Sustainability First’s New Energy and Water Public Interest Network (‘New-Pin’) is seeking to ensure long-term decisions have the public interest at their heart. Associate Sharon Darcy explains why the Network was set up

Energy and water service providers and regulators are wrestling with how best to involve customers and other stakeholders in long-run strategic decision-making around the big energy and water ‘trilemmas’. Balancing today’s costs against tomorrow’s benefits – particularly in the face of uncertainty – can be challenging.

Companies in these sectors provide services that are crucial for public, environmental and economic health. Yet there is sometimes little public dialogue on how best to reconcile short- and long-term tensions between affordability on the one hand, and investment for security and sustainability on the other.

“It is unclear whether current approaches to how costs, risks and benefits are shared can support the level of change necessary while at the same time maintaining public acceptance”

Government Strategic Policy Statements do not always resolve these issues. Discussions on affordability tend to be focused on questions of intra-generational equity, less so inter-generational fairness and the impacts on future consumers, citizens and the environment. Company and regulatory decisions also tend to focus on sector-specific solutions, not always recognising systemic risk or making the most of cross-sector lessons and synergies.

 

Public acceptance

Over the coming decades, the energy and water sectors need to significantly step up investment to adapt to and mitigate the impacts of climate change and to modernise by embracing innovation and the smarter digital world – in the process enabling them to respond to changing public expectations.

It is unclear whether current approaches to how costs, risks and benefits are shared can support the level of change necessary while at the same time maintaining public acceptance.

There are fundamental questions about how, as a society, we might wish to meet the costs of long-run transformation of our infrastructure; how best to
support development of new innovative approaches to both the supply and demand sides; and what business models might best be expected to deliver such a major step up in investment while at the same time retaining public confidence.

There are differing views as to how energy and water service providers and regulators should respond to the social and environmental externalities that affect the sectors. Arguments have been made that the
intractable nature of these issues can lead to them getting dragged into value choices. Others have pointed to the need for a change in the framing of the problems facing the sectors that recognises that they are
different and complex.

“Although there is much talk, there are few solutions. It is clear, however, that addressing such questions in a practical way is core to building a clearer understanding on how best to serve the public interest for the long run”

Although there is much talk, there are few solutions. It is clear, however, that addressing such questions in a practical way is core to building a clearer understanding on how best to serve the public interest for the long run. In the absence of such consensus, there is a risk decision-making will become more polarised and politicised. This can lead to stop-start decisions and investment instability that can push up the cost of capital and put long-term service resilience in question.

In the end, this has the potential to undermine the social ‘licence to operate’ of providers, and to question the legitimacy of regulators.

New-Pin
Sustainability First has established the New Energy and Water Public Interest Network (New-Pin) to create a stronger and more coordinated voice for the long-term public interest in the sectors.

New-Pin brings together companies, regulators, government departments and public interest advocates with an interest in energy and water to provide an independent forum to:

•    Build understanding between different stakeholders as to what the long-term public interest looks like in these sectors, helping to deal with difficult issues in a more considered and stable way;

•    Develop capacity and expertise among public interest advocates, ensuring a more level playing field with the views of the public more fully represented in long-term company and regulatory decisions;

•    Improve board-level understanding of the value of public engagement in these sectors and a better grasp of what successful engagement and governance in the public interest might look like.

The network covers both energy and water in order to improve understanding of the interdependencies and nexus between the two sectors, in areas such as resilience or the common use of data, and issues such as systemic risk and boundary conflicts.

This cross-sector approach will also increase the opportunities for the cross-fertilisation of ideas

Sharon Darcy

Associate,

Sustainability First