and so we want to make sure whatever is published is accurate.
Chair: We will move on due to time.
Q328 Torcuil Crichton: I will not keep the Minister long; he just has to agree with all my questions. I have two quick security questions, Michael, but first back to grid connections. You know I have an interest in community grid connections. In the Commons last night, the Prime Minister, after he had answered the previous 123 questions, agreed with me that community grid connections should be given priority over private company connections. Yet your Department’s response to this Committee’s call for that was that the Department rejects the recommendation and remains agnostic over granting community energy special status. Who is right, the Prime Minister or your Department?
Michael Shanks: First, I have not seen the Prime Minister’s answer. I am sure, as I have said to you before, he agrees with the idea that community energy is inherently a good thing and that we should do everything we can to support it.
Torcuil Crichton: Those are warm words.
Michael Shanks: We have been working on this, though. If we get to a place where Ministers start to choose who should and should not get ahead in the connections queue, it becomes difficult to end that process. We are working on how we define community energy groups, which will make this more straightforward. We are also doing whatever we can to support community energy groups that have connection offers, and I know I am working on one in your constituency, which is a particularly good example of where there is a real opportunity. I am also conscious that if we start to create carve-outs across how connections work, we create an even more complex system. We also potentially risk the actual construction of that connection being held back by projects not being ready when they say they are ready. There are a series of factors. In principle, I am also absolutely in favour of it. In practice, I would like to see exactly how we can make it work; it is not quite as straightforward.
Q329 Torcuil Crichton: I am sure you and I will continue this conversation over many weeks and months to come. On security, Claire Coutinho said in Parliament earlier this year that NESO failed to meet security standards on a hot day in June. If that is proven to be correct, do you have any confidence in NESO or ongoing confidence in NESO's ability to balance the grid?
Michael Shanks: I have confidence in NESO because it did balance the grid. On the day in question, although margins were extremely difficult, not a single customer was disconnected from the grid. We had unprecedented weather conditions across Europe, which affected the grids in most countries. It met demand and stayed within the statutory limits. There is a review being undertaken into the whistleblowing accusations that Claire Coutinho has raised with me. That review is under way and is moving as quickly as possible; it will be weeks rather than months before the conclusions come in and we will learn whatever lessons there are to learn from it. I would just emphasise the fact that the data that we know right now, without any kind of review, is that the system worked under huge strain.
Q330 Torcuil Crichton: Another aspect of security—and I know you have just written to Graeme Downie about this—is the Ming Yang yard in Ardersier in the highlands and islands, which was rejected on security grounds. That has been questioned again by the First Minister, John Swinney, and many others, including the company itself. I know national security is important, but we need more transparency and clarity on why that did not go ahead. Can you give us any?
Michael Shanks: The factory has been conflated with the decision that we made, and I understand entirely why, obviously. The question we were asked by developers, as a Government, was whether we would see Ming Yang turbines deployed in UK waters. We carried out a national security assessment and deemed that we would not, and therefore the factory did not become an investment proposition on that basis. I cannot go into the detail in that national security assessment, but I have sought to brief the First Minister on as much detail as we can, so he can understand the decision.
My one point, which I have still never heard any counter to, is that I am a Scottish Member of Parliament and Minister for Energy, and I would clearly love to announce jobs being created in the north of Scotland. What possible ulterior motive could I have that would lead the UK Government to make this decision other than a very high bar for a national security implication? Of course, we would like to announce 1,000 jobs being created in the north of Scotland. I hope that in itself is enough of an indicator about how seriously we took the decision.
Q331 Torcuil Crichton: My final question is this: if they do not come from that yard, where will our wind turbines come from?
Michael Shanks: That is partly why we are investing more than £1 billion through GBE and building engineering in the UK. We are working with a series of developers in Europe to build factories to build these turbines. We want much more of this built in Britain. I was just in Norway last week having this conversation with European Ministers; there is not enough supply chain in Europe and Britain because we have relied too much on things being built from elsewhere. There is now a shared objective right across the continent to shift that, and we will build these supply chains in Britain and in Europe and share them with our North sea neighbours.
