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May 2017

By Market Insight Team | Posted July 03, 2017


The main political parties have published their manifestos ahead of June 8’s general election. The Conservatives said they would consult on how to extend their proposed safeguard tariff cap to microbusinesses. The party also said it wants the UK to have the lowest energy costs in Europe, and claimed it would commission an independent review into the cost of energy to advise on hitting emissions targets, ensuring a reliable energy supply, and keeping costs down.

Labour’s manifesto lent its backing to a low-carbon economy. The party said it would ensure 60% of the UK’s energy comes from zero-carbon or renewable sources by 2030, through supporting nuclear and the development of tidal lagoons. The party also claimed it would take network companies back into public ownership and create regional publicly-owned co-operatives and energy companies.


Citizens Advice has called for a revised approach on communicating the benefits of the smart meter rollout to small businesses, following the publication of a report examining microbusinesses’ interest in and understanding of smart meters. The report found nine in 10 (90%) small businesses had heard of smart meters, but just six in 10 (63%) were aware businesses would be getting one alongside domestic consumers.

Businesses in the Midlands have been offered demand-side response opportunities by local electricity network owner, Western Power Distribution (WPD). The new trial, set to go live in November, will give businesses the chance to earn extra money from existing energy assets.


A new survey by professional services firm, PwC, has revealed two-thirds (65%) of UK businesses are concerned over the cyber risks associated with energy technology. Just over half (51%) of businesses were concerned their client data was not being handled securely enough by their energy supplier, and PwC called on suppliers to “gain the confidence of their customers”.

New research from the University of Bath has found non-domestic buildings in the UK are often using twice as much energy and emitting twice as much carbon dioxide as the professionals who designed them predicted. The study warned that, unless addressed, this could lead to missed climate goals.

Also covered in this Regulatory Report:


The energy agenda – political parties reveal their manifestos

Ahead of this week’s general election, the main political parties published their manifestos, providing insight into energy policy under a new government.

The Conservatives claimed they wanted the UK to have the lowest energy costs in Europe for both businesses and households. The party said it would commission an independent review into the cost of energy, to ensure costs are as low as possible while ensuring reliable supply and a greener economy. The party would also consider how to extend a proposed household price cap to micro-business consumers. This safeguard tariff cap would “protect customers who do not switch against abusive price increases.”

The Conservatives placed a focus on the goals of energy policy, such as reliable and affordable energy, rather than how it is generated. However, the party also said it did not think more large-scale onshore wind is “right for England”, instead maintaining the UK’s position as a “global leader in offshore wind”. The party also reiterated its commitment to the smart meter rollout, wishing for every home and business to be offered one by 2020.

In reaction to the Conservative manifesto, Roz Bulleid, Head of Climate and Environment Policy at manufacturer’s organisation, EEF, said: “We are delighted to see manufacturers’ long-running concerns over the competitiveness of UK electricity costs addressed through the commitment to achieving the lowest energy costs in Europe for businesses and consumers.”

In contrast, Labour would look at taking energy networks back into public ownership to deliver “renewable energy, affordability for consumers, and democratic control.” The party would also support the creation of locally accountable public energy companies and co-operatives to compete with current private energy suppliers. Such companies would be able to buy regional grid infrastructure, with Labour passing laws to facilitate this.

Labour would give its backing to a strong low-carbon economy, ensuring 60% of the UK’s energy comes from zero-carbon or renewable sources by 2030. The party announced it would ban fracking and explicitly supported specific electricity generating technologies such as “further nuclear projects” and the development of tidal lagoons. It also claimed Labour would prioritise tariff free trading with the EU energy market in Brexit negotiations.

Both parties won praise for their low-carbon commitments. The Renewable Energy Association (REA) called the Conservative manifesto a “solid building block” for the low-carbon transition. Chief Executive Nina Skorupska outlined how the energy markets “will change almost unrecognisably” during the next parliament, and how the UK can lead the way in the “global energy revolution”.

Similarly, Friends of the Earth Campaigner Dave Timms welcomed Labour’s manifesto. Timms said: “Labour’s manifesto offers a compelling and practical vision for a sustainable energy system which bans fracking, keeps our homes warm and powers them with clean electricity.”

However, Labour’s plans for renationalisation of the energy system were met with resistance from industry groups. David Smith, Chief Executive of the Energy Networks Association, defended the performance of the energy networks. Smith said: “The current market is working well – not only has it reduced costs for customers by 17% since privatisation but it has delivered significant levels of investment in that time. A further £45 billion is already forecasted to be invested in the next six years to deliver the kind of energy infrastructure that will help ensure our economy is fit for the future.”

Think tank calls for UK to remain in EU energy market, post-Brexit

The UK’s integration in the European internal energy market (IEM) will be important for both the UK and EU member states after Brexit, argued a joint research paper by Chatham House, the University of Exeter, and the UK Energy Research Centre.

Published on 10 May, the report explained that the UK and the EU27 should be able to find common ground over energy policy. It said strong co-operation could help make sure existing and future interconnectors are used as efficiently as possible, enhancing geopolitical security.

The UK is also set to leave the European Atomic Energy Community (Euratom), a treaty that governs the European nuclear industry. Once it does, the report added that this close cooperation would be key in developing rules and regulations in nuclear safety and safeguards for the UK.

The best way for this to be done, the report said, was the creation of a “robust new pan-European energy partnership”. It referred to this as an enlarged European Energy Union. The report said such a partnership could offer a useful platform for aligning EU policies with third countries such as Norway and Switzerland.

A third of EU coal plants face upgrade or closure, says new analysis

The Institute for Energy Economics and Finance Analysis (IEEFA) has found that the enforcement of new EU emissions limits means over one-third of coal-fired power stations across the EU face expensive air quality upgrades or closure.

The research was issued on 8 May and found that the biggest polluters facing the most expensive retrofit investments represent 108 plants with a combined 187GW of capacity. The group includes around 35% of all larger coal, lignite and biomass power plants, by capacity, and 18% of the total, across Europe.

Gerard Wynn IEEFA Energy Finance Consultant said: “These regulations will further undermine and in many cases shatter the fragile economics of coal generation across the EU compared with gas and renewables.”

The report made four recommendations, including an end to policies that reward “ageing and highly polluting power plants” through schemes that subsidise their operators to shut them down, and encouragement of better public-health policy through greater support for cleaner technologies in Eastern Europe.

Solar continues to rise in latest goverment energy trends

Renewable capacity, especially solar, continued to increase in 2016 according to the government’s latest Energy Trends.

The figures, published on 11 May, explained that output was a little lower than in 2015, which benefitted from record wind speeds and rainfall levels. It revealed renewable electricity generation in 2016 was 1% lower at 83.6TWh. But renewables capacity, the potential output of available plant, had increased 13.7% year-on-year.

Solar had the highest share of renewable capacity (33%) out of a total 34.7GW recorded for the final quarter of 2016. It grew by 2.4GW for the year, primarily accrediting under the government’s mechanism to support large-scale renewable electricity generation, the Renewables Obligation (RO). The report noted this occurred mainly towards the first quarter of the year, before the closure of the RO to the majority of small-scale solar and all larger solar plant in March 2016.


Citizens Advice calls for new approach to small business smart meter rollout

Citizens Advice published its Smart Choices report on 28 April, analysing microbusinesses’ interest in, and understanding of, smart meters. It found nine in 10 (90%) small businesses had heard of smart meters, however just six in 10 (63%) were aware that businesses would be getting one alongside domestic consumers.

Around 53mn smart meters are set to be installed in over 30mn premises, including businesses, across Wales, Scotland and England by the end of 2020. The Conservatives reiterated their commitment to the deadline in their manifesto.

More businesses reported falls in energy consumption (23%) than increases (14%) once a smart meter was installed, but for the majority (58%) consumption stayed at the same level. Of those currently without a smart meter, two-thirds (66%) expressed an interest although the consumer advocacy noted levels of interest were heavily linked to usage.

The report recommended a comprehensive and simple campaign to inform small businesses about the smart meter rollout; communications efforts should focus on the potential for reducing demand, rather than billing accuracy.

Midlands businesses offered demand response opportunities

Local electricity network operator, Western Power Distribution (WPD), has launched a new three-year trial providing businesses in the Midlands a chance to earn extra money from existing energy assets through demand-side response (DSR).

The Flexible Power trial is set to go live in November. It is open to businesses that have their electricity metered on a half-hourly basis and can reduce electricity consumption or increase on-site generation in response to an automated signal. WPD will also offer every business a tailored offer based on their usage.

WPD Innovation and Low Carbon Networks Engineer, Matt Watson, said: “Previous tests […] have seen offices adjusting their ventilation to reduce their consumption and factories using their back-up generators to increase on-site generation.”

Battery storage boom expected by end of the decade

Commercial battery capacity could expand to over 100 times its current level over the next four years, according to analysis carried out by SmartestEnergy.

The annual Energy Entrepreneurs Report, released on 4 May, said there is scope for storage capacity in 2020 to be 30-100 times greater than the 20MW of batteries in operation currently. Storage is likely to become increasingly important in the UK’s energy system, as it can store and export intermittent renewable energy during periods of peak demand or allow energy consumers to avoid more expensive peak demand periods.

The report noted that 558MW of projects have won contracts worth £235mn and are set to be in operation by 2020. In total, there are over 2.3GW of new battery projects currently in planning.

The report revealed that growth in independent generation projects had “flatlined” in the final three months of 2016. Independent generators commissioned 38 projects from October to December, compared to an average of 275 projects completed each quarter since 2013.


Firms fear cyber-attacks on new energy technology

A new survey conducted by professional services firm PwC has found around two-thirds (65%) of UK businesses are worried about the cyber risks associated with energy technology.

