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April 2017

By Market Insight Team | Posted May 31, 2017

April 2017 – in brief


It has been confirmed that the government’s renewables subsidy auction will not be affected by Prime Minister Theresa May calling a snap general election for 8 June. The pre-election “purdah” period will now mean that very little new energy policy documentation or decisions will be published prior to the election.

The system operator highlighted the challenges of the country’s changing energy mix in its Summer Outlook Report 2017. National Grid said greater flexibility will be required over summer 2017 to balance the electricity system through periods of low demand, and to manage increased supply and demand variability. It noted that it should have enough generation to meet demand, even as many power stations go offline for maintenance for periods over the summer.


The Energy Networks Association (ENA) has urged the government to put networks at the heart of its Industrial Strategy in its response to the government’s green paper. It said innovation in smarter networks can deliver new opportunities for both economic growth and employment across all regions of the UK.

The energy regulator has found that only 21% of businesses switched supplier in 2016, down from 25% in 2015. Ofgem’s annual survey of small and micro-business engagement in the energy market found that two-thirds (66%) of businesses did have some degree of engagement in the energy market, while the appeal of lower prices was cited as the primary motivation for switching supplier.


Funding has been awarded by the government to help develop the next generation of driverless and low-carbon vehicles. In total, £109.7mn has been awarded, backed by significant additional funds from industry, to seven projects. These include the development of a battery suitable for high-performance vehicles, and research into technologies to reduce the weight and improve electrification in SUV vehicle platforms.

The government has confirmed the sale of the Green Investment Bank (GIB) to Macquarie Group in a £2.3bn deal. Climate Change and Industry Minister Nick Hurd said that the deal secures “fair value” for the UK taxpayer and spoke of Macquarie’s “track record” of success in green investment. Hurd added that the UK will benefit from ”increased investment” in green infrastructure as it transitions to a green economy.

Also covered in this Regulatory Report:


Renewables subsidies auction unaffected by snap election

The Department for Business, Energy and Industrial Strategy (BEIS) has confirmed that the government’s auction for renewables subsidies will not affected by the Prime Minister Theresa May’s decision to call a snap general election for 8 June,

The second contracts for difference (CfD2) auction commenced on 3 April, and BEIS confirmed that there will no change to the scheduled CfD2 timings.

However, with the government now entering purdah – the pre-election period – the department is prevented from making new policy announcements or introducing new initiatives. This means the expected release of initial proposals on promoting effective competition in the domestic energy retail market, the smart energy call for evidence, and the coal power station closure policy could be impacted.

The government did reiterate that the Emissions Reduction Plan will be released shortly, although any further new policy will be determined by the new government from 8 June onwards.

Energy policies will be determined by the soon-to-be-released party manifestos. While the Conservative government’s pre-election rhetoric focussed on price caps in the domestic market, some industry stakeholders are focussed on the low-carbon transition and energy efficiency.

Green energy group RenewableUK’s Executive Director, Emma Pinchbeck called on all parties to support a “vibrant renewable energy sector” if they want to be successful in government, citing how three-quarters of the public support renewables and any incoming government had a “massive opportunity” to reap the benefits of the renewable energy transition.

Industry body Energy UK urged a continued commitment to decarbonisation and making energy efficiency a national priority, while stressing the industrial strategy should be built on a low-carbon economy.

Greater flexibility needed over summer: National Grid

The system operator has highlighted the challenges of the country’s changing energy mix in its Summer Outlook Report 2017, published on 6 April.

National Grid said greater flexibility would be needed during summer 2017 to balance the electricity system through periods of low demand, and to mitigate the increased supply and demand variability it is experiencing on the system. Due to falling demand on the British electricity system, it expects that there will be periods where there is more generation than necessary.

To deal with this, the system operator said it is planning to curtail flexible generation. It may also instruct inflexible generators to reduce their output between late April and the end of summer, to help it balance supply and demand.

Historically, National Grid’s level of intervention has been minimal in meeting these requirements but with the changing generation mix, the system operator explained that direct intervention is now needed to maintain the security of the system.

Based on current forward prices it is “unlikely” that any coal-fired power stations will choose to generate, whether providing baseload or running at peak, due to the relative costs of running gas and coal-fired power stations. National Grid is also confident that the diverse range of available gas supplies will be sufficient to meet demand.

Eurelectric calls for EU carbon market to be strengthened

The EU’s carbon trading market, the EU Emissions Trading Scheme (EU ETS) should be strengthened according to new analysis on making the electricity sector the “key energy carrier” for a decarbonised and competitive Europe.

In its report, A Bright Future for Europe, published on 19 April Eurelectric proposed strengthening the EU ETS through two mechanisms. The first would increase the ambition of the EU ETS by reducing the cap for emissions, meaning polluters would either need to reduce emissions or pay for more allowances. It also proposed improved measures to reduce the oversupply of allowances due to unforeseen circumstances, such as the financial crash of 2008.

It further stated that decarbonisation investment should be driven by market-based mechanisms such as the EU ETS. It advised against using the electricity consumer as a financing source for low carbon investment through renewable subsidy schemes.

New onshore wind could be delivered at no extra cost to energy users

The UK government could deliver 1GW of new onshore wind capacity at no additional policy cost to consumers over and above long-term wholesale power prices, according to new research for Scottish Renewables.

The report, published on 13 April and produced by Baringa Partners, recommended that projects receive support under the government’s Contracts for Difference (CfD) renewables subsidy scheme. The report claimed that payments to the wind farms in the first years of their operation would be more than offset by payments from the generators to consumers over the remainder of their contract. This is because, under the CfD scheme, if wholesale prices increase above the agreed subsidy, generators must pay the difference back.

Niall Stuart, Chief Executive of Scottish Renewables said: “crucially this is the first analysis of its kind that shows investment in the most competitive onshore wind projects can now be delivered in a way that is in line with the Conservative manifesto pledge to end new subsidies for the sector.”

Renewables industry asks for policy certainty after subsidy scheme closure

The Renewable Energy Association (REA) has called for greater policy certainty from the government following the closure of the Renewables Obligation (RO).

The Renewables Obligation came into effect in 2002 and was the main support mechanism for large-scale renewable electricity projects in the UK. The mechanism placed an obligation on UK electricity suppliers to source an increasing proportion of supplied electricity from renewables.

The scheme closed to all new generating capacity on 31 March. It was described by REA as “the single most important” support for the recent growth in renewable electricity generation. The group urged the government to use the Industrial Strategy and forthcoming Clean Growth Plan to support the future construction of low-carbon electricity generation projects.

James Court, REA Head of Policy and External Affairs said: “Without the RO the industry is left with the Contracts for Difference mechanism, while this does support new generation auctions take place at unpredictable intervals and the policy is prone to government more directly picking winners.” Court added that repeated policy change has led to renewable electricity generation shrinking slightly in 2016, despite steady domestic growth and a rapidly evolving global market. He stressed this cannot happen again if the UK is to meet its Fourth or Fifth Carbon Budgets.


ENA urges government to put networks at heart of industrial strategy

The Energy Networks Association (ENA) has urged the government to put energy networks at the heart of its Industrial Strategy, in response to the government’s green paper.

The organisation set out its vision of how the UK’s gas and electricity networks will play a vital role in delivering the UK’s Industrial Strategy. It said innovation in smarter networks can deliver new opportunities for both economic growth and employment across all the regions of the UK.

By 2020, the ENA said that the UK’s energy networks would have attracted around £80bn of investment since 1990. This would have helped towards delivering one of the most reliable energy networks in the world and one with some of the lowest network costs in Europe, the ENA explained. It added that smarter networks have the potential to deliver an estimated potential of £13bn of Gross Value Added, £5bn of potential exports to 2050 and 8,000-9,000 jobs over the 2020s and 2030s associated with smart grids.

ENA Chief Executive David Smith said: “As we increasingly see the deployment of new energy technologies the opportunities for businesses to take advantage of a smarter energy grid will be huge. Our energy networks will be responsible for delivering that technology so it’s vital that their role is at the heart of the UK’s Industrial Strategy.”

Regulator finds small business switching down in 2016

Only 21% of businesses switched supplier in 2016, according to Ofgem’s annual survey of small and micro-business engagement in the energy market. This is down from 25% in 2015.

Despite the decline in switching the research, published on 7 April, found that two-thirds (66%) of businesses had some degree of engagement with the energy market in the year. This could include switching tariff or exploring options, and the regulator asserted that overall engagement had increased since 2014. The appeal of lower prices was the primary motivation for switching supplier (85%). Of those that didn’t switch, over four in 10 (44%) were active in other ways – for example, over a quarter (26%) had switched tariff with their existing supplier.

The main reason for not switching was businesses being “broadly satisfied” with their current supplier. Meanwhile, almost a fifth (19%) of small businesses had taken no action in the last year nor had they switched in the previous five years.

Non-domestic smart meter installations fall in final quarter of 2016

New figures have shown that the number of smart and advanced meters installed in smaller non-domestic sites by large energy suppliers from October to December 2016 was the lowest quarterly level since Q2 2014.

Around 13,000 smart and advanced meters were installed, which is a 4% decrease on the previous quarter. Approximately 5,000 of these were smart meters. As of 31 December 2016, there were an estimated 858,700 smart and advanced meters installed in smaller non-domestic sites by both large and small energy suppliers.

The report said that there were 923,600 non-domestic smart and advanced meters operating in smart mode or with advanced functionality as of December 2016, over one quarter of non-domestic meters in operation.


Funding awarded for next generation low-carbon vehicles

BEIS and the Department for Transport (DfT) have announced £109.7mn in funding to help develop the next generation of driverless and low-carbon vehicles.

The funding, announced on 11 April, is backed by significant additional funds from industry. It will see seven projects share grants from the latest round of funding from the Advanced Propulsion Centre (APC), which exists to position the UK as a “centre of excellence” for low carbon propulsion development and production.

Successful schemes include the development of a battery suitable for high-performance vehicles, research into technologies to reduce the weight and improve electrification in SUV vehicle platforms and a project to both address gaps in and strengthen the UK supply chain.

These projects will be led by Equipmake, Ford Motor Company, Great British Sports Cars, Jaguar Land Rover, Ricardo Innovations, Romax Technology and Wrightbus.

In addition, a further seven ultra-low and zero emissions vehicle technology projects have won funding from the government’s Office for Low Emissions Vehicles. The government also confirmed that existing electric car incentives will be maintained.

Business and Energy Secretary Greg Clark claimed low-carbon and driverless cars are the future. He added the government is determined, through the Industrial Strategy, to build on the country’s strengths and “put the UK at the forefront of this revolution”.

Government confirms sale of Green Investment Bank

The government has confirmed the sale of the UK Green Investment Bank (GIB) to Macquarie Group in a £2.3bn deal.

The GIB was created by the UK government to support green projects, on commercial terms, across the UK and to mobilise other private sector capital into the UK’s green economy. The process to move it into the private sector has been underway since March 2016, with the sale finally announced on 20 April.

Under Macquarie’s ownership, the GIB will look to invest at least £3bn of new investment into the green economy over the next three years.

Climate Change and Industry Minister Nick Hurd said: “We have secured fair value for the UK taxpayer. GIB has a well-funded new owner that is committed to the Bank’s green mission, with a track record of success in green investment and an ambition to grow the business. The UK will benefit from increased investment in our green infrastructure as we make the transition to a green economy.”

The sale drew mixed reaction. Macquarie’s “track record” was cited by RenewableUK as a positive. Executive Director Emma Pinchbeck said that the organisation was “confident” the sale would see GIB grow and build on its past successes.

However, in contrast Ed Davey, former Energy and Climate Change Secretary, called the sale “environmentally irresponsible” and “politically dubious” on the eve of an election. Greenpeace was similarly negative, Policy Director Doug Parr warned that the “hole left” by the GIB would slow the low-carbon transition and progress on climate targets.

UK cutting carbon emissions fastest in the G7, according to new research

Research by the Energy and Climate Intelligence Unit (ECIU) has found that in the 25 years since the signing of the United Nations Climate Convention, the UK has achieved the highest economic growth of any of the G7 nations, while also achieving the most substantial reduction in carbon emissions.

From 1992, when the Convention was signed, to 2014 British per-capita greenhouse gas emissions were 33% down. UK per-capita gross domestic product (GDP) grew by more than 130% in nominal terms, and by 45% in real terms.

Richard Black, Director of the ECIU, said: “It’s really time to slay once and for all the old canard that cutting carbon emissions means economic harm. […] if you have consistent policymaking and cross-party consensus, it’s perfectly possible to get richer and cleaner at the same time.”

Climate policy should not reduce Welsh industrial output: CCC

It is important that climate policy is designed to prevent carbon leakage or a reduction in Welsh industrial output. The findings come from the Committee on Climate Change’s independent advice on emissions targets for the Welsh government. Published on 13 April, the report said the emissions reporting framework for the Welsh government should be based on actual emissions. This should avoid carbon leakage, where energy intensive industries site abroad to avoid costly carbon policies, as policies can be designed to minimise their impact on certain sectors.

The report highlighted that Wales accounts for 9% of UK-wide emissions but has only around 5% of its population. This is because it has a higher proportion of industry compared to the UK average; the report claimed the Port Talbot steelworks represented 18% of total Welsh emissions in 2014. Therefore, the report stressed that if there is a risk of carbon leakage, policy should not encourage a reduction in Welsh industrial output.

Policy makers urged to prioritise energy efficiency  

Responding to the Industrial Strategy consultation, the Royal Academy of Engineering (RAEng) has urged policy makers to prioritise improving energy efficiency and resource productivity, particularly in buildings and energy networks.

The organisation released its response on 24 April, calling for the development of a long-term, integrated, energy strategy that builds on all available low-carbon forms of generation, including carbon capture and storage, nuclear power and heat networks.

The response also argued that the strategy must allow UK industry, academia, government and investors to “break out of their silos” and work together to achieve sustainable growth.

Scottish government scheme saves businesses £40mn on energy and waste costs

A Scottish government scheme has helped small and medium-sized enterprise (SMEs) to save around £40mn on their energy and waste costs since 2013.

The average saving for companies using Zero Waste Scotland’s Resource Efficient Scotland (RES) scheme, as reported by Energy Live News on 3 April, was around £16,000. The free scheme involves a team of expert advisors assigned to identify the most effective ways for companies to affordably improve their resource efficiency. It comprises of free advice and technical support for firms, as well as sharing best practices and using new technologies.

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