Weekly Industry Update – 08.05.18

Category : News


Contents:

Week in Energy

Policy updates:

Industry updates:

Week in Energy

Monday 30/04 – Labour unveils plans to fund local authorities to deliver energy efficiency upgrades. Citizens Advice criticises Ofgem’s decision not to open a mid-period review of the 2015-2023 electricity distribution price control, the Energy Networks Association responds that networks have delivered record investment at a lower level of cost than pre-privatisation.

Tuesday 01/05 – The UK rises to 7th in the latest EY international renewables rankings on the back of subsidy-free projects coming online. The Energy Technologies Institute releases a report looking into nuclear cost drivers, finding significant scope for cost reduction.

Wednesday 02/05 – First Minister Nicola Sturgeon commits the Scottish government to an expansion of funding for energy efficiency and praises the Scottish renewables sector. The Offshore Renewable Energy Catapult finds tidal stream has the potential to “significantly reduce costs” from approximately £300/ MWh today to below £90/ MWh within 1GW of deployment. The Energy Networks Association seeks views on the challenges and opportunities of the Open Networks Project.

Thursday 03/05/08 – The BEIS and Welsh select committees launch a joint inquiry into the government’s decision making on the Swansea tidal lagoon. Energy and Clean Growth Minister Claire Perry indicates that the government’s upcoming post-2019 solar direction could provide a “really positive” set of outcomes for the industry. She added that the Conservative Party is “absolutely not against onshore wind”.

Friday 04/05 – The International Energy Agency finds last year renewable energy accounted for two-thirds of new power added to the world’s grid.

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Policy 1 | Sturgeon launches new Energy Efficient Scotland route map

First Minister Nicola Sturgeon launched the Scottish government’s new Route Map to an Energy Efficient Scotland and provided further details on its Climate Change Plan and new Energy Strategy, during a speech at this year’s All Energy Conference.

Speaking in Glasgow, the First Minister acknowledged the strength of Scotland’s low-carbon industries and expertise saying that people “across the globe” are aware of the country as a world leader in low-carbon technology. The reason for such a reputation, she said, was the innovation, knowledge and leadership that is prevalent throughout Scotland’s low-carbon industries, which now employ 50,000 people.

Discussing the government’s Energy Strategy and Climate Change Plan Sturgeon acknowledged the role of government in maintaining such a reputation, committing to “do everything in our power to support your sector”. It has been a busy year for energy, she said, before highlighting that there are several important challenges ahead over the years to come.

The Scottish government’s Climate Change Plan sets out its ambitions to reduce greenhouse gas emissions by two-thirds by 2032. The accompanying energy strategy sets out the changes required and pathways to take to meet this target. Sturgeon pointed to the success of the electricity sector as a benchmark – in 2005 renewable energy generated less than 20% of Scotland’s total electricity demand; now that figure is approaching 70%,

This success should be replicated elsewhere, said Sturgeon, urging that the next 12 months see something similar “not just for electricity but for our energy use as a whole, including heat and transport”. The government’s “very ambitious” target is that by 2030 at least 50% of Scotland’s overall energy use comes from renewable sources. Acknowledging the difficulty of reaching such a target the Minister added that the government is determined it happen.

Success will require change across four pillars: energy efficiency, heat transport and renewable energy. On heat, Sturgeon pointed to ongoing government investment in district heating schemes as well as innovative projects being trialled by Scottish Water among others. Transport, she added, will see investment in infrastructure to support electric and hydrogen fuelled vehicles.

Energy efficiency is an area that “doesn’t always get the attention it deserves” said Sturgeon, outlining key areas of focus for the government that encompass its route map to an Energy Efficient Scotland. These include providing £49mn this year for helping to tackle fuel poverty; ensuring that all of Scotland’s homes have a good rating for energy efficiency by 2040; and consulting on setting new long-term standards and targets for non-domestic buildings.

Overall, Sturgeon added, the route map will “ensure that the benefits of low carbon society are felt by everybody across our society”. Rather than focus on the challenges associated with climate change, she said, it is important that industry and government must “talk much more about the opportunities that arise from tackling [it] as well.”

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Policy 2 | Local grids consider future challenges of connecting flexible assets

Trade association the Energy Networks Association (ENA) has released a call for evidence to gain stakeholder views on the challenges and opportunities of the Open Networks Project.