The latest PwC B2B Energy Survey was published on 8 May, revealing that over half (51%) of businesses were concerned their client data was not being handled securely enough by their energy supplier. Should their current supplier fall victim to a cyber-attack, three in five (57%) said they would switch supplier.

PwC found there is increasing recognition that cyber security and data privacy are risks to energy systems – from power stations to smart meters. The report added that batteries, electric vehicles and others face threats from hackers as well.

PwC Cyber Specialist, Niko Kalfigkopoulos, said: “With around a third of industrials and over a fifth of commercial organisations planning to spend more than £1mn on smart energy technology, the need for utilities - and smart technology suppliers in general - to get their cyber house in order is vital. Those organisations that react now with effective and transparent strategies will be the winners in the long run.”

PwC recommended suppliers only consider partnering with “trusted” third party technology firms. It called for customer privacy to be prioritised, and for suppliers to push for a form of industry standard product assurance. This would enable them to label their devices as “approved” and reduce their exposure to being left at fault, if a customer adds “unapproved” devices to their network, the report said.

Steve Jennings, Power and Utilities Leader at PwC, said: “It’s vital that energy suppliers gain the confidence of their customers by clearly demonstrating their ability to not only identify innovative technologies but critically to enhance their cybersecurity capabilities to respond to a range of sector specific events that could increase vulnerability.”

Commercial buildings using more energy than planned

UK non-domestic buildings are often using twice as much energy and releasing twice as much carbon dioxide as the professionals who designed them predicted, according to new research carried out by the University of Bath.

Published on 2 May, the study explained the gap between how much energy a building is predicted to use and how much it consumed once constructed will lead to unachieved climate goals – unless the UK construction industry quickly addresses “not fit for purpose” building modelling professionals.

The government has set a target of reducing national greenhouse gas emissions by at least 80% by 2050. There is an “immediate reduction target” of 34% by 2020.

Lead Investigator and Professor of Low Carbon Design at the University of Bath, David Coley, said: “The impact of the inaccuracies of building modelling professionals has severe financial and environmental implications for both the government’s global warming targets as well as building owners who are purchasing homes and other buildings that are sold to be energy efficient but in reality are not.”

UBS tips electric vehicle to reach cost parity with conventional cars by 2018

According to UBS analysis, the cost of owning an electric car (EV) will reach the same level as petrol-powered cars by next year.

The report was covered in The Telegraph and the Financial Times on 19 May, with experts from the investment bank’s evidence lab outlining how the “total cost of consumer ownership can reach parity with combustion engines from 2018”.

The analysts said this is likely to happen in Europe first and will create an uplift in demand. UBS therefore increased its 2025 forecast for EV sales, including plug-in hybrids, by around 50% to 14.2mn. It said this equates to around 14% of global car sales. The analysts claimed Europe would lead the way with 30% of car sales attributable to electric vehicles in 2025, whereas the current share is around 1%.

The bank also predicted that the manufacture of electric cars will become more profitable as demand (and therefore scale) increases and improvements in battery technology bring costs down. High margin options such as driverless technology could also improve profitability. UBS said: “Once total cost of ownership parity is reached, mass-brand EVs should also turn profitable.”

Green Deal Finance Company seeks to launch new Green Deal offering

The Green Deal Finance Company (GDFC) has announced the launch of a new £5mn bond offering an annual return of 12%, as it looks to re-launch a new Green Deal-style offering.

A government-led initiative, the Green Deal was devised to encourage property owners to take out loans to fund energy efficiency measures. The loan was intended to fund itself through savings on the energy bill, however scheme uptake was poor and the programme failed.

Now privately owned, the GDFC is aiming to become the leading finance provider to UK SMEs, landlords and homeowners wishing to save money and improve their properties through energy efficiency products.

Killian Pender, the entrepreneur behind Greenstone Finance, which acquired the GDFC, said: “Our latest fund raise …[allows] us to accelerate the re-launch of the business and make a greater positive impact on the environment sooner.”

EU energy ministers consider "dilution of energy savings ambition"

The EU’s 28 energy ministers are considering the dilution of the bloc’s energy saving objectives, according to EURACTIV on Monday 22 May. The ministers are reportedly concerned that the legally-binding objective for EU countries to cut energy consumption by 30% come 2030 is difficult and inflexible. The proposition obliging energy firms to ensure 1.5% less energy is sold to end consumers each year is also under scrutiny.

EURACTIV reported that both objectives had been openly changed by the EU’s 28 energy minsters, owed to fears over the economic burden this would represent. The report explained that Malta, which currently holds the presidency of the EU, is considering making the 30% overall energy savings objective non-binding. Furthermore, the annual 1.5% target on end consumers would be lowered to 1.4% and also made non-binding.

Campaigners have expressed concern over the proposed “dilution”, warning that it would be “a massive step backwards”. Business representatives in the European Alliance to Save Energy issued a statement urging ministers to “resist proposals” to lower the EU’s ambitions on energy efficiency. 

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