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June 2018 Regulatory Report

By Market Insight Team | Posted July 06, 2018


The government has launched a consultation seeking views on widening the eligibility criteria for energy-intensive industries (EIIs) to be made exempt from the indirect costs of the government’s renewable electricity support schemes. Subject to evidence showing the current business level of 20% electricity intensity is causing “competitive distortions”, the government will consider options including lowering the threshold to as low as 10%, which would raise other bills.  

Elsewhere, the government has also revealed plans to include remote island wind (RIW) in future CfD auctions. In a response to an earlier consultation, the department stated that RIW projects must be over 5MW and be located at least 10km from shore to be eligible.  


National Grid’s Winter Review and Consultation 2018 has been published, comparing the events of winter 2017-18 against original forecasts. It found that the “Beast from the East” event on 1 March resulted in the UK gas network having to manage the highest demand recorded for seven years. With gas system supply at an “unprecedented” 100mcm less that instantaneous demand, National Grid released a Gas Deficit Warning. The report concluded that both the electricity and gas systems responded well to the challenges of extreme weather but, as part of its winter consultation, views are being sought on the effectiveness of gas warnings.

Distribution network operator Western Power Distribution has launched a tender seeking more providers of demand-side response in order to help to balance its networks, seeking expressions of interest from half-hourly metered businesses.


The EU has announced a new provisional target that will see at least 32% of the bloc’s gross final energy consumption come from renewable sources by 2030. The announcement forms part of a wider package of “ambitious targets”, which also included new targets for the use of renewable fuels for transport and rules to allow consumers to become “renewable self-consumers” who generate their own renewable energy.

Consultancy EEVS has published its latest Energy Efficiency Trends report focused on consumers and suppliers of non-domestic energy efficiency measures in Q1 of 2018. It found industry confidence has been on a downward trajectory over the last 18 months and a “notable step down” in the volume of procurement.

Also covered in this Regulatory Report:



BEIS to widen EII exemptions for renewable support schemes

BEIS has launched a consultation seeking views on whether to widen the eligibility criteria so more energy-intensive industries (EIIs) are made exempt from the indirect costs of the government’s renewable electricity support schemes.

In an announcement on 22 June, BEIS said it was seeking evidence of “intra-sectoral distortions”, proposing a “do nothing” option in the absence of such evidence. Subject to evidence showing that the current business level of 20% electricity intensity is causing – or could cause – significant competitive distortions, BEIS set out options for lowering the threshold to 17%, 15% or 10%.

As bills are lowered for EIIs, the result is a rise in bills for non-exempt energy users. A 10% intensity threshold would translate to an annual bill increase of £12,000 for a medium business energy user, and £110,000 for an ineligible business operating in an energy intensive industry.

BEIS said that lowering the threshold would enable more EIIs to benefit from relief but recognised that it could also add further costs to non-eligible consumers, including other businesses. To mitigate this, the department offered three options to reduce aid intensity (the amount of exemption that a company receives) for EIIs with lower levels of electricity intensity to: 50% for businesses with electricity intensity at or above 17% and below 20%; 50% for businesses with electricity intensity at or above 15% and below 20%; and 35% for businesses with electricity intensity at or above 10% and below 15%. Under all of these scenarios aid intensity would remain at 85% for businesses with electricity intensity at or above 20% to “give businesses that are eligible under the current electricity intensity threshold to receive relief at 85% aid intensity the certainty of continuing to do so.”

The consultation is also seeking new information from any sector that can demonstrate it satisfies the necessary trade and electricity intensity criteria and thus should be added to the “eligible sector” list. BEIS is also consulting on proposed changes to the regulations for the Contracts for Difference scheme, which it said would improve the overall operation of the EII exemption. Specifically, these changes relate to issues such as how quickly an existing business opening a new meter can receive exemption for that meter.

On recovered money from over-exempted EIIs, BEIS noted that under EU rules, the value of any over-exemption of EIIs must be recovered. The department is consulting on proposals to recover the value of any over-exemption without redistribution of this value back to consumers.

