Informer Issue 584 - 07/02/2023

The competitiveness of the UK as a clean energy investment destination is at “severe risk” unless steps are taken in the Spring Budget, according to industry bodies. Five energy trade associations representing over 750 companies have written a strongly-worded joint letter to the Chancellor Jeremy Hunt urging him to take action to secure green growth. “Despite our industry’s commitment to the low carbon energy transition, we are concerned that there is no clear government plan to deliver green economic growth and continue attracting clean energy investment into the UK,” the letