Big utilities holding back green transition

The “big six” utility companies have been accused of delaying the low-carbon transition.

A report compiled by InfluenceMap for Friends Provident Foundation said that the incumbent power companies have “undue influence on UK energy policy and regulation, hindering the clean energy transition and posing significant investor risk”.

The paper said the undue influence arose by representatives from the “big six” having close relationships with Ofgem and the Department for Business, Energy & Industrial Strategy (BEIS).

It also said representatives from the largest companies sit on key regulatory panels, slowing down the pace of change towards “decarbonisation, decentralisation and democratisation” (3Ds).

‘Policy capture’

The report labelled the interference as “policy capture” and said factors included private meetings with officials, continual messages about “the lights going out” and a disconnection between messages that power company chief executives said in public and the actions of their companies.

Colin Baines, Investment Engagement Manager at Friends Provident Foundation, said: “There is emerging consensus that the energy market is facing unprecedented disruption due to the trend towards decarbonised, decentralised and increasingly democratised energy and that this is now being driven as much by economics, technology and innovation as it is by government policy.

“It should concern investors that the business models of the ‘big six’ appear to be based on their current ability to maintain the status quo via regulatory influence.

“It should also be a concern that none of the ‘big six’s’ lobbying activity is sufficiently aligned with this 3D transition, an indicator that they are perhaps not adequately preparing for the market disruption they face.”

German example

Dylan Tanner, Executive Director at InfluenceMap, added: “The research shows the incumbent utilities in the UK, through persistent and strategic capture of the policy process, appear to be clinging to outdated business models.

“History shows this usually ends badly for the shareholders of the companies most resistant to change.”

The report highlighted that E.ON and RWE lost 80% of their profitability after misreading the speed of change in German energy policy.

> Download the report