February 2020 Regulatory Report

Generation

On 13 February, Prime Minister Boris Johnson’s announced the results of the government’s Cabinet reshuffle. Chancellor Sajid Javid resigned and Andrea Leadsom was sacked as Business Secretary. Javid was replaced as Chancellor with Rishi Sunak, who was formerly Chief Secretary to the Treasury. Andrea Leadsom was replaced by former International Development Secretary Alok Sharma. Defra Secretary Theresa Villiers was sacked and replaced with former Minister of State for Agriculture, Fisheries and Food George Eustice. Lord Goldsmith of Richmond Park was made Minister of State at Defra. George Freeman was sacked as Minister of State for Transport Technology and Innovation, alongside Housing Minister Esther McVey who was also sacked.

Delivery

The National Infrastructure Commission (NIC) urged the government to deliver the National Infrastructure Strategy in 2020 and use it to set out the pathway for a flexible energy system to help achieve net zero at lowest cost through its Annual Monitoring Report 2020, issued on 26 February. On 13 February, BEIS announced that it will be increasing the assistance amount provided through the Hydro Benefit Replacement Scheme, with the effect of reducing costs for all electricity consumers in the North of Scotland from April 2021. Additionally, Ofgem released reports on the delivery of outputs and financial performance of the electricity and gas transmission and distribution sectors under the current RIIO-1 price control for 2018-19 on 7 February.

Usage

According to a report released by the International Energy Agency (IEA) on 11 February, energy-related global carbon emissions were unchanged year-on-year in 2019 at 33 gigatonnes (Gt). CDP also published a new report on 24 February which found that for the EU’s goal of climate-neutrality by 2050 the economy will need to be decarbonised at a rate of nearly 8% per year

Also covered in this Regulatory Report:

• Drax to end the use of coal by March 2021
• Europe added 3.6GW of offshore wind capacity in 2019.
• Low carbon generation provisionally reaches record highs of 51.6% of supply
• DfT launches consultation on bringing new ICE sale ban forward to 2035.
• UKGBC new case study catalogue to support companies.
• Reading and Leeds publish net zero strategies.

Generation  

Chancellor resigns and Sharma to head BEIS and COP26

As part of Prime Minister Boris Johnson’s 13 February reshuffle, Chancellor Sajid Javid resigned and Andrea Leadsom was sacked as Business Secretary. Javid was replaced as Chancellor with Rishi Sunak, who was formerly Chief Secretary to the Treasury – this is Sunak’s first cabinet role. Andrea Leadsom was replaced by former International Development Secretary Alok Sharma. Leadsom had held the role since July 2019. Sharma was also appointed as Minister for COP26, filling the post left vacant for two weeks after the sacking of Claire Perry O’Neill.

Defra Secretary Theresa Villiers was sacked and replaced with former Minister of State for Agriculture, Fisheries and Food George Eustice. Villiers had held the role since July 2019. Lord Goldsmith of Richmond Park was made Minister of State at Defra. George Freeman was sacked as Minister of State for Transport Technology and Innovation, alongside Housing Minister Esther McVey who was also sacked. Both McVey and Freeman had held their roles since July 2019.

Following the departure of Chancellor of the Exchequer, Sajid Javid and the appointment of Rishi Sunak to replace him, the government has confirmed that it will not be changing the date of the Budget. On 18 February, Sunak announced that he is “cracking on with preparations” in order to announce the Budget on 11 March. Additionally, the Cabinet Office published a statement confirming the appointment of Business Secretary Alok Sharma as COP26 President. The 18 February statement said: “Sharma began his first full week in the new role with a meeting with UN Deputy Secretary General Amina Mohammed, where they committed to working closely together towards a successful, globally ambitious summit later this year in Glasgow.” Additionally, BEIS announced that Lord Callanan, as part of the reshuffle, has joined the department and Lord Duncan of Springbank, who was Minister for Climate Change, is no longer in the department.

Drax to end the use of coal by March 2021

Drax has announced that almost 50 years of power generation from coal at its power station in North Yorkshire, is expected to end in March 2021, ahead of the UK’s current formal 2025 deadline. Announced on 27 February, the decision comes after a comprehensive review of its operations. Whilst the company does not expect to use coal after March 2021, it will ensure its two remaining coal units remain available until September 2022 in line with its existing Capacity Market agreements.