The project is an initiative to drive progress towards a smart and flexible energy network. It is designed to deliver major policies set out in the Ofgem and BEIS Smart Systems and Flexibility Plan, the government’s Industrial Strategy and the Clean Growth Plan.

Currently applications from storage at the non-domestic scale and other Distributed Energy Resource to gain a connection to the electricity system are treated in the same manner as all other import and export applications for a similar capacity at the same voltage level. The process is the same, yet as the technology or its operating pattern differs from more traditional applications, the modelling and analysis by network design and planning teams “must reflect this”, according to the ENA.

Currently local power networks do not offer a bespoke connection process for storage or other DER, yet there are more flexible offer types available which can help remove barriers to connection. As the volume, complexity and variation of the requirements increases, so too does the analysis required to determine the minimum scheme.

The ENA aims to identify gaps in the Distributed Energy Resource (DER) management process and create and action plans to facilitate the promotion of storage and or other applicable DER where it can assist quicker and cheaper connections. Ofgem, BEIS, 10 of the UK and Ireland’s electricity network operators and other key stakeholders are collaborating on the project.

Questions the consultation centres around include:

  • Under what circumstances should customers/flexibility/storage service providers be connected ahead of other resources to enable better use of existing network capacity
  • Where the opportunities lie in the existing connections process for storage and other DER to be connected ahead of other resources, and
  • With promotion of flexibility in mind, does the definition of the problem outlined in this Call for Evidence report align with respondent’s thinking.

The findings in these areas thus far suggest that the issue is less with the existing queue management processes and more to do with factors like market certainty, tender requirements and service availability.

The next phase of work in this area will include detailed gap analysis, a roadmap, a good practice guide and an action plan.

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Policy 3 | Inquiry launched into the future of Scotland’s oil and gas industry

The House of Commons Scottish Affairs Committee has begun an inquiry into the future of the oil and gas industry in Scotland that will look at challenges facing the sector and how best to secure the future against declining reserves.

The committee highlighted the important role that Scotland’s oil and gas plays in the UK economy, contributing approximately £17bn to the balance of trade and supporting over 300,000 jobs. Accordingly, the inquiry will address what action the UK government is taking to support the industry’s long-term future and how effective it has been.

Scottish oil and gas has seen lower employment and investment in recent years, as well as experiencing low oil prices and declining tax revenues. MPs will consider how the economic return from Scotland’s oil and gas reserves can be maximised, as well as how the various stakeholders – UK and Scottish governments and oil and gas companies – can work together more effectively. They will also address the current devolution settlement and whether it offers the best way for stakeholders to support the industry.

Finally, the committee will take a broader view on areas such as skills and expertise, technology and supporting infrastructure and how best to maximise these assets. It will also look to understand how government can provide support to ensure future opportunities are maximised.

The inquiry is open for written submissions until 1 June 2018.

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Policy 4 | Public concern over UK energy security rises, according to BEIS

The government has published results from its latest Public Attitudes Tracker (PAT), which analyses and monitors public attitudes on energy priorities such as energy security, the cost of bills and renewable energy policies.

The report, published 26 April, is the result of interviews with 2,102 people in the UK. On the subject of energy bills, 30% of those questioned admitted to being either very or fairly worried about paying their bills – similar to previous levels. Those who were more concerned said they felt energy bills were “generally more expensive” than other bills and that their price had increased exponentially compared to other outgoings.

The latest wave of the tracker also revealed record levels of support for renewable energy, with 85% of people supporting it. Support for solar and offshore wind were also at their highest levels since the tracker began, at 87% and 83% respectively.

Rising concern about the UK’s future energy security is noted, with 72% of respondents concerned about “the UK becoming too dependent on energy from other countries”. A high proportion too (71%) felt that the UK is “not investing fast enough” in alternative sources of energy. In line with this, support for the use of renewable energy has reached a peak of 85%.

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Industry 1 | UK regains ground in EY renewables rankings

A report by consultants EY has ranked the UK has the 7th most attractive country in the world for renewable energy investors.

The Renewable Energy Country Attractiveness Index (RECAI), is a bi-annual report, which ranks the top 40 countries in the world based on the attractiveness of their renewable energy investment and deployment opportunities.

