January 2021

Generation
The Energy White Paper (EWP) was scrutinised by the Commons Business, Energy and Industrial Strategy (BEIS) Committee over two sessions.
The government confirmed that the Non-Domestic Renewable Heat Incentive (NDRHI) will close to new applicants on 31 March this year.

Delivery
Ofgem has recommended the creation of an independent body to help lead the path to net zero at the lowest cost to consumers.
On 22 January, Ofgem issued a consultation seeking views on plans to place responsibility for the management and delivery of the Market-wide Half Hourly Settlement (MHHS) programme on industry.
The Energy Networks Association (ENA) published Britain’s Hydrogen Network Plan on 21 January, setting out activities that that will need to be undertaken to deliver a hydrogen economy.

Usage
The government announced a consultation on higher performance targets for non-domestic buildings (the Future Buildings Standard) which will mean they will be zero carbon ready by 2025.
In his first day in office, President Biden signed an executive order to begin the process for the US to rejoin the Paris Climate Agreement.

Also covered in this Regulatory Report:

National Grid ESO: 2020 was GB’s greenest year
Report argues for continued support for nuclear power
UK solar capacity grew by 545MW in 2020
IEA to publish world’s first net zero roadmap for the energy sector
Labour stresses need to tackle climate change as part of recovery
UKPN to join five local authorities in tackling EV charging blackspots

Generation

Energy White Paper faces scrutiny

The Energy White Paper (EWP) was scrutinised by the Commons Business, Energy and Industrial Strategy (BEIS) Committee over two sessions.

In the first, Climate Change Committee Chief Executive Chris Stark praised the Energy White Paper (EWP) for being framed as a strategy for net zero and climate change, which he said would have been unlikely to be the case had it been released a few years ago. Energy UK Chief Executive Emma Pinchbeck welcomed the breadth of the EWP, concurring with Stark’s point about how energy now includes areas such as transport. She also agreed that there was too little detail in the EWP regarding how the public would be engaged with as part of the transition to net zero, how they would be incentivised to participate in the changes proposed and how to support people through those changes while encouraging positive behaviours.

The second session saw Business Secretary Kwasi Kwarteng taking questions. He was asked why the government is aiming for power sector decarbonisation by 2050 and not earlier. He said this is because the government wants to make sure costs do not become too high for consumers and that other technologies will emerge which will enable cheaper decarbonisation.

The Business Secretary was asked what the total cost of the EWP would be. He said bills are affected by wholesale prices, so it is hard to estimate. He added that that the government has made “huge commitments” to protect the most vulnerable, including £9.2bn for fuel poverty policies in the 2019 Conservative manifesto. He also highlighted the significant fall in cost of some renewables, such as offshore wind generation, in talking about the difficulties in estimating the costs of the EWP.

On funding and development difficulties around new nuclear projects, Kwarteng said that Hinkley Point C had, “for all the noise”, broadly found itself on time and was optimistic any other plant would be as well. He continued, saying nuclear power was of paramount importance, as renewable energies were less reliable.

Business renewable heat scheme to close 31 March

The government confirmed on 14 January that the Non-Domestic Renewable Heat Incentive (NDRHI) will close to new applicants on 31 March this year. The news was announced as part of the government’s official response to the ‘Non-domestic Renewable Heat Incentive: ensuring a sustainable scheme’ consultation. The NDRHI was originally launched in November 2011, offering financial support to businesses for the installation of eligible renewable heating systems.

The closure date means that a plant must meet the eligibility criteria, be commissioned, and submit a properly made application by midnight on 31 March 2021. The payment period for the NDRHI will end on 31 March 2041.
BEIS says it is closing the scheme because it is “transitioning to future support schemes that most strategically target tax-payers money”. Other measures it has confirmed it will be going ahead with serve to ensure a smooth transition between the NDRHI and the future support schemes, including the Green Gas Support Scheme, Public Sector Decarbonisation Scheme and Green Heat Network Fund. Similarly, the extension of the Domestic RHI by a year to 31 March 2022 will aid the transition to the Clean Heat Grant, which is expected to begin in April 2022 with funding committed for two years.

National Grid ESO: 2020 was GB’s greenest year

Great Britain’s electricity system was greener in 2020 than any previous year, with National Grid Electricity System Operator (ESO) data calculating an average carbon intensity of 181gCO2/kWh for the year. Releasing data on 11 January, National Grid ESO revealed May 2020 was the greenest month on record (average of 143gCO2/kWh) and also registered the lowest carbon intensity ever seen on the system, at 46gCO2/kWh on 24 May. The ESO said this was a result of significant periods of coal-free electricity generation and record-breaking levels of power from zero carbon sources, with periods of record low electricity demand during national lockdown also contributing.

The record for the highest ever level of wind generation was broken several times during the year, with wind contributing its highest ever share to the electricity mix at 59.9% on 26 August. Solar power also set new records for its highest ever level of generation (9.7GW) and its highest share in the mix, providing a third of total electricity on several occasions in May.

Report argues for continued support for nuclear power

A report by the Centre for Policy Studies thinktank, published on 21 January, argues that the government must continue to support nuclear power generation in the UK to meet the expected doubling of electricity demand by 2050. Bridging the Gap explains that the construction of at least one additional nuclear power plant would provide a significant boost to GB’s energy security. The government has indicated its desire to help bring at least one large-scale nuclear power station to the point of Final Investment Decision by the end of the current Parliament. The Centre for Policy Studies says this will require a change in financing models.

The report recommends exploring innovative financing methods, such as the Regulated Asset Base (RAB) model to fund new nuclear facilities. To mitigate the potential shortfalls of the RAB model concerning costs, the report suggests setting predetermined arrangements for how any excess costs are absorbed between consumers or investors. Additionally, a demand for greater transparency of any financing deal might allow Parliament or other interested bodies to better scrutinise the process.

The report makes four other broad recommendations to deliver a net zero energy system other than building new nuclear power: the introduction of a carbon tax; streamlined green regulations and subsidies; improving the business environment to promote innovation and adopting single Equivalent Firm Power auctions.

UK solar capacity grew by 545MW in 2020

The UK saw 545MW of new solar PV capacity deployed in 2020, according to analysis carried out by Solar Media and published by Solar Energy UK on 21 January. This represents a 27% year-on-year increase compared with 2019. 60% of the new capacity came from ground-mounted PV systems, while the remaining 40% was installed on rooftops. The majority of this is located on commercial and industrial buildings. At the end of 2020, 13.9GW of solar capacity had been installed in the UK.

In April 2020, solar hit a new all-time peak generation record of 9.68GW, while in May 2020 solar supplied 11% of all electricity. The strongest growth in 2020 came from the ground-mount segment, driven by utility-scale projects. Solar Energy UK and Solar Media also announced a new partnership between them, which includes quarterly and annual market updates for new solar PV capacity added in the UK. Solar Energy UK Chief Executive Chris Hewett said: “These figures show that the government is playing catch-up in its understanding of the strength of the UK’s solar energy industry. Solar energy will enable people across the country to benefit from clean, cheap power for their homes and technology, such as electric vehicles.”

Delivery

Ofgem recommends Independent System Operator

Ofgem has recommended the creation of an independent body to help lead the path to net zero at the lowest cost to consumers. Announced on 25 January, the body would be fully separated from National Grid. It would have a more active role in designing and planning new grid infrastructure and providing independent advice to the UK government. Ofgem is recommending full separation to “help ensure future decisions on how to manage the energy system are taken in the interests of consumers, helping to keep costs as low as possible”. Ofgem has estimated that the independent body, or Independent System Operator, could save consumers £0.4-4.8bn between 2022 and 2050.