BEIS confirms changes to renewables auctions

BEIS has set out plans to differentiate remote island wind (RIW) from other onshore wind so it can compete in future Contract for Difference (CfD) auctions for “less established” Pot 2 technologies, alongside technologies such as tidal and biomass combined heat and power.

In response to a previous consultation, released on 6 June the department stated that RIW projects must be over 5MW and be located at least 10km from shore. BEIS also confirmed that all new dedicated biomass plants with combined heat and power seeking CfD contracts will require an overall efficiency of 70%, 10% heat efficiency and a primary energy saving of 10%. It also plans to change the definition of waste in line with a new EU definition.

The next auction is expected to take place in Spring 2019.

Climate watchdogs urge policymakers to pursue low-cost decarbonisation

Despite progress in decarbonisation, the government’s climate advisors – the Committee on Climate Change (CCC) – have warned that the UK is off track to meet its binding climate goals.

In its annual Report to Parliament, released on 28 June, the CCC reported that UK emissions are down 43% compared to the 1990 baseline while the economy has grown significantly over the same period. However, a rapid decarbonisation of the power sector has masked a lack of progress in other areas of the economy including transport, agriculture and buildings. the last five years, emissions reductions in these areas have stalled. To make further progress, the CCC called on the government to support the “simple, low-cost” options, such as providing a route to market for cheap onshore wind.

CCC Chairman, Lord Deben, said: “Although the UK seeks to lead the world in tackling climate change, the fact is that we’re off track to meet our own emissions targets in the 2020s and 2030s.”

Eurelectric calls for UK-EU collaboration following Brexit

The European electricity trade association Eurelectric has urged policymakers to minimise the disruption to energy and climate issues that may result from Brexit. In a report published on 20 June, Eurelectric recommended close collaboration between the UK and EU to support continued wholesale energy market integration, cross-border interconnection and efficient energy trading arrangements.

The report confirmed Eurelectric’s view that UK actors should continue to be full members of EU bodies, such as ACER, ENTSO-E and ENTSOG, during any transition. It added that any future agreement should include a “full and comprehensive energy and climate chapter” focused on the Internal Electricity Market, Ireland’s Single Electricity Market, the EU energy and climate frameworks, the Industrial Emission Directive, and the carbon market the EU Emissions Trading Scheme (ETS).

Elsewhere, Minister for Energy and Clean Growth Claire Perry has provided a written response to a European Commission notice to energy stakeholders on the consequences of a “no-deal” Brexit. In the letter, Perry stated that ensuring affordable energy supplies for both the UK and EU “is a key objective of the future partnership that the UK is seeking with the EU”.

BNEF outlines “fundamentally” different future electricity system

Bloomberg New Energy Finance (BNEF) has predicted that half of the world’s electricity will be generated from wind and solar by 2050. The company’s annual New Energy Outlook report, published on 20 June, said that cheap renewable energy and a battery boom will “fundamentally reshape the future electricity system”.

Cost will be a key driver of this change, said the report. The cost of an average solar PV plant is predicted to fall by 71% by 2050, while BNEF expects wind energy cost to fall 58%. Cheaper battery technology will enable these renewable sites to continue to operate when there is no sun or wind. As part of the changing industry, the report predicted that the use of coal will shrink dramatically to just 11% of global electricity generation by 2050, down from its current share of 38%. It added that gas consumption for power generation is only predicted to increase “modestly”.

The ongoing growth of electric vehicle usage is predicted to add as much as 3,461TWh of new electricity demand globally by 2050, which equates to 9% of total demand.


National Grid to review Gas Deficit Warning following extreme winter weather

National Grid’s Winter Review and Consultation 2018 has been published, comparing the events of winter 2017-18 against original forecasts and seeking stakeholder feedback to inform preparation for the coming winter.