“Ending the use of coal at Drax is a landmark in our continued efforts to transform the business and become a world-leading carbon negative company by 2030,” commented Drax CEO, Will Gardiner. “Drax’s journey away from coal began some years ago and I’m proud to say we’re going to finish the job well ahead of the Government’s 2025 deadline.”

Drax Power Station first started generating electricity using coal in the 1970s. Once the second half of the power station was built in the 1980s, it became the largest power station in the UK with the capacity to generate electricity for six million households. Over the last decade, four of the power station’s six generating units have been converted to use sustainable biomass, delivering carbon savings of more than 80%. Stopping using coal at Drax will also lead to a reduction in the company’s workforce. Trade Unions and employee representatives will be consulted over the coming months. The company is also talking to government, trade unions and industrial businesses around the launch of a Zero Carbon Skills Taskforce to enable those affected to gain the skills required and to seize new job opportunities as the UK moves towards a net zero economy.

Coal reduction behind 6.6% emissions fall for power sector

The latest UK Greenhouse Gas Emissions statistics showed that total greenhouse gas (GHG) emissions and carbon emissions each fell 2% over the period, from 451.5 MtCO2e to 461.0 MtCO2e. GHG emissions in 2018 are estimated to be 43.1% lower than they were in 1990.

Published by BEIS on 4 February, the release found that a 6.6% fall in power sector emissions between 2017 and 2018 was the main driving force behind this fall. The 6.6% fall resulted from a 24% reduction in coal use for electricity generation between 2017 and 2018. This follows large falls in 2016 and 2017 driven by the increase in the carbon price floor in April 2015, from £9 per tonne of carbon to £18 per tonne of carbon, which led to a shift away from coal towards gas. Coal use in generation reduced by 91% between 1990 and 2018. In 2018 there was also a fall in the use of gas for electricity generation of 4%, while renewables saw a 19% rise. BEIS found that the other main factor in the long-term decline of energy sector emissions is the fall in deep-mined coal, with the last three large deep mines all closing in 2015.

Transport was the largest emitting sector in 2018, in terms of GHG emissions, responsible for 28% of total emissions. The main source of transport emissions was the use of petrol and diesel in road transport. Transport emissions fell by 1% between 2017 and 2018, despite a small increase in road traffic. Emissions from transport have remained largely static and were 3% higher in 2018 than 1990. Emissions from businesses fell 3% between 2017 and 2018, and the sector was responsible for 1% of all GHG emissions in 2018. Residential emissions, responsible for 15% of all GHG emissions in 2018, rose 4% from 2017 to 2018.

Europe added 3.6GW of offshore wind capacity in 2019

Europe added 3,623MW net offshore wind capacity in 2019, meaning Europe now has a total installed offshore wind capacity of 22.07GW. Wind Europe reported the figures in its Offshore Wind in Europe: Key Trends and Statistics 2019, published on 6 February. 10 new offshore wind farms, consisting of 502 turbines came online in 2019. The UK added 1.7GW, Germany 1.1GW, Denmark 374MW and Belgium 370MW. Wind Europe believes the next three years will see a significant increase in floating wind capacity, with the installation of projects in the UK, France, Norway and Portugal. Pre-commercial projects for the next three years will range between 24MW to 88MW.

The average rated capacity of offshore turbines installed in 2019 was 7.8MW – 1MW more than in 2018. Hornsea One became the largest offshore wind farm in the world at 1,218MW. €6bn (£5bn) of investments financed 1.4GW of additional capacity in France, the Netherlands, Norway and the UK in 2019. Offshore wind costs also continued to fall significantly last year. Auctions in the UK, France and the Netherlands delivered prices in the range of €40-50/MWh (£34-42/MWh). In 2019, five corporate power purchase agreements (PPAs) were signed for offshore wind farms. The first PPA was signed in 2018.

Low carbon generation provisionally reaches record highs of 51.6% of supply

On 27 February, BEIS released its December 2019 energy statistics which allow a provisional assessment to be made of trends in energy production and consumption in 2019. Low carbon generation accounted for a record high of 51.6% of supply, up from 49.6% in 2018, following record outputs from wind, solar and bioenergy, due to increases in capacity for all three technologies. Renewables production rose by 4.9%, with an increase in bioenergy output of 2.1%, and an increase in wind, solar and hydro output of 11% to a record high level due to increased wind and solar capacity. Nuclear output was down by 14% to the lowest level since 2008 and production of coal fell by 14% to a new record low. A more detailed analysis will be available in Energy Trends on 26 March.