The latest edition, published on Tuesday, 1 May, saw the UK rise from its previous position of 10th, which it held in both the October and May 2017 editions. It also continued the overall upward trend that the UK has seen since its record low of 14th in October 2016.

EY explained that following the large drop in UK renewable energy investment in 2017, the nation’s first subsidy-free solar PV site has seen investor interest increase. The 10MW Clayhill solar farm was opened by Energy and Clean Growth Minister Claire Perry in September 2017, and at the time was hailed by many as a milestone in the solar industry.

EY noted that the use of onshore wind projects for merchant generation and the potential attractiveness to investors of the repowering of existing windfarms that are coming to the end of their operational lifespans have also helped to increase the investment case for UK renewables.

China retained the top position, followed by the United States and Germany. India and Australia completed the top five. Ireland continued to climb in the rankings, having risen from 31st in October 2017 and 40th in May 2017. The higher position was partly attributed to the announcement that the government was considering plans for the new Renewable Energy Support Scheme, which includes plans for a technology-neutral auctions from 2019. The recent approval of the North South interconnector also helped Ireland rise up the rankings.

As well as examining the investment trends in individual countries EY also assessed some global trends that are impacting the renewable sector. It found that a number of the world’s largest oil companies have begun to invest in renewables.

This has involved the acquisition of companies and projects that are unrelated to their traditional business operations, which have until recently focused almost solely on the extraction, refining and distribution of hydrocarbons.

The report suggested that this has been primarily driven by an increasing global concern in relation to climate change. This has forced these oil companies to start considering the implications to their businesses of the low-carbon transition.

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Industry 2 | National Grid forecasts stable outlook for transmission charging changes in October

On Tuesday, 1 May National Grid issued its latest indicative NTS transmission charges which will apply from 1 October.

National Grid predicts the forecast charging base will increase by 27TWh, or 3%, with no material change forecast to the Transmission Operator (TO) maximum allowed revenue. However, the forecast demand will be reassessed before the final prices are confirmed in October when a new set of demand data is available. This is expected to be in May or June. The TO entry commodity charge is forecast to be 0.0427p/kWh, down 0.0007p/kWh from the current rate. The TO exit commodity charge is forecast to be 0.0203p/KWh, an increase of 0.0001p/kWh. The System Operator (SO) commodity charge is forecast to be 0.0089p/kWh, down 0.0012p/kWh from the current rate. Final charges will be issued by 1 August.

National Grid estimated that if any of the proposals for UNC636 Updating the Parameters Used to Calculate the NTS Optional Commodity Charge are implemented, this could result in up to a 10% reduction in the total TO and SO commodity charges from 1 October 2018. The system operator noted that the outcome of this modification “is uncertain”.

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Industry 3 | ETI identifies cost reduction potential for nuclear power generation

A study by the Energy Technologies Institute (ETI) has identified eight key drivers that could potential reduce the costs of new nuclear projects. The summary of the Nuclear Cost Drivers project, published on Monday, 30 April, also suggested 35 “credible opportunities” to reduce the costs of nuclear electricity generation.

The project found that there is a “very significant cost reduction potential” for new build nuclear projects in the UK, but that fleet deployment alone would not necessarily guarantee a reduction in costs. The ETI argued that to realise the potential cost reductions, project developers will need to implement and manage “well-designed and intentional” programmes that incorporate a range of cost-reducing measures.

The ETI also came to a number of other conclusions, including: that “relatively significant” cost savings are possible outside of reducing the cost of capital in construction; that larger Gen III/III+ reactors and Small Modular Reactors (SMRs) are more market-ready than advanced reactors; and that cost-reductions and a better guarantee of delivery can reduce the perceived risk of ne build nuclear and therefore lower the cost of interest during construction.

The ETI recommended that there now be an in-depth study undertaken into how to deliver “meaningful” cost reductions in new build projects, and that a sequence of optimal near and longer-term actions be designed for government, developers, the regulator and stakeholders. The study also identified the potential for a step-reduction in the cost of advanced reactor technologies and SMRs. The ETI noted that while these technologies are not yet licensed, or construction ready, there is evidence to support the early testing of designs and the examination of cost reduction strategies by potential investors.

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