While winter commenced with average seasonal temperatures, on 1 March, the “Beast from the East” event resulted in the UK gas network having to manage the highest demand recorded for seven years. At the same time, upstream gas supply loses were experienced due to sub-zero temperatures. Gas demand reached 417.7mcm and electricity transmission system peak demand reached a high of 50.7GW on the same day.  

These conditions saw the gas system at an “unprecedented” 100mcm less than instantaneous demand, which resulted in National Grid releasing a Gas Deficit Warning (GDW). These are issued to notify the market of a significant supply deficit and prepare shippers to respond to balancing requests. In this instance the warning saw trading throughout the day, which helped balance supply and demand and led to a rise in gas prices. National Grid concluded that both the electricity and gas systems responded well to the challenges of extreme weather but, as part of its winter consultation, is seeking views on the effectiveness of the GDW service.

Western Power Distribution launches tender seeking demand-side response

District Network Operator (DNO) Western Power Distribution (WPD) has become the latest local grid to launch a tender requesting more demand-side response (DSR) in order to help it balance its networks. Last year the company commenced a flexibility trial in the Midlands, which then went live in April 2018. Subsequently, it is now seeking expressions of interest from half-hourly metered businesses that can increase generation or cut their consumption in the Northampton, Plymouth, Exeter, South Hams, Beaumont Leys and Rugeley areas.

WPD intends to structure its programme so that, if flexibility is not required, businesses can bid into other flexibility products and markets. Firms will be paid to provide one or two of three services: Secure, designed to manage network peak demand and reduce loading; Dynamic, which will support the network in the event of specific faults; and Restore, designed to assist with restoring the network following rare faults. The expression of interest ends on 11 July and WPD plans for the service to go live on 31 October.  

National Grid to develop new Black Start approach

National Grid plans to develop a new procurement process for Black Start capabilities by the mid-2020s and to involve renewable energy sources and battery storage. The plans were announced at the end of May as part of National Grid’s balancing services product roadmap.

Black start is the service that re-energises the grid after a total or partial black-out. These services have traditionally been provided by large coal-fired power stations, but with the power mix changing, National Grid is considering new technologies.

Cathy McClay, Head of Commercial, Electricity at National Grid, explained that “the world of energy is changing”, as the shift towards a low-carbon future presents new challenges. By the mid-2020s National Gird plans a fully competitive Black Start procurement process “with submissions from a wide range of technologies” and DNOs playing a more active role.


EU sets new 32% renewables target for 2030

EU officials have approved a new provisional target that will see at least 32% of the bloc’s gross final energy consumption come from renewable sources by 2030. The new target, which was initially announced on 14 June, formed part of a wider package of “ambitious targets” agreed by the EU Parliament and Council that included renewable self-consumption, transport targets and updates relating to biofuels.

The targets were decided on an “energy efficiency first” principle, which focused on measures that make energy demand and supply efficiency across all planning, investment and policy decisions. They will enable the EU to meet its goal of reducing emissions by at least 40% below 1990 levels by 2030, in accordance with the Paris Agreement.

MEPs and Ministers also agreed on several other points, including the decision that a minimum of 14% of fuel for transport use must come from renewable sources by 2030. They also agreed on new rules to allow consumers to become “renewable self-consumers” who generate renewable energy for their own consumption and receive remuneration for self-generated electricity that is fed into the grid. The full EU Parliament is expected to vote on the new rules in October, after which it will become legally binding.

On 19 June new laws on energy efficiency for the next decade were also finalised, with EU lawmakers and national representatives agreeing on an overall EU-wide target of 32.5% by 2030.

EEVS finds fall in business energy efficiency confidence

The latest Energy Efficiency Trends report, published on 13 June by consultancy firm EEVS, has found that despite a previous recovery, industry confidence has been on a downward trajectory for the last 18 months. The report, which provides market insight for consumers and suppliers of non-domestic energy efficiency, related to the first quarter of 2018.