Delivery – 3 on page

NIC: 2020 must be “year of action” for energy infrastructure

The National Infrastructure Commission (NIC) has urged the government to deliver the National Infrastructure Strategy in 2020 and use it to set out the pathway for a flexible energy system to help achieve net zero at lowest cost. The NIC said this in its Annual Monitoring Report 2020, issued on 26 February. It noted the absence of a government response to the 2018 National Infrastructure Assessment, saying that the first step in 2020 must be the publishing of the National Infrastructure Strategy.

The NIC praised the progress by the government and Ofgem in raising the capacity of flexible technologies deployed on the networks since the release of its Smart power report in 2016. Interconnection capacity rose in 2019, with an additional gigawatt of interconnection capacity entering operation. The NIC welcomed the reinstatement of the Capacity Market (CM) and BEIS’s consultation on lowering barriers to entry for demand-side response (DSR). However, the NIC said there remains much more to do in 2020:

• Maintain access to future interconnector projects in EU negotiations and prioritise retaining access to EU power markets and market coupling.
• Amend the Electricity Act 1989 to define storage as a distinct subset of generation.
• Review the latest evidence on costs of and barriers to access DSR technologies in the CM.
• Facilitate the transition to more actively managed local networks and Distribution System Operators.
• Set out a clear level of ambition for overall system flexibility, including a framework to monitor it.

BEIS to alter the Hydro Benefit Replacement Scheme

BEIS announced on 13 February that following a consultation, it will be increasing the assistance amount provided through the Hydro Benefit Replacement Scheme, with the effect of reducing costs for all electricity consumers in the North of Scotland from April 2021. The consultation outcome sees the government retaining the Hydro Benefit Replacement Scheme and the Common Tariff Obligation, which protects consumers in the North of Scotland from the high costs of distributing electricity in the region.

BEIS said the rise in the amount provided by the Hydro Benefit Replacement Scheme means “the costs of an existing Shetland cross-subsidy are spread across all licensed electricity suppliers in GB, instead of being funded by North of Scotland suppliers currently”. Cross-GB funding for the Shetland cross-subsidy would lower distribution charges for the North of Scotland by £27mn annually, which would be worth an estimated £17 per household in the region in addition to the existing assistance amount. This represents around a 2% reduction in energy bills for consumers in the North of Scotland.

Ofgem reports on 2017-18 network performance

Ofgem issued reports on the delivery of outputs and financial performance of the electricity and gas transmission and distribution sectors under the current RIIO-1 price control for 2018-19 on 7 February. Ofgem found that all the three electricity transmission operators (TOs) met or exceeded the annual output targets set, with strong levels of network reliability and all connection offers to customers within the licence timescales. There was a continued upward trend in the numbers of requests for connection, with National Grid Electricity Transmission (NGET) making 186 offers, up 60% from 116 in the previous year and even higher percentage increases for the other TOs.

Usage

Global carbon emissions flatline in 2019

Energy-related global carbon emissions were unchanged year-on-year in 2019 at 33 gigatonnes (Gt), according to a report released by the International Energy Agency (IEA) on 11 February.

Emissions from advanced economies (Australia, Canada, Chile, EU, Iceland, Israel, Japan, Korea, Mexico, Norway, New Zealand, Switzerland, Turkey and United States) decreased by 3.4% in 2019 to emit 11.3Gt of carbon, despite growth increasing on average by 1.4% in these countries.

A drop in emissions by 5% in the EU countries accounted for 40% of the total decrease in emissions seen in advanced economies, with coal-to-gas switching continued to be incentivised across the continent. Germany was responsible for nearly a third of the drop in emissions, the country has not seen emission levels as low as these since the 1950s.

Carbon emission levels in the UK, although not stated in the article, were thought to have fallen again in 2019, continuing the trend seen in recent years. The phase-out of coal-fired generation assets continued in the UK in 2019 as generation from these plants contributed only 2% of total electricity generation in the country. The decline in coal-fired generation has largely been offset by the rise of renewables’ share of the generation mix, reaching nearly 40% last year.

Japan saw the largest percentage year-on-year decline for a decade as emissions fell 4.3%; the country emitted just over 1Gt of carbon in 2019. The US saw the largest decrease in volume of carbon emissions by a single country, falling by 140Mt – a 2.9% drop year-on-year.