Q332 Chair: Going back to flexibility for a moment, the Association for Decentralised Energy told us that consumer flexibility is the only way of reducing energy bills in this Parliament. Is it right?
Michael Shanks: It is not the only way but it is a very important way. ADE is doing great work, particularly around heat networks, which is something we have been really behind on as a country compared to the rest of Europe. There are real opportunities. In a lot of ways, flex is a quick win if we can get consumers to take advantage of it quickly. It is not the sole answer, and even if we accept flexibility and support on bills and everything else, we are doing so as part of the short-term solution. It still does not avoid building the grid and everything else for the long term.
Q333 Chair: “Quick wins” is an interesting phrase. How quick and how much?
Michael Shanks: As I said to Lizzi earlier, we are already seeing consumers benefiting; it is happening right now and starting to gather pace. Market-wide half-hourly settlement is a very nerdy thing, but it is the thing that unlocks people being able to take much more use of time-of-use tariffs and benefit from it. People are buying smart appliances more than ever before. This is already happening. We just want to accelerate it.
Chair: Good.
Q334 Graeme Downie: Let me pick up very briefly on some of the points made by Lizzi about getting flexibility for vulnerable consumers and those on lower incomes. We heard evidence from our first panel about work that allows a portfolio of shared flexibility so that the consumer does not necessarily individually have to do it. We also heard that there are elements of the warm homes plan that make it harder for those consumers to actually be part of a portfolio.
Can you talk a little about how you make sure that flexibility helps those on low incomes and those who are most vulnerable, who are frankly less likely to have the time to go into an app and make sure they can actually do that thing? Those are the people we should be targeting. How do we make sure flexibility does not bypass those people? Can you write to us with information on how we are making sure the warm homes plan does not, through unintended consequences, block people from taking part in those plans?
Very quickly, how are we making sure that those kinds of projects are rolled out at speed? A lot of what you have said today has been about pilots and initiatives. How do we get that to scale and start accelerating that really quickly if, as you have said, that is one of the key opportunities?
Michael Shanks: I can go one further than writing to you by encouraging you to invite my colleague Martin McCluskey, who is Mr Warm Homes Plan and is desperate to speak to this Committee—that is on the record now. The warm homes plan is all about trying to take as agnostic a view as possible about what the solutions are and to genuinely intervene in some of the poorest households to create warmer homes and more energy-efficient homes. If there are any kind of issues that are holding back those particular households, then we should tackle that.
To your point about looking at innovative schemes that pull these things together, we launched a consultation on community batteries. I am interested in looking at options that are not just flexibility for individual households but could be a whole block of flats benefiting from particular interventions that mean they are not taking individual decisions on things. Having information in people’s hands is one of the most invaluable things— to know that if they turn on something at a particular time, it will be cheaper. All households can benefit from that. Then we also have to look at the data divide, how much access people have to the internet, and so on. There is still a big divide on that. All this is part of the flexibility road map. I will make sure it is also on the radar in the warm homes agency.
On the question of pace, there is a lot of work going on at the moment around getting the warm homes agency moving forward and across Government on devolution to make sure that in England, for example, these powers are being devolved wherever possible down to local strategic authorities to make sure that that gets moving—and similarly in Scotland and Wales.
Q335 Graeme Downie: How do you make sure that while we are working with the systems of devolution and control, we are not pausing delivery and making sure things happen? Systematic change can often be a reason not to do things at the same time.
Michael Shanks: I get the point. The warm homes agency is a good example of this. The whole aim is to imagine a shopfront that is a trusted source of information above all else. We have a confusing landscape of insulation providers, and no one really knows who to trust. We have clearly gone through a period of evaluating past schemes and finding huge problems. There will be a national front to that, giving a really clear shopfront for the options available to people, but the delivery should be done locally to take account of local priorities. The national delivery is absolutely moving ahead. It is not being paused at all. Local delivery will be levers put in the hands of the Scottish Government, the Welsh Government and local mayors to do local work. We need to learn from what the ADE has raised around heat networks, for example, where some parts of the country are really moving ahead of national Government.
