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Climate change and green investment - pressure on utilities providers

The National Infrastructure Commission has called for utility regulators to have new powers if the UK is to tackle climate change. Behind this is the belief that there needs to be long-term strategic investment to reduce emissions, improve digital connectivity and build resilience to flooding.

Future Cities Forum spoke to the United Kingdom Regulators Network (UKRN) - see below - for a response and will be discussing the on-going issues of climate change and green investment in its forums and round tables over the autumn and into 2020, in particular the government's work proposed in its new Environment Bill.

The UK government says it has introduced a new Bill to Parliament to cover 'the biggest environmental priorities of our time', with action to improve air and water quality as we leave the EU. The principles will be enshrined in law and legislation will also create legally-binding improvement targets, holding the government to account on its commitment to reach net zero emissions by 2050.

It says it will improve air quality by fighting pollution and transform the way we manage waste, introduce a consistent approach to recycling and tackling waste crime, minimise the use of single use plastics, and improve resilient water and waste water services in the face of our changing climate. Devolved administrations across the UK will help to tackle these issues with their own individual approaches.

Biodiversity net gain, it says, will allow it to deliver the housing we need whilst also enhancing nature and this has been co-designed with the MHCLG. An amended duty on public authorities around biodiversity, it insists, will ensure that every level of government is playing its part.

Climate change was discussed at our June Future Cities Forum where panellists gave their views on how innovation to integrate low carbon power is creating new models for energy networks. The Head of R&D UK at EDF Energy, Xavier Mamo, explained how important it is to use existing energy assets in combination with technology and 'smart' innovation, to introduce ways of using and distributing low carbon sourced energy. He spoke about the Oxford City and County Council-led 'Project LEO' ('Local Energy Oxfordshire') which will develop a new model for the way in which local energy systems in Oxfordshire are managed and measured:

'The system will balance local demand with local supply in a real-world environment - and will help test markets, inform investment models, and assess the benefits of flexibility to the energy system. The project - which is a £40 million collaboration between ten partners including SSEN, EDF Energy, two councils and both the Oxford-based universities - will demonstrate the potential for people and communities to become active participants in the energy systems of the future. Project LEO will enable social enterprise, the Low Carbon Hub, to add to its 40+ projects with an extra £16 million of investment to work on projects with the community. The project is funded with £13.8 million from UK Research and Innovation and £26 million from private partners', he stated.

Xavier also spoke about the need to keep the customer at the front of innovation, and cited EDF's project with the residents of Elmore House in Brixton, London. This pioneering community energy initiative enables the block's residents to access energy generated from a solar PV system on the roof, store it in battery and then trade it - peer-to-peer - with one another using block chain technology.

Co-Head of Energy at investor, Amber Infrastructure, Jenny Curtis, commented on the complexity of investing in low carbon projects. While she admired Bristol City Council's move to partner with a strategic private sector investor to help take the city to carbon zero by 2030, she said: 'When we are looking at funding a project, we consider technology, policy and regulatory risks, but there has been a policy vacuum recently especially around the de-carbonisation of heat... we have been encouraged to invest in Combined Heat & Power (CHP) but now the focus is on heat pumps.

'When you are investing in bricks and mortar it's pretty straightforward, but with energy it's an overlap of energy, digital, as well as communications and urban infrastructure. It is a complicated area. Amber has been responding to the Treasury's Infrastructure Finance Review and political and regulatory uncertainty is an issue for investors. However, it's important to look at how we solve things at a local level, where joined-up, integrated planning (of energy projects) must come to the fore. I would also recommend that local authorities look at energy storage, if they have spare land, because it's part of the new model developing around low carbon energy.'

The firm has invested in a range of energy projects for local authorities in communal heating solutions, serving both social and affordable housing, and this includes LEEF's scheme in Hackney which addresses fuel poverty, and the district heating network in Enfield's Lee Valley.

Meanwhile the NIC's report 'Strategic Investment and public confidence' suggests that it is essential to make utitly companies invest in new infrastructure. It considers the need for extensive strategic investment in each of the sectors to reduce emissions, improve digital connectivity and build resilience as floods and drought become more likely.

The Commission concludes that while the current model has mostly achieved what it was created to do, it has created a culture of short termism. The model's excessive reliance on utility companies for strategic direction means that the long term investments needed to meet challenges such as climate change have not been sufficiently prioritised. It also stated that regulators must use the price and market controls at their disposal to balance the needs of consumers and investors and ensure the market operates fairly.

Future Cities Forum spoke to the United Kingdom Regulators Network via Ofcom to gain some reaction to the NIC's proposals. The UKRN said:

'We welcome the NIC's focus on consumers and investment. These are central priorities for the UKRN and are reflected in our work plan. Our members will be giving careful thought to the recommendations, while recognising that the UKRN's membership is broader than the regulations within the scope of the NIC's review'.

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