Transport, energy & materials are highest emitting sectors

CDP published a new report on 24 February which found that for the EU’s goal of climate-neutrality by 2050 the economy will need to be decarbonised at a rate of nearly 8% per year.

Doubling Down Europe’s Low-Carbon Investment Opportunity by consulting firm, Oliver Wyman, commissioned by CDP, found that in 2019, 882 companies, responsible for over 3.2 GtCO2e of emissions, reported €124bn of new low-carbon investments to CDP. The European companies reporting to CDP and analysed in the report were said to play an “enormous role” in the EU’s ability to achieve its climate neutrality target. It says the companies represent around 76% of Europe’s market capitalisation and have emissions equivalent to 75% of the EU total.

Low carbon investment was found to be driven by companies in the high-emitting transport, energy and materials sectors accounting for 50%, 38% and 5% respectively. More investment was said to be needed in transformational breakthrough technologies, particularly the materials sector, where despite being responsible for 5% of low carbon investment, it was responsible for 38% of reported score 1 and 2 emissions. CDP added that companies in the cement, chemicals, metals and mining and steel industries need to develop “breakthrough” technologies if they are to decarbonise in line with the EU’s ambitions. CDP said that for the European corporate sector to be on track for net zero emissions by 2050, low carbon capital investment among the reporting companies would need to more than double from €59bn in 2019 to around €122bn a year. The report found that companies anticipated more than 2.4GtCO2e of cumulative emissions reductions over the lifetime of their initiatives, which represented a contribution to companies’ bottom line of over €40bn.

DfT launches consultation on bringing new ICE sale ban forward to 2035

The Department for Transport (DfT) launched a consultation on bringing forward the date of the proposed ban on new internal combustion engine (ICE) vehicle sales from 2040 to 2035. The government said it reflects the Committee on Climate Change’s advice on what is needed in order for the UK to end its contribution to climate change by 2050. The proposals relate to new cars and vans. Owners of existing petrol, diesel and hybrid cars and vans will still be able to use these vehicles and buy and sell them on the used market.

Launched on 20 February, the consultation seeks views on:

• The phase out date.
• The definition of what should be phased out, barriers to achieve the above proposals.
• The impact of these ambitions on different sectors of industry and society.
• What measures are required by government and others to achieve the earlier phase out date.

The consultation closes at 23:45 on 29 May.

UKGBC new case study catalogue to support companies

On 14 February, the UK Green Building Council (UKGBC) launched its catalogue of net zero case studies, profiling projects that demonstrate innovative approaches that align with UKGBC’s net zero carbon buildings framework.

The online catalogue aims to provide organisations with practical examples of the methods needed to encourage and deliver a net zero carbon built environment, across a wide variety of building types.

Richard Twinn, Senior Policy Adviser to UKGBC said: “It is vital that we now start moving from the why of net zero to the how; considering the actual, feasible solutions out there for the built environment. This case study library aims to be part of that effort, shining a spotlight on key examples of best practice from across the sector, and different building types.”

Twinn continued: “As the transition gathers pace, we will continue to add to and update the collection as a useful source of information for those seeking to achieve net zero.”

Reading and Leeds Councils publish net zero strategies

Announced on 24 February, Reading Borough Council is set to spend up to £34mn to reduce emissions in the two years since it declared a climate emergency. Major capital projects included in the proposed budget include £4.5mn for renewable energy (across three years from 2020-21); £2.55mn for energy saving measures (across three years from 2020-21); £1.19mn for retrofitting the bus fleet to lower emission standards (across two years from 2019-20), as well as £250,000 for electric vehicle charging points (across two years from 2020-21). The Council has already reduced its own emissions by 62.5% since 2008-09 and by 18.5% in 2018-19 alone, saving £10.9mn in energy costs over the last decade. It has also met its 50% carbon reduction target by 2020, three years early.

Published on 19 February, West Yorkshire Combined Authority and the Leeds City Region Enterprise Partnership (LEP) also stated that it is carrying out a study on how the Leeds City region can meet net zero by 2038 or sooner. In order to meet the target and meet the City Region’s obligations under the Paris Agreement, emissions will have to be reduced by 14.5% every year, the LEP said. The results of the study, known as the North & West Yorkshire Emissions Reduction Pathways, will plot out a roadmap towards net zero emissions for both regions and produce recommendations for policymakers and councillors to consider.