It attributed the lower level of confidence to an ongoing trend related to orderbooks. Specifically, the first quarter of this year saw a continuation of a downward slide in orders over the last 12 months. This was reinforced by consumer feedback, which recorded a material drop off in projects being commissioned; figures show that 60% of the companies surveyed commissioned energy projects in the first three months of 2018. EEVS said this was part of a “notable step down in the volume of procurement over the last year”.

In 2016, for example, procurement did not drop below 65% and reached a high of 80% in Q4. Improvements in the energy efficiency of lighting were revealed as the most popular investment, with gains also seen in smart building technology, smart metering and monitoring and targeting software.

Suppliers were recorded as “significantly upbeat” about the outlook for the next three months, with many anticipating favourable conditions in the months ahead and 76% reporting an expected uptick in Q2 2018. Elsewhere, suppliers were noted as “unequivocal” in their feedback on government performance during Q1 2018. The report said that “strongly negative feedback has continued for 12 months, with more than eight out of 10 suppliers now considering government action on energy efficiency to be either ‘neutral’ or ‘ineffective’.” Regarding the government’s management of the wider UK economy it was revealed that only one in 10 suppliers considered it “effective”.

BEIS gives the green light to ultra-fast EV charging innovation

On 12 June the government announced that it was supporting new ultra-fast electric vehicle (EV) charging technology that aims to ensure fast and safe charging for high-powered electric car batteries. PowerDrive Line is one of 12 innovation projects that has received funding from the government’s Faraday Battery Challenge. This forms part of the Industrial Strategy Challenge Fund and will see the government invest £246mn to support battery technologies for EVs.

PowerDrive Line is focused on solid-state battery cell development and will address concerns about manufacturing such advanced technology at scale and how to develop ultra-fast charging technology of less than 25 minutes. Business and Energy Secretary Greg Clark said the innovation was “an example of our modern Industrial Strategy in action and will help pioneering companies realise the economic benefits that the global transition to a low carbon economy offers.”

In other EV-related news, it has also been confirmed that the government is to create a dedicated EV taskforce, with Transport Minister Baroness Sugg saying at a Lords hearing of the Automated and Electric Vehicles Bill on 5 June that it “will work with government, the energy sector and the automotive sector to look at what further actions can be taken to ensure that the energy system is used more efficiently for the uptake of electric vehicles.”

Climate Action Network report finds Europe is “off target” on climate change

A report published by Climate Action Network Europe has revealed that all EU countries are “off target” when it comes to increasing their climate action in line with their Paris Agreement goals.

The publication, which examined EU Member States’ activities on climate change and their current greenhouse gas emissions, said that “no single EU country is performing sufficiently in both ambition and progress”. It stated that all EU countries can and must do more to achieve their Paris Agreement targets.

The UK ranked 14th on the list of countries and, together with Belgium, Denmark and Germany, was no longer seen as being at the forefront of the fight against climate change. The report noted that, while the UK has committed to several ambitious climate targets, it has been “falling well short of being a force for progressive policy at EU level”. Recommendations to improve this included establishing clarity on energy frameworks post-Brexit and taking the opportunity of the 10th anniversary of the Climate Change Act to raise emissions targets to “net zero” before 2050.

Energy-positive “Active Office” opens at Swansea University

The UK’s first energy-positive office, which generates more solar energy than it consumes, has opened at Swansea University on 21 June. The new building, known as Active Office, uses a range of innovative technologies to generate, store and release solar energy in one integrated system. It was designed by SPECIFIC, a UK Innovation and Knowledge Centre led by Swansea University.

Active Office is an example of the “buildings as power stations” concept that points to a new generation of low-carbon buildings and offices that produce their own clean energy. The office uses a range of technologies, including integrated solar PV panels, a combined PV thermal system that can generate both heat and electricity from the sun, lithium-ion batteries to store generated electricity and a 2,000-litre water tank that stores solar heat.

Buildings currently account for around 40% of the UK’s energy consumption and energy positive buildings like Active Office offer several advantages, such as lower energy costs for consumers, less requirement for peak central power generating capacity, improved energy security and reduced carbon emissions.

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