Research report
Planning Works: Local Energy Planning to Accelerate Net Zero
Aug 2024
This article was originally published in Green Alliance’s blog, Inside Track.
In early October, the energy regulator Ofgem closed its Regional Energy Strategic Plan (RESP) policy framework consultation; there are some positive developments coming, but the need for further reform remains.
Overall, it’s clear more regional planning is needed, particularly to decarbonise heat, but it must be carefully embedded into the UK’s energy governance framework, protected from vested interests and have clear oversight.
A significant number of new agencies and structures have been created, including the National Energy System Operator (NESO) which incorporates RESPs, GB Energy, the Clean Power Mission Control and Elexon’s new role in flexibility market facilitation. While recent changes may limit political appetite for reform, the case for an independent energy oversight and co-ordination body is stronger than ever.
RESPs will be, subject to further Ofgem considerations, a new regulated function run by the NESO. Since 2022, Ofgem has been consulting on the effectiveness of local energy institutions and governance. Its aim for RESPs is that they will “enable the co-ordinated development of the energy system across multiple vectors, provide confidence in system requirements and enable network infrastructure investment ahead of need”.
Ensuring local and national network planning work together to optimise the whole system is essential and Ofgem should be commended for these reforms. However, the absence of a consistent framework for local authority action on net zero energy is challenging. Government efforts to support local authorities are insufficient, as decarbonising energy systems will require substantial local action.
Formally launched on 1 October, the NESO will take over system planning and real time management of the gas and electricity systems from National Gas and National Grid. Having functions run by private interests with potential conflicts at a time of rapid system change was no longer viable, and the need for an independent integrated system operator was proposed (including by us) years ago.
The NESO will strategically plan electricity and gas networks, including providing advice to the government, as well as being responsible for RESPs. Despite a lack of fanfare, this is a big change in Britain’s energy governance.
The RESPs will act as regional convenors and forecasters for local energy system change with a particular focus on network developments.
Managing the expected and significant investment to enable rapid heat, transport and power system decarbonisation is challenging for Ofgem. Whilst RESPs could provide additional scrutiny and promote debate from a whole system perspective, there is also considerable risk of incumbent networks dominating. In theory, the NESO will have final sign off on outputs but it’s unclear how this will work in practice.
The RESPs will inform Ofgem on price control process requirements; assist local authorities with local planning; and they will feed into national planning, such as the Strategic Spatial Energy Plan, which maps land and sea for energy issues.
Under current proposals, NESO staff in each region will run local strategic boards and produce RESPs annually, with a detailed update every three years. These are expected to comprise of representatives from local energy network companies (gas and electricity), local and regional governments and other relevant actors, such as heat network operators or local transport authorities.
The latest consultation asks for views on board representation and cites concerns that inclusion of independent experts may diminish co-ordination. As it stands, boards may be filled with industry incumbents, some of which have a common shareholder (eg across gas and electricity), alongside under resourced local and combined authorities. It is unclear if all (unitary) local authorities in a region would be expected to sit on the board, potentially resulting in very large boards with widely varying knowledge and capacity to engage.
The obvious complexity of RESPs’ structures aside, the consultation asked: “Do you agree that the RESP should include a long-term regional vision, alongside a series of short-term and long-term directive net zero pathways?”.
We fear RESP processes may over complicate planning. We broadly know what must happen at the local level to facilitate the energy transition by 2050. Transport needs to be widely electrified and, alongside building efficiency improvements, heat pumps must be deployed in most places. In dense urban areas, local heating solutions will be needed, including heat networks. There are bigger uncertainties around industry but, overall, three issues for the energy regulator to manage are: expand electricity network capacity; grow new heat networks; and retire much of the gas grid.
The consultation suggests local authority energy plans will be key inputs, but that RESP staff will not directly develop local plans for an area. The realities of local and regional governance mean local authority action on energy system decarbonisation is largely discretionary (at least in England). However, many local authorities won’t have capacity to feed into the process properly, again highlighting the risk of industry capture of RESPs processes.
Despite regional differences (eg Scotland’s net zero target year is 2045), the core task of the RESPs process is to hasten decarbonisation everywhere and they need to ensure clear direction, supporting local authorities.
Existing regional organisations, such as the Net Zero Hubs in England, Local Partnerships Wales or Heat and Energy Efficiency Scotland, could help local authorities, including with technical support, but they cover large areas and their capacity to take on new roles is unclear. If there is a place to focus new staff or resources to drive the energy transition, local authority energy planning is surely high up the list?
Some larger, more resourced localities, like the West Midlands, Greater Manchester, the Greater London Authority or Bristol, have considerable expertise in local energy planning, but these are the exception. It doesn’t have to be this way. The RESPs consultation makes strong commitments to providing technical advice on local energy plans, increasing access to digital tools and improving data consistency. These measures can ensure informed local input, enabling interrogation of regional decarbonisation options and network assumptions. This should avoid the limitations of one-off consultancy reports and scenarios which are expensive and difficult to update.
Meanwhile, the government is developing a new Heat Network Zoning Authority to work with local authorities to identify where heat networks may be needed, delineate zones and support local co-ordinators. These along with demand reduction should be incorporated into RESPs’ development.
Establishing the NESO, GB Energy and Clean Power Mission Control are significant steps, but energy system co-ordination and governance questions remain. How will GB Energy and the NESO work together? To what extent will the clean power mission by 2030 incorporate whole system approaches across sectors, in line with the aims of the RESPs? Is there a risk local plans will be ignored in favour of centralised plans? These are just some of the questions that need to be answered.
Two things should happen. First, local authorities need help to plan. The RESPs could provide data tools and technical advice, but these alone are insufficient. Local energy planning must be granular and dynamic to inform network planning and project development, with funding and a clear local governance framework.
Second, national energy planning should be co-ordinated to avoid duplication and ensure accountability. Significant efficiency savings are possible if NESO, Distribution Network Operator and local authority planning functions are integrated. One institution, such as the NESO or an independent energy agency, could advise on roles, methods and integration. This would need to produce objective data and guidance. Decisions and plans should be based on common datasets, with standardised and transparent assumptions and methodologies, also helping other bodies such as the National Infrastructure Commission and Climate Change Committee.
This adviser would not be a policy maker or regulator and could be funded via bills (as the NESO will be) or general taxation. This isn’t original or controversial. The US, Germany and Denmark all have established, well respected agencies advising on, but not setting, energy policy.
Supporting local authorities and developing a single independent energy expertise centre are pragmatic proposals; both could form part of NESO or GB Energy’s remit or come under a new body. Further governance reform is required and, while it will take time, it would streamline the landscape. These fundamental issues need to be resolved before new institutional arrangements, including RESPs, are bedded in.