Energy policy can either speed up or slow down the rise of renewables but it cannot stop it.
A new report has warned Britain's Big Six energy suppliers that they must change how they do business if they are to thrive in the future - just days after the government announced fundamental changes to the energy markets.
The report is authored by Forum for the Future, an international sustainability non-profit, and draws together fresh insights on the rapid transformation of the UK energy system provided by a group of former utility company chief executives, energy ministers and a high-ranking civil servant.
Volker Beckers, the former RWE npower boss, and Ian Marchant, the former chief executive of SSE, contributed to the report and also authored an open letter warning the Big Six that they must now shift from centralised fossil fuel generation and focus on mainstreaming smart energy services and local renewables in order to avoid stranded assets.
The report highlights how forecasts for renewables and battery storage costs and deployment have been hugely misleading and reveals how the speed of transformation in the energy sector has caught the industry off-guard. This has, the report claims, left the incumbents fighting for a place in the future market.
Investors are warned that the old-world business model of large power stations and passive consumers is being rapidly undermined by a decentralised, renewable, digitised and people-led approach.
Accept and embrace the revolution
The report also argues that there are still major challenges to overcome, such as decarbonising urban heating and electrifying transportation.
The publication comes after the latest figures showed the number of British homes, communities and businesses now generating their own renewable power has risen to more than 900,000 - an increase of 12,000 percent from 2010. At the same time, Centrica - the UK’s largest utility - has lost 50 percent of its market value since 2013.
Will Dawson, Associate Director for Energy and Climate at Forum for the Future and the lead author of the report, said it was now time for the Big Six to “accept and embrace the revolution” and ensure that it betters the lives of everyone by creating jobs, lowering bills, cleaning up the air and safeguarding the climate.
He added: “It’s important that the large energy companies that have dominated for so long are playing their part to the full so we don¹t lose the expertise and valuable assets they have built up. That means rapidly making decentralised, community and smart energy systems their core business, not innovation trials on the side.”
Decarbonisation, decentralisation and democratisation
Colin Baines, Investment Engagement Manager at the Friends Provident Foundation, which commissioned the report, said it was increasingly clear that the Big Six needed to develop new more resilient business models if they were to survive the “3D energy transition” of decarbonisation, decentralisation and democratisation.
“We want to see a managed and just transition that reduces the risk of stranded assets and shocks to both the economy and communities,” he said.
“As responsible investors, we will be using this report to commence shareholder engagement with the energy utilities and intend to work with other like-minded shareholders to collectively put pressure on them to disclose how they intend to improve their resilience to this market disruption.”
Mr Marchant states in the report: “There is now a prosumer revolution, where ordinary people and businesses are both producing more energy, with more and more households and communities becoming generators, actively creating their future energy system.”
Steve Holliday, the UK Executive Director of National Grid from 2007 to 2016, adds: “Energy policy can either speed up or slow down the rise of renewables, storage and electrification of heat and transport, but it cannot stop it.”
Brendan Montague is the contributing editor to The Ecologist and a regular columnist with openDemocracy. He tweets at @EcoMontague.