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UK utilities urged to publish 'just transition' plans

National Grid, E.On, RWE, Scottish Power, EDF and Centrica urged to follow SSE’s lead and publish dedicated strategies setting out how workers and consumers will be protected from any shocks of net zero transition.

Windmill engineer wearing PPE standing on wind turbine

The United Kingdom's largest utility companies are facing calls to publish dedicated strategies that set out how they to intend to manage the social implications arising from the shift from fossil fuels to low- and zero-carbon solutions, amid fears progress to decarbonize the energy sector could stall if companies at the forefront of the transition do not secure a broad social mandate. 

Activist investors Royal London Asset Management and Friends Provident Foundation have called on the energy companies to establish formal "just transition strategies" detailing how communities, consumers and workers will be protected from job losses and electricity price hikes as oil, coal and gas plants are shuttered or curtailed. 

Last month, SSE became the first energy company in the U.K. to launch a formal just transition strategy, and the investors are calling National Grid, E.ON, RWE, Scottish Power, EDF and Centrica to follow suit.

"There are real risks of social backlash to the transition, which may deter it from happening or decelerate its pace," said Carlota Garcia-Manas, senior responsible investment analyst at Royal London Asset Management. "Energy companies need to address the social impact that the transition carries."

Businesses and governments are under growing pressure to ensure the journey to net-zero emissions delivers benefits to all consumers, communities and workers, and ensure those in carbon-intensive industries are protected from fallout that could arise from job losses and any increases in electricity costs in the short-term.

There are real risks of social backlash to the transition, which may deter it from happening or decelerate its pace ... Energy companies need to address the social impact that the transition carries.

Following calls from trade unions for the government to develop regional "just transition" strategies that would seek to mobilize investment in retraining programs, maximize green job creation and ensure the costs and impacts of emission reduction policies are spread fairly across the country, five of the U.K.'s leading business groups also have demanded the government make a "just transition" a net zero priority.

Last week, Garcia-Manas urged energy companies to "bring workers, communities and consumers with them on the journey to net zero in a way that addresses the trade-offs and maximizes its benefits, embedding fairness in their approach."

Any plans developed by utilities should be detailed and comprehensive, she said. "They should have a plan to address the fact that the increased digitization and shift away from certain technologies already requires new talent and reskilling of the sector's workforce," she noted. "Also, they should bear in mind that inadequate pricing mechanisms may affect the most vulnerable customers, increasing fuel poverty."

Responding to the call to action, a spokesperson from National Grid told BusinessGreen the firm would report annually against the goals set out in its Responsible Business Charter, which includes commitments to deliver energy in a "fair and affordable way" to communities and to ensure "no one is left behind" in the transition to clean energy.

A spokesperson from E.ON said the firm "fully supports a just transition whilst achieving net zero emissions." "We have been at the forefront of the move towards sustainability for many years, having moved away from fossil fuel generation to focus on renewables and smart energy solutions for our customers," they said. "We expect there to be huge growth in our core areas of strength, such as installing energy efficiency and heat pumps, throughout the 2020s."

RLAM and Friends Provident Foundation have urged the utility companies to publish dedicated just transition plans ahead of the COP26 climate conference set to take place in Glasgow next autumn. "It is imperative that companies and investors understand and act on the risk of ‘stranded people' and ‘stranded communities,' in terms of skills and economic utility, as well as the financial risk of 'stranded assets,'" said Friends Provident Foundation investment engagement manager Colin Baines.

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