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Weekly Industry Update – 28.08.18

Category : News


Week in Energy

Policy updates:

Industry updates:

Week in Energy

Monday 20/08 – The SNP calls on Chancellor Phillip Hammond for reassurances that government will not use the Autumn Budget to undermine North Sea recovery with tax rises. Ofgem approves proposal to facilitate electricity market sandbox for industry participants.

Tuesday 21/08 – Carbon Tracker report predicts that EU Emissions Trading System (ETS) carbon prices could continue to rise to as much as €50 per tonne during the winters of 2020-21 and 2021-22.

Wednesday 22/08 – Chatham House says flexible electricity systems can deliver lower whole-system costs, but government and regulator action will be required. Scottish tidal power turbine provides more than 25% of Orkney electricity demand.

Thursday 23/08 – EU Emissions Trading System (ETS) carbon prices reach a 10-year high at €20.67 per tonne.

Friday 17/08 – Latest Ofgem Feed-in Tariff deployment figures show close to 6,000 total installations to date in Period 3 (1 July to 30 September 2018).

Policy 1 | Government to integrate EU energy legislation post Brexit

A letter written by Energy and Clean Growth Minister Claire Perry and published by BEIS on Wednesday, 22 August, has outlined government plans for a statutory instrument (SI) that would see several aspects of EU energy policy and legislation integrated into domestic law following Brexit.

The SI, which is planned to be set in motion after Parliament’s summer recess, is one of several that will seek to amend energy legislation during the UK’s process of leaving the EU. It will transfer energy-related legislative functions from the European Commission to the Secretary of State in Great Britain and to the Secretary of State and the Northern Ireland Department for the Economy (DfE) in relation to Northern Ireland. Perry said the that this is to “provide continuity for businesses in the United Kingdom”.

The SI is not dependent on the outcome of Brexit negotiations as it will be necessary under any scenario. It will include powers to create, in limited circumstances, new Network Codes governing the gas and electricity markets and to amend these codes in line with future developments in the energy sector. The letter recognises the breadth of content that is covered by such codes and notes that any changes exercised through SIs will still be subject to parliamentary legislation.

As far as the depth of change permitted by SIs, Perry noted that power will be limited to recreating specific provisions currently found in Network Codes and which are “essential to the proper operation of the UK’s energy market” so it can “continue to operate as intended”. This would, she said, “avoid unexpected disruption to the energy regulatory framework and wasting of efforts and investments already undertaken to comply with codes and guidance which are already in force.”

The SI will also allow amendments to “definitions and reporting requirements” under the Regulation on wholesale Energy Market Integrity and Transparency (REMIT), which provides a consistent EU-wide regulatory framework specific to wholesale energy markets to ensure they remain fair, open and competitive. On a related subject, it will also transfer powers for making amendments to existing reporting templates under the Security of Gas Supply Regulation. These are necessary, said Perry, “to ensure the UK’s market abuse prevention mechanisms and plans and risk assessments for ensuring security of gas supply can be kept up to date”. The letter concluded by saying that all the energy functions transferred by the SI “will be exercised at the earliest necessary point” post-Brexit.

On Thursday, 24 August, the government published its first 25 guidance notes on how a “no deal” Brexit scenario would work and how businesses and the public can prepare. With regards to energy, the government confirmed its financial guarantee for EU-funded programmes including Horizon 2020 and said that it remained committed to ongoing collaboration in research and innovation with a view to growing UK research and development to 2.4% of GDP by 2027. Plans were also unveiled for a new domestic nuclear safeguards regime to be run by the Office for Nuclear Regulation.

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Policy 2 | Report calls for government plans for changing power system

A report by Chatham House published on Wednesday, 22 August, has said that there is growing evidence that highly flexible electricity systems have the potential to deliver lower whole-system costs.

The report highlighted the need for an increasingly flexible power system to account for intermittent generation beginning to represent the majority of newly installed generating capacity across Great Britain. This is largely attributed to the significant decline in the costs of solar and wind technologies that is projected to 2030. However, the report said that, as a result of the accelerating deployment of a range of “flexibility enablers”, the expectation of cost escalation – resulting from the expense of managing intermittent generation at huge volumes – may never materialise.

