COVID-19: Keep up to date with the latest information via our Frequently Asked Questions. If you are experiencing a power cut or loss of supply, click here.

Weekly Industry Update – 12.03.18

Category : News


Week in Energy

Policy updates:

Industry updates:

Week in Energy

Monday 05/03 – The government launches a consultation on its draft National Planning Policy Framework, calling for a proactive approach to mitigating and adapting to climate change. The International Energy Agency finds greater investment is needed to meet global oil demand from 2020. The government encourages UK businesses to keep applying for funding and participating in projects under the EU’s Horizon 2020 programme.

Tuesday 06/03 – The Scottish government confirms it will soon introduce a new Climate Change Bill to raise its climate ambitions “even higher”. BEIS confirms that it found “strong support” for amending UK legislation to enable EU Emissions Trading System compliance deadlines to be brought forward in the UK to ensure allowances are still valuable.

Wednesday 07/03 – Ofgem outlines a new round of network price controls in a consultation, proposing a five-year price control period instead of eight and lower returns for network companies. Analysis by Carbon Brief finds that at the end of 2017, the UK’s total CO2 emissions were 38% below 1990 levels and were as low as the levels of emissions in 1890.

Thursday 08/03/08 – The government responds to the Business, Energy and Industrial Strategy Committee’s report on Brexit and the civil nuclear sector, stating it is confident the Office for Nuclear Regulations will be able to deliver a domestic safeguards regime that meets international standards by March 2019. The Public Accounts Committee opens an inquiry into the Renewable Heat Incentive in Great Britain. The EU Energy and Environment Sub-Committee says it will take evidence on the implications of Brexit for the UK’s participation in the EU ETS on Wednesday, 14 March. Research by think tank, Carbon Tracker, warns fossil fuel companies could waste €1.6tn in investment by 2025 if they fail to take global climate goals into account.

Friday 09/03 – Data from the Office for National Statistics finds GB’s fuel trade deficit rose by £3.1bn to £5.4bn in the quarter to January 2018, a period in which the primary pipeline for transporting UK oil and gas faced problems.

Back to top

Policy 1 | Ofgem sets out new price controls for networks

Ofgem has set out proposals for a new regulatory framework for network companies, which it says will lead to better outcomes for energy users.

Network companies are monopoly businesses, so Ofgem sets price controls – a ceiling on the amount companies can earn from charges to use the networks. The controls are designed to protect consumers and ensure they get value, and to also make sure companies operate the network efficiently and sustainably, while they make a return. RIIO (Revenue=Incentives+Innovation+Outputs) is Ofgem’s performance-based framework to set the price controls.

It published a consultation on Wednesday, 7 March, in which it claimed its new “tougher approach” would lead to savings of over £5bn to consumers over five years. To achieve this, it suggested a cost of equity range of between 3-5%. The cost of equity ranges relate to the amount that network companies pay their shareholders and is set at 6-7% today. Ofgem said its new figure is the lowest rate ever proposed for energy network price controls in Britain.

The regulator said that it was able to push forwards with a tougher regulatory framework because of a stable, predictable and low risk regulatory regime, which has ensured consumers benefit from high levels of investment, innovation and reliability at the lowest cost. It called on networks to step up their use of innovation even further. This would be in a bid to maintain high levels of reliability while also enabling support for new technologies. These include electric vehicles, electricity storage, and local renewable generation.

As well as the lower cost of equity, Ofgem made a series of other proposals for the new framework, including shifting the price control period from the current eight-years to a five-year period. It explained this was because predicting some investment needs during the energy transition is harder over a longer period.

Ofgem also is proposing tougher requirements to put network companies’ business plans for the next price controls “under the microscope”. These include a wider scope for opening up high value network upgrades to competition across the gas and electricity sectors; a targeted innovation support programme to support strategic challenges across the sector and to involve third party inventors and entrepreneurs in trialling new business models; measures to ensure that consumers don’t pay for capacity which is not used; and failsafe measures to protect consumers, including companies having to share more of the savings they make due to greater efficiency or use of innovation with consumers.

In reaction, the CEO of the Energy Networks Association (ENA), David Smith said: “Energy networks are the nerve-centre of a smarter, cleaner energy market, responsible for delivering a range of exciting new services for our homes, businesses and communities. Balanced regulation is fundamental to delivering these […]” The proposals were also welcome by Citizens Advice, which called on Ofgem to “hold its nerve” and see through the changes.