Business Secretary Kwasi Kwarteng said: “I welcome Ofgem’s contribution to the debate over the future structure of our energy system and will consider its recommendations thoroughly."

Ofgem proposes industry-led HHS implementation

On 22 January, Ofgem issued a consultation seeking views on plans to place responsibility for the management and delivery of the Market-wide Half Hourly Settlement (MHHS) programme on industry. This would see the role of the Senior Responsible Owner (SRO) move from Ofgem to Elexon, with new obligations on electricity suppliers and network operators to secure the effective implementation of the programme to be put in place.

The regulator now believes that Elexon is best placed to act as the SRO, taking on responsibility for establishing, operating, and managing appropriate programme structures and governance to ensure timely and effective implementation of MHHS. Ofgem clarified that it will remain the Programme Sponsor and will retain the responsibility of approving or rejecting code modifications needed to implement settlement reform.

Considerations are set out on the impact that an industry-led approach would have on the Significant Code Review (SCR) process. Responses to the consultation are requested until 5 March.

Blueprint outlines actions to deliver hydrogen network

The Energy Networks Association (ENA) published Britain’s Hydrogen Network Plan on 21 January, setting out activities that that will need to be undertaken to deliver a hydrogen economy. These include a mixture of policy and wider industry actions. The plan is part of the ENA’s Gas Goes Green programme. The five network companies the plan is aimed at are Cadent, National Grid, Northern Gas Networks, SGN and Wales & West Utilities. The plan follows four stages:

Preparing for the transition (2020-25) – this includes continuing the Iron Mains Risk Reduction Programme (which addresses the failure of ‘at risk’ iron gas mains), completing the safety case, trialling 100% hydrogen in homes and carrying out network modelling.
Carrying out solution pilots (2025-30) – this includes 100% hydrogen domestic pilots, 20% blending in parts of the network and billing on the basis of energy content rather than volume.
Scaling up (2030-40) – new hydrogen pipelines will be built between industrial clusters and the iron mains replacement programme will be completed.
Full transition (2040-50) – a national hydrogen network will be in place and hydrogen will be a normal part of training for Gas Safe engineers.

Usage

Government plans net zero business building standard

The government announced a consultation on higher performance targets for non-domestic buildings (the Future Buildings Standard) which will mean they will be zero carbon ready by 2025. BEIS sees heat pumps and heat networks as playing major roles in the Future Buildings Standard. BEIS is proposing an interim target for 2021, which would require a 27% reduction in carbon emissions on average per building over the current Part L 2013 standard.

Responses are requested by 13 April.

Alongside this, the government outlined plans to improve the energy performance of new homes, with low carbon heating and built to be ‘zero carbon ready’ by 2025. Announced by Housing Minister Chris Pincher on 19 January, new homes will be expected to produce 75-80% lower carbon emissions compared to current levels from 2025. There will also be interim standards to require new homes to produce 31% lower carbon emissions from 2021, whilst existing homes will also be subject to higher standards.

In the government’s official response to the consultation, it explained that zero carbon ready means that in the longer term, no further retrofit work for energy efficiency will be necessary to enable them to become zero carbon homes as the electricity grid continues to decarbonise. This is because the Future Homes Standard will require new homes to be built without fossil fuel heating. The government says its work on a full technical specification for the Future Homes Standard has been accelerated and it will consult on this in 2023.

While the government said: “the future is likely to see a mix of low carbon technologies for heating”, it anticipates that heat pumps will become the primary heating technology for new homes, and it believes that it is “therefore important to build the market for them now”.

US rejoins Paris Agreement

In his first day in office, President Biden signed an executive order to begin the process for the US to rejoin the Paris Climate Agreement. Announced on 20 January, the move reverses President Trump’s decision to remove the US from it. The executive order states the Biden administration will “listen to the science” and reduce greenhouse gas emissions. It also says that there will be an immediate review of the actions taken during the Trump presidency.