Lower-cost systems will be dependent on policy and regulatory action to stimulate flexibility-enabling technologies such as smart electric vehicle (EV) charging, battery storage units and digitalisation with intelligent control. Currently, EV uptake is rising, with global deployment of new EVs exceeding one million units for the first time in 2017. Further improvements to smart EV charging could enable significant advances in system flexibility.

By 2030, smart EV charging in the UK is expected to be equivalent to 18% of the country’s current generating capacity. Rapid cost reductions in battery manufacturing, driven by increased deployment of EVs, has led to the development of affordable static, grid-level storage, which in turn enhances power system flexibility.

The report recognised the need for new market mechanisms that appropriately value the emerging collection of flexibility services while ensuring adherence to core principles of energy security and environmental protection. Chatham House recommended the use of government reforms to create efficient market signals for new forms of flexibility. It noted the shift in focus of system operation, from transmission networks with capacity markets for large power generators towards distribution systems, distributed energy resources and energy service platforms.

To enable the connection of distributed energy resources to the network, governments, regulators and utilities will need to work together to design and implement the rules and protocols for energy services. This process will also allow the emergence of new consumer-orientated services.

Furthermore, the report recommended that in order to avoid the potential for cyber security threats, regulators will need to collaborate with utilities and technology companies to develop standards for the growing number of internet-connected appliances and distributed energy resources that will accompany flexibility being provided in greater volumes.

Finally, the report warned that existing power companies are unprepared for the changes and that those able to provide flexible solutions could come to dominate the sector in the coming decades.

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Policy 3 | International energy management standard for businesses updated

An international energy management standard for businesses – ISO 50001 – that provides extensive information on business energy objectives and improving energy performance, has been updated to reflect an evolving energy landscape.

ISO 50001 provides businesses with a step-by-step guide on establishing policies, processes, procedures and specific energy-related tasks to meet objectives and use energy more efficiently and effectively. It includes ways that companies can reduce energy costs, become more resilient to system shocks and changes, comply with energy legislation and work more sustainably.

The International Organization for Standardization (ISO) said, in a press release published on Tuesday, 21 August, that addressing energy efficiency and climate change challenges are increasingly important in meeting the UN’s Sustainable Development Goals. Accordingly, it has updated ISO 50001 to reflect the current best practice globally. The updated standard includes new terms and definitions, greater clarification of certain energy performance concepts and adjusted requirements that make it easier to integrate new strategies into existing management systems. It also aims to place a stronger emphasis on the role of top management to facilitate organisational culture change.

Head of Sustainability at the UK’s British Standards Institution David Fatscher said: “Technology, the regulatory environment and scientific knowledge have all changed markedly in the last seven years, and this update of the standard acknowledges that transformation.” He called reducing energy costs a “win-win for organisations, who can achieve lower financial outgoings whilst minimising their carbon footprint”, adding that “ISO 50001 can assist organisations of all shapes and sizes in establishing a process for continual energy improvement”.

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Policy 4 | EU Carbon prices reach 10-year high as report predicts further rises

EU Emissions Trading System (ETS) carbon prices reached a 10-year high on Thursday, 23 August, at €20.67 per tonne. The EU ETS charges industry and power facilities for each tonne of carbon dioxide they emit, with companies able to purchase permits from Member States to cover their emissions.

The high price occurred in the same week that a report published by Carbon Tracker claimed that EU carbon prices could more than double to €40 per tonne between 2019-23, which could render many of the bloc’s coal plants unprofitable.

Reforms to the EU ETS have caused the price of carbon to increase from €4.38 per tonne in May 2017 to the current high prices that have been seen in August of this year – representing a 120% increase since the start of 2018. Carbon Tracker has predicted that carbon prices will average between €35 and €40 per tonne over the next five years and that they could reach up to €50 per tonne during the winters of 2020-21 and 2021-22.

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Industry 1 | Report says flexibility first approach can aid decarbonisation

An evolving energy landscape and the transition to a low-carbon economy that includes greater decentralisation of energy production is changing the way in which Distribution Network Operators (DNOs) must plan, maintain and operate the distribution network, said a report from UK Power Networks (UKPN).