Stakeholders have until 2 May to respond to the proposals, with Ofgem to finalise the framework for the next price controls by summer 2018.

Back to top

Policy 2 | Scottish government to introduce new Climate Change Bill

The Scottish government has confirmed that it will soon be introducing a new Climate Change Bill in an effort to enhance its climate ambitions.

The announcement was made as part of a Ministerial Statement from Climate Change Secretary Roseanna Cunningham, which accompanied the publication of the third report on the Scottish government’s efforts to meet their climate targets. This latest report covered the period from 2018 to 2032 and formed part of the Scottish government’s overall Climate Change Plan. The government noted the “great success” that has been seen in decarbonising the electricity sector and said electricity will become “increasingly important” as a power source for heat and transport. It also reiterated its target of sourcing 50% of all of Scotland’s energy demands from renewables by 2030.

By 2032, Cunningham said Scotland will have “set the scene” for the deployment of carbon capture and storage (CCS) technologies. However, she added that the Plan is not dependent on CCS being able to contribute to emission reductions.

The Minister went on to discuss the industrial sector, which she said will be “more efficient [and] more productive”. This will be supported through the Low Carbon Infrastructure Transition Programme, through which the Scottish government plans to provide £60mn of new investment “to maximise Scotland’s enormous potential in the low-carbon sector.”

Cunningham noted that the “significant decarbonisation” required by industry will be dependent on continued access to the EU Emissions Trading System. However, she added that the UK government’s “unwillingness or inability” to provide clarity on this issue is “risking investment and growth” in the Scottish economy. She therefore argued that it was “imperative” that the UK government looks to reassure industry on the future of the scheme.

The plan also considered the role businesses could play in meeting climate goals. It noted that investing in energy efficiency will help insulate them from energy price rises and that transitioning to a low-carbon business model would “meet the expectations of an increasingly climate-aware consumer base.”

The government has also unveiled proposals to transform the transport sector, saying it has plans for electric vehicles and infrastructure upgrades to enable the realisation of its commitment to phase out the need to purchase petrol or diesel cars and vans by 2032. Cunningham pledged to introduce low emission zones in Scotland’s largest cities and take “significant strides” towards greener buses, heavy goods vehicles and ferries. The plan also outlined proposals to have buildings insulated “to the maximum appropriate level”, which will lower bills for consumers and will help to tackle fuel poverty.

Cunningham concluded: “We are not taking any easy options, because this government believes that we have a moral obligation to act, and we are confident that Scotland’s unique gifts – plentiful renewable energy resources, a strong legacy of innovation, and the ingenuity of the people of Scotland – will enable us to realise the opportunities that lie ahead.”

Back to top

Policy 3 | May confirms UK will seek close energy cooperation with the EU

Prime Minister Theresa May has said that post-Brexit, the UK will look to secure broad energy cooperation with the European Union (EU).

Delivering a speech on Friday, 2 March, May set out new details of the government’s position over Brexit, accepting that access to the EU market would be “less than it is now”. May drew on how there were many areas in which the UK and EU economies were closely linked, citing energy, transport, digital, law, science and innovation, and education and culture as examples.

May said that on energy, the broad cooperation the UK will look to secure will include protecting the single electricity market across Ireland and Northern Ireland. It will also involve exploring options for the UK’s continued participation in the EU’s internal energy market. The government also feels it is of “benefit to both sides” if the UK maintains a close association with Euratom’s nuclear safeguarding regime.

Back to top

Policy 4 | National Planning Policy Framework calls for proactive climate action

On Monday, 5 March, the government launched a consultation on its draft National Planning Policy Framework.

The draft text set out how new developments should be planned for in ways that help to reduce greenhouse gas emissions. It also said that plans should look to take a “proactive approach to mitigating and adapting to climate change”. This means planning policies should support measures to ensure the future resilience of communities and infrastructure to climate change.

The framework also noted that the planning system should support renewable and low-carbon energy and associated infrastructure. Plans should look to provide a positive strategy for energy from these sources – one that maximises the potential for suitable development. At the same time, it should ensure any adverse impacts – such as visual – are sufficiently addressed.

It also said opportunities where development can draw its energy supply from decentralised, renewable or low carbon energy supply systems should be identified, as should opportunities for co-locating potential heat customers and suppliers.

The text further called for local planning authorities to support community-led initiatives for renewable and low-carbon energy.

The consultation will run until Thursday, 10 May.

Back to top

Industry 1 | Greater investment required to meet oil demand from 2020: IEA

The International Energy Agency (IEA) has found that increases in oil production in the United States, Brazil, Canada and Norway will be able to more than meet global demand until 2020, but that investment will be required to boost production from then on.

In its latest annual Oil Market Report, published on Monday, 5 March, the IEA found that this additional investment will be needed, despite falling costs, as the oil industry has yet to fully recover from the “unprecedented” drop in investment in 2015-16. Since, the report indicated little to no increase in upstream investment outside of the United States in 2017-18.

According to IEA data, global oil demand is forecast to increase by 6.9mb/d by 2023 to 104.7mb/s as a result of boosted economic growth in Asia and a resurgent petrochemicals industry in the United States, accounting for 25 % of oil-demand growth. Collectively China and India will contribute nearly 50% of total of global oil demand and are expected to remain the main driver behind future growth.

However, the development of more stringent pollution policies and the increasing penetration of electric vehicles is expected to slow demand growth. In addition, the implementation of a new marine fuel rule with lower sulphur content in 2020 will create uncertainty within the market.

Global oil production capacity is projected to grow by 6.4mb/d to 107mb/d by 2023 due to increasing shale production led by the US. IEA data suggested by 2023 the US total liquid production will rise from 13.2mb/d in 2017 to 17mb/d in 2023, led by the Permian Basin where output is expected to double. IEA’s report indicated the need for further investments in pipelines and associated infrastructure to increase the future availability of oil to world markets.

IEA analysis revealed that discoveries of new oil resources fell to record low in 2017, with less than 4bn barrels of crude, condensate and NGLs found as a result of decreased investment. The report suggests lower investments resulted in a combined reduction of 1.7mb/d in oil production from China, Mexico and Venezuela.

The report found record oil supply from non-OPEC countries can cover expected demand growth. However, if investments remain insufficient by 2023, the effective global spare capacity cushion will fall to only 2.2% of demand, the lowest number since 2007, increasing the possibility of oil prices becoming more volatile until sufficient supplies become available.

IEA’s Executive Director, Dr. Fatih Birol commented: “[…] the weak global investment picture remains a source of concern. More investments will be needed to make up for declining oil fields – the world needs to replace 3mb/d of declines each year, the equivalent of the North Sea – while also meeting robust demand growth.”

Back to top

Industry 2 | Energy executives concerned over cyber-attack impacts

A recent survey found 76% of energy executives cited business interruption (BI) as the most impactful cyber loss scenario for their organisations.

The research conducted by Marsh in partnership with Microsoft highlighted the growing threat cyber presents to the energy industry, as well as the increasing effect any business interruption could have on production and revenues.

The report found energy executives were more likely to name physical damage and disruption to industrial systems or other operational technology than respondents from other industries, with a quarter (26%) of respondent indicating they were aware that their company had been victim to a successful cyber-attack in the past 12 months.

The survey revealed 61% of respondents placed cyber in the top five risks faced by their organisations. However, more than half (54%) of energy executives have not quantified or did not know what their worst possible loss exposures could be.

The report suggested greater understanding, quantification, and implementation of additional mitigation strategies are necessary to tackle the growing threat and impacts of cyber-attacks.

Back to top

Industry 3 | Universities launch global organisation dedicated to research on sustainable finance and investment

A university collaboration has launched a global organisation dedicated to accelerating and promoting multi-disciplinary academic research on sustainable finance and investment.

The Global Research Alliance for Sustainable Finance and Investment (GRASFI) launched on Monday, 5 March, consisting of 18 global research universities each with expertise in emerging fields. Member universities include University of Oxford, University of Cambridge, Yale University, Imperial College London, Columbia university and London School of Economics and Political Science.

The organisation aims to co-ordinate an annual academic conference on sustainable finance and investment internationally; develop academic collaboration between researchers working on sustainable finance and investment; and nurture the growth and development of graduate students and junior academics working on sustainable finance and investment.

Back to top

Tags :
Warning: Invalid argument supplied for foreach() in /home/ssebusinessen/public_html/wp-content/themes/sse/single.php on line 115

Leave a Reply

  • This field is for validation purposes and should be left unchanged.