Q336 Chair: What are you doing to scale up all these pilots?
Michael Shanks: On the one I am responsible for, which we talked about today when Sir Christopher asked about free wind—if we are going to call it that—I want to see the evidence for it, and if it works, we should be rolling it out right across the country. It is likely that the east of England and parts of Wales and Scotland will benefit from it.
Q337 Chair: The block of flats example you just gave to Graeme is a well-trodden path in lots of places. What is stopping that from being rolled out right now as a very good way to give people cheaper energy?
Michael Shanks: Nothing is really stopping it, but the emphasis has not been there enough in previous years and that is changing. Of course, investment is a problem because there is a cost to retrofit; it is significantly expensive. There is also capacity in local areas. For example, on local energy, one of the things I consistently hear is that it is not just about money; it is about capacity in communities and expertise. We have hollowed out local government through austerity. A lot of the experts in these spaces were among the first to lose their jobs as part of that austerity programme. We have to build this back up again. There is good work happening; we just need to get the pace behind it and that is all the work that is happening with the warm homes agency.
Q338 Chair: We are rapidly running out of time. Before we do, we have heard that transmission companies are making record profits. Do you accept that evidence?
Michael Shanks: We want to be very clear that these companies are delivering a service for the public and they are being funded by bill payers, so we are trying to work to keep the costs to an absolute minimum. We closed a loophole in the latest transmission period to make sure that they could not benefit from inflationary increases. We will do the same with the distribution companies. Far be it from me to defend company profits—I am certainly not going to do that—but it is important to recognise that National Grid, for example, is a number of different businesses that make revenue from a number of different sources. The part I am responsible for is its transmission business, and we are working to keep costs to an absolute minimum.
Chair: I am now going to make a suggestion. When we finish in a minute or two, the three people sitting behind you who were on our previous panel have things they would like to say to you about grid connections, as you were not in the room at the time.
Michael Shanks: I am not sure that is within your power, Chair.
Q339 Chair: I will take your lead. Challenging the chair of a Committee—that is very interesting, Minister. In particular, we were told that the grid connections system has not sped up at all. They will tell you in detail; it is a valuable conversation for you to have. Earlier you said to us that you have made progress. From what we heard from the previous panel, it does not sound as if progress has been made.
Michael Shanks: Let me say two things. Clearly progress is being made if you look at the data, which is publicly available, but I am happy to share more detail on that with the Committee. I look at the data several times a week to see the connections that are going out the door. They are going out much faster than they have been and a significant number are now out and offers accepted. There are still not enough, though. It took too long; I have not said anything to the contrary.
It has been a frustrating, painful and expensive process, and a lot of projects have been held up because of that. Fundamentally the alternative was a system that was never actually going to be delivered. Offers stood there on paper, but were not being engineered, built and delivered. As difficult as this has been, 700 GW sitting in a queue expanding every single day was not sustainable, and we had to do this process. We have learned a lot from it; NESO has learned a lot from it. The next window will be much more efficient, but we are also doing everything we can now.
Q340 Chair: Do you accept that the location of storage is a key area that needs further work, whether co-location or otherwise?
Michael Shanks: I have asked for some advice on this because there is quite a mixed picture around co-location. Instinctively, you would think it would make perfect sense to have battery storage next to the generator. From the system’s point of view, there is some evidence that suggests it actually does not particularly matter if there is co-location or not. You can deploy the storage from wherever it is in the system, in front or behind. A constraint might make more of a difference. There is a mixed body of evidence, which I would like to see more on.
Q341 Chair: The point being we are not getting the location of the storage, rather than where it is.
Michael Shanks: I am not sure if I agree with that, but a part of the strategic spatial energy plan is looking at some questions as well. The issue you are probably alluding to is where there was a connection process for a solar farm that is now delayed because they want to locate a battery. The challenge is that is materially a different ask for the connection than it was before.
Q342 Chair: You have told us that before.
Michael Shanks: It remains true, Chair.
Chair: Thank you for the slightly extended session. As ever, you are very generous in your contributions to this Committee. We look forward to seeing you again next week again, same time, same place.