The new administration’s climate envoy, former US Secretary of State John Kerry, tweeted that the commitment set “a floor, not a ceiling” for America's climate leadership and urged international co-operation ahead of the COP26 conference due to be held in Glasgow in November.

President Biden also revoked the presidential permit granted by President Trump to the Keystone XL Pipeline to Canada. The pipeline would carry about 830,000 barrels of heavy crude a day from Alberta, in Canada, to Nebraska, in the US. President Obama vetoed a bill approving construction of the pipeline in 2015 but the decision was overturned by President Trump.

The UK COP26 President, Alok Sharma, welcomed Biden’s election, saying it was a good thing for climate ambitions. He added that the UK is having lots of dialogue at both federal and state level on environment and climate action as well. When asked what role the UK would be playing in Biden’s plans to host a meeting of major economies to discuss global climate action, and how this meeting would fit into the wider COP programme Sharma said there were an array of wider events and overall welcomed the ambition of the incoming administration and looked forward to working with them.

IEA to publish world’s first net zero roadmap for the energy sector

The International Energy Agency (IEA) announced that it will produce the world’s first comprehensive roadmap for the energy sector to reach net zero emissions by 2050. The IEA is a Paris-based autonomous intergovernmental organisation. Announced on 11 January, The World’s Roadmap to Net Zero by 2050 will detail what is needed from governments, companies, investors and citizens to fully decarbonise the energy sector and put emissions on a path in line with a temperature rise of 1.5C.

The IEA also announced that reinvigorating international energy cooperation will be a major theme of the second IEA Clean Energy Transitions Summit. This year’s summit will be co-hosted with the UK government on 31 March and will focus on how governments can work together more effectively to ensure long-term net-zero targets are translated into concrete action in the run up to COP26. COP26 President Alok Sharma said: “The IEA’s plan to produce a pathway to net zero global emissions by 2050 is another important step for climate action. This will make clear the actions countries must take individually and collectively to meet that goal.”

Forming part of a series of new IEA projects to support efforts to reach global energy and climate goals, the new roadmap will be released on 18 May.

Labour stresses need to tackle climate change as part of recovery

Labour Leader Keir Starmer has said that the tackling the climate emergency must “be at the heart” of the UK’s COVID-19 recovery. Speaking on 12 January, his comments followed a meeting with climate and environmental campaigners alongside Labour’s Shadow Business Secretary Ed Miliband, Shadow Climate Minster Matthew Pennycook and Shadow Environment Secretary Luke Pollard.

The meeting, convened by the Green Alliance, also included leaders of the National Trust, Greenpeace UK, RSPB, WWF UK, The Wildlife Trusts and Friends of the Earth.

Starmer warned that the climate and environmental emergency will be “the defining challenge of the next decade” and repeated Labour’s calls for a Green Economic Recovery from the pandemic. Starmer said the climate “will be central to Labour’s agenda both now and at the next election”.

UKPN to join five local authorities in tackling EV charging blackspots

UK Power Networks (UKPN) – the company which runs the electricity distribution network for London and the South East and East of England – announced plans to collaborate with Cambridge City and Cambridgeshire County Councils, Norwich City Council, Norfolk County Council and the London Borough of Redbridge to resolve electric vehicle (EV) charging blackspots through pilot project, Charge Collective.

Announced on 12 January, by sharing data and expertise, local authorities will help the network operator to identify chargepoint blackspots, which will enable the network operator to hold a competition to incentivise investors to bid at the lowest cost to deliver the priority chargepoints. UKPN said it hopes this will give drivers the confidence to switch to electric vehicles (EVs). UKPN forecasts 3.6mn EVs to be connected to its system by 2030.

UKPN said Charge Collective will help assess how much of a discount to connect to the electricity network is required, to encourage chargepoint installers to invest in areas where the market is struggling to deliver currently. It will be a model that could be scaled up across the country if successful, it said.