With the challenge of achieving net zero looming ahead, energy operators are under pressure - and scrutiny - to explain how in practice they will achieve this.  These operators - vital players in addressing the climate crisis  - submitted their Environmental Action Plans to Ofgem last year. Sustainability First,¹ in partnership with Citizens Advice, teamed-up to assess the plans' effectiveness.

The networks had asked their consumers and stakeholders two key questions. What priority to give to decarbonisation? And, at what extra cost?  The answers were clear - a wish to decarbonise and to protect the environment, while being aware of the need to keep down customer bills. We wanted to look at how far the Plans the companies put forward met that goal.

Carbon footprint

An important part of the Plans is the steps the companies are taking to reduce the carbon footprint of their businesses. Ofgem had required the companies to get their long-term decarbonisation plans accredited by an expert global body, the Science Based Targets initiative (SBTi). We support the companies’ efforts to take this ‘long-view’ and to track progress as they go. 

In their plans the companies set out their targets for car and van fleets to go electric, the use of renewable energy to power their own buildings and depots, and reducing use of back-up diesel generators. They are also starting to talk to their suppliers about what they are doing to reduce their own carbon footprints. This is all welcome. 

Some companies also plan to use offsetting to enable them to hit headline net zero targets in the next few years. We are less convinced that this is good value for money – and if nothing else it needs to be clearer how much they are relying on offsetting to hit their targets.

Invisible emissions

However, our biggest concern is that this focus on these obvious areas means that many of the networks are ignoring the “invisible” sources of emissions that account for over 90% of their carbon footprint and which the SBTi says they need to take into account. There are two major areas of network operations where we would like to see the companies do much more to reduce their carbon footprint. 

First, electrical losses. More needs to be done to tackle the 7% of power that is simply ‘lost’ as it transfers across the networks from generator to customer. This adds cost to customer bills, means we need to build more generators to meet net zero and adds to carbon emissions. Some power-loss is inevitable due to the physics but there are important steps the companies can take such as using more energy efficient equipment.

Second, the networks hold equipment that contains a highly potent and long-lived greenhouse gas, SF6 (sulphur hexafluoride). The companies must work out what to do about the 200,000 items of this small SF6 kit across their networks. They must of course tackle leaks (which are modest). But, also vital, the companies must work-up detailed plans for how, over time, they will safely get all SF6 equipment off their networks. 

The companies tend to see both losses and SF6 as largely outside their near-term control. We disagree. Both areas are basic to network decarbonisation and to long-run efficient network management. The companies need to put far more effort into addressing these challenges over the next 5 years and Ofgem needs to put strong incentives on them to do that.

Pollution and biodiversity

As well as reducing their carbon footprints the networks have also rightly set themselves goals to meet legal duties on pollution control. One important area is to stop oil leaking from cables and seeping into the ground. Another is to get rid of any traces of PCB - a cancer-causing chemical still found at extremely low levels in some network equipment. These are each necessary steps - but ‘big spend’ items. Ofgem must therefore look carefully at what is proposed to ensure it is efficient and to make sure that the companies do what they promise. 

There are also important promises to improve the biodiversity on the sites that the networks manage, ensuring gains for plant- and wild-life. This is a new area for the networks and we would like to see them sharing ideas. They also need to be clear where they are going beyond what is already required by law on major projects.

Making it happen – collaboration and reporting

The distribution networks have a central role to play in helping the UK meet its net zero targets. The companies should innovate as much as they can, keep an open mind and be ready to adapt.  They must learn quickly from each other and from good practice elsewhere. 

The way that Ofgem regulates the networks means that there is an element of rivalry between them. In the search for early answers to these challenges, Ofgem must encourage the companies to collaborate and coordinate to keep down costs. 

The Environmental Action Plans include many good proposals. And over the next five years each company must show progress against their targets in an annual environmental report.  That said, in our detailed reading of the Plans, we struggled to gain a clear picture of what each company plans to spend and the split between the different activities and targets. Seemingly, anti-pollution spend will outstrip spend on decarbonisation by far. We have been asking the companies how they set their priorities and to make the costs clearer.

It’s also very hard to compare across the plans because the environmental targets aren’t on a common basis. This makes it hard to know how far individual company targets are ambitious.  We hope that Ofgem will set clear rules about how progress should be reported.

Finally, this a complex area and customers will find it hard to judge how well the networks are really doing.  That’s why we want to see Ofgem commission and publish an independent review each year of all the DNO environmental data, and how companies are doing in meeting their many environmental promises. 

As well as helping Citizens Advice with their report, we have also provided our views to Ofgem on the ED2 plans. If you wish to read more our response is at Sustainability First Response. DNO ED2 Business Plans. February 2022