Informer Issue 516 - 15/06/2021

The leaders of the G7 nations have committed to a “green revolution” aimed at limiting the rise in global temperatures through measures including accelerating renewables and ending unabated coal generation as soon as possible.

Recovering the costs of decarbonising the energy system through electricity bills disincentivises consumers in the shift to net zero, according to a report. A research paper by Cornwall Insight points out that funding the cost of decarbonising the power system has mainly been through consumers' electricity bills and in 2020-21 alone these costs amounted to £10bn. But the report questions whether that is the right approach to stimulate the decarbonisation of domestic heating and said the current status quo of policy cost recovery is a significant disincentive for households to electrify and transition to new low carbon heating technologies. “While initially policy costs were applied to electricity bills for very good reasons, this disincentive is a barrier for the UK to meet its net zero target. Driving the right financial incentives for consumers to choose low carbon options while managing the impact on the public purse by reallocating policy costs elsewhere will be key,” it argues. Options explored for a new approach include reallocating all or part of the policy costs to gas bills, shifting costs onto general taxation, or recovery as a fixed "residual cost” similar to the way Ofgem's Targeted Charging Review (TCR) has shifted the sunk costs of the network into a fixed charge. “Each reallocation method comes with its own range of risks and opportunities and should not just be considered on its own but rather as a suite of tools policymakers can use to hit carbon budgets,” said the report. Read more

Carbon prices are expected to rise in the decade ahead as the recovery from Covid gathers pace and governments strengthen their climate policies, according to a new report. The annual survey of the International Emissions Trading Association (IETA) found members expect to see higher carbon prices in every emissions trading system (ETS) currently in operation worldwide between 2025 and 2030, including the recently launched market in the UK. IETA's CEO Dirk Forrister, said: "Calls to build back better from the pandemic are aligning with increased climate ambitions both from governments and business to give the world much-needed optimism for the future, reflected in this year's survey. "Heightened focus on achieving net-zero emissions from a myriad of actors will have a big impact on carbon market growth and bring more attention to the power of markets to deliver on climate ambitions." Prices in the EU’s ETS recently hit €50 per tonne for the first time and last month’s maiden UK ETS auction saw prices rise to £50 at one point. Read more

EDF’s Dungeness B nuclear power plant is to close ahead of schedule after it was deemed beyond repair. The site on the Kent coast shut for repairs in 2018, but had been expected to re-start this summer and run until 2028. EDF said defuelling would now start immediately and last several years. It said the plant had run for 10 years longer than its original design life, and in line with expectations when it was acquired by EDF in 2009. John Benn, Station Director at Dungeness B said: “EDF has had to make a hard decision – but it is the right one. It gives our teams, our community and our business a clear understanding of the future.” The GMB union said workers were "stunned" by the decision, although most of the jobs at the site are set to continue during the defuelling process. Tom Greatrex, Chief Executive of the Nuclear Industry Association, said the closure highlighted the need to invest in new nuclear stations to ensure the UK is on track for net zero. Read more

The competition watchdog has ordered National Grid not to start integrating Western Power Distribution (WPD) into its business while it looks into the £7.8 billion acquisition. The Competition and Markets Authority (CMA) has issued an initial enforcement order for the companies to carry on operating separately until it has concluded its merger review. The £7.8bn deal to acquire WPD, the electricity distribution network operator for the Midlands, South Wales and the South West, was announced in March and completed this week. A National Grid spokesperson said: "Following National Grid's voluntary notification of the WPD acquisition, the CMA is undertaking its merger review which has not yet concluded. As a result, and as is customary in such circumstances, the CMA has issued an initial enforcement order, requiring the WPD Group to continue to be run independently from National Grid and under its existing management until the CMA review has completed.” When the deal was first announced National Grid said it was a “one-off opportunity to acquire a significant scale position in UK electricity distribution”. “WPD has a high quality, fast growing asset base and an excellent track record of customer satisfaction, operational performance and financial returns,” it said. Read more