Energy Systems Catapult’s ‘Building a Governance Framework for Local Area Energy Planning’ used a combination of stakeholder interviews, market research and whole system modelling to explore how coordinated local area energy planning could deliver significant financial benefits on the road to net zero. It also explored in detail the future policy, regulatory and governance reform that is needed to deliver it.

A Local Area Energy Plan (LAEP) sets out the change required to transition an area’s energy system to net zero in a given timeframe. This is achieved by exploring potential pathways that consider a range of technologies and scenarios, and when combined with stakeholder engagement leads to the identification of the preferred cost-effective pathway to achieving an area’s net zero goal.

• LAEP can proceed now without causing significant costs to the wider system. The compensatory costs associated with uncoordinated LAEP only begin to be realised when a critical mass of LAEP (over 90 – or 25% of districts) are implemented in an uncoordinated way. These costs range from national infrastructure to investment in buildings, transport and decentralised power. Appropriate coordination measures will eventually be required and could deliver significant benefits and cost savings. Coordinated LAEP is likely to deliver substantial whole system cost savings, in the order of 1% GDP, relative to an organic, unplanned approach.
• The total energy system discounted cost saving from this approach could total £252bn between 2025 and 2050.

A consistent local evidence base, established through LAEPs, is the starting point for coordinating local, regional and national decisions but will require new processes and governance. A range of coordinating mechanisms are required for both for the creation and  implementation of LAEP which ultimately seek to:

• Better align spatial and energy planning frameworks.
• Incentivise coordinated action across local authority boundaries.
• Address key tensions between local level ambition and regional regulatory price control.
• Enable aggregation of LAEPs to a scale which can inform strategic infrastructure investment and policy.

The success of coordinated LAEP starts with the creation of high quality LAEPs as a material consideration at the local level. This will require resources within LAs supported by a technical assurance facility and reporting process, to support decision making on current policy priorities across heating, transport and industrial decarbonisation.

There is a clear need to join up energy and spatial planning responsibilities.

A statutory enhanced partnership (SEP) is a mechanism used to formalise the relationship between local authorities and private sector operators. SEPs have been used predominantly in the transport sector to support the successful delivery of national Government initiatives by setting out clear and specific service level plans and outcomes, however this type of arrangement could be used with respect to local authorities and network companies. Currently, there are no formal requirements for DNO/GDNs to engage with LAs on energy planning, running the risk of misaligned strategies. We envision a place for SEPs to deliver on 3 key targets, namely – transparency, risk, and investment.

Incentivising the aggregation of LAEPs through existing regulatory  measures and formal partnerships could help create a mutual understanding of the investments and risk mitigation measures required. Going forward, these partnerships should be complemented by the development of whole system asset management decision making  frameworks, informed by LAEP.

High quality LAEPs aggregated to regional levels can then act as an evidence base to inform regional whole systems energy planning and cluster decarbonisation.

Key actions

To building a governance framework for coordinated Local Area Energy Planning, the following key actions are recommended:

1. Enable local authorities to support with strategic policy coordination by rolling out LAEP.

2. Planning frameworks will need to do more to support net zero.

3. Provide multidisciplinary resources into LAs to support with LAEP.

4. LAEPs should be an essential piece of evidence in the RIIO process.

5. Independent coordination at the regional level required to ensure lowest cost of net zero delivered.

6. Expand the role of net zero hubs to support with LAEP project development and investment.

7. Ofgem to commission further evaluation of statutory enhanced partnerships for delivering coordination.