The Flexibility Roadmap, published on Tuesday, 21 August, outlined the opportunities that may arise from the transition to a smarter grid for operators, customers and businesses. It said that the role of DNOs is changing because of greater decentralisation and the management of flexible demand and generation – change that is being driven by innovative technologies, decarbonisation and consumers taking an increasingly active role in their energy use. Such a landscape, said UKPN, requires DNOs to evolve into Distribution System Operators (DSOs) with a more active role as network operator.

The roadmap says that such a role is required to manage the emergence of distributed energy resources (DER) including storage systems and electric vehicles (EVs). For example, there is close to 25GW of solar and onshore wind capacity currently installed in Great Britain, most of which is connected to distribution networks and has a variable energy output. Similarly, the ongoing electrification of heat and transport, as well as the uptake of “load intensive devices” such as EV charging points, places greater emphasis on the management of this DER into the network.

These system changes present several challenges to how networks are operated but can also offer flexibility by adjusting their demand or generation of electricity based on the needs of the system, with the size and type of flexible DER differing depending on point of connection to the distribution network.

For example, larger DER systems such as industrial or commercial loads, EV fleets and larger generation and battery storage systems are likely to connect to Extra High Voltage and High Voltage networks whereas residential properties connect to low voltage networks. UKPN currently has more than 9GW of distributed generation connected to its networks, which equates to around one third of the total in Great Britain. However, in highlighting the potential growth of DER and its impact on the network, the report noted “more than 27GW of storage enquiries” that have been made as well as “considerable EV deployment potential across our low voltage networks”.

Looking ahead, UKPN said that the introduction of further flexibility to manage future networks can provide several advantages. These include more efficiency network operation through the management of load uncertainty, the provision of a lower cost solution to conventional reinforcement and promoting competition to provide network solutions. It can also help in achieving wider decarbonisation targets and offer wider system benefits such as allowing DER providers to “stack” revenues opportunities in other markets including wholesale and balancing so that the value of their flexibility to the system as a whole is maximised.

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Industry 2 | Plans announced for UK’s first carbon-negative business park

Westcott Venture Park in Buckinghamshire has announced plans to build a 15MW subsidy-free solar farm on its site, which it claimed will make it the first “carbon-negative” business park in the county.

It was reported in The Business Magazine on Thursday, 16 August, that the solar development is expected to generate more power than its tenants use each year. Over its 25-year lifetime, the project is expected to produce over 14.5GWh each year, with any generation not used on site to enter the grid via a 33kV connection. The site will include provision for adding battery energy storage at a later date.

The business park’s first solar plant was established in 2011 and comprises 6,102 solar panels over 10 acres. It has generated more than 11GWh of electricity and has avoided more than 4,300 tonnes of CO2 emissions. However, the new project represents a ten-fold increase and is set to provide an estimated 7% internal rate of return to its investors.

Director of Rockspring Property Investment Managers – which owns the business park – Rod Mordey said: “This pioneering scheme is the UK’s first unsubsidised on-site solar power plant, proving Westcott Venture Park is the ideal location for forward-looking businesses. We are committed to creating an environmentally sustainable business park and this is one of the key initiatives to reduce our carbon footprint.”

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Industry 3 | Companies urged to be more ambitious on renewables

Two organisations that support businesses in developing more climate-friendly practices have produced a report urging companies to do more to accelerate the clean energy transition.

In a joint report, published on Monday, 13 August, The Climate Group and the Carbon Disclosure Project said businesses should set “clear and ambitious” 100% renewable electricity commitments as soon as possible.

The report said: “A 100% goal leaves no room for doubt – reaching a 100% renewable electricity requires change across a business globally, from the boardroom right through to the shop floor,” and added: “Speed is just as important. To keep warming under 2 degrees Celsius, we need to decarbonize the grid by 2050, globally. Targeting 100% renewable electricity by this time is not a stretch target, it’s the minimum we need to succeed.”

The organisation’s RE100 initiative sees companies pledging such targets. According to the Climate Group, nearly two-thirds of RE100’s 140 members aim to power their operations entirely with renewable electricity by 2025, and more than three-quarters by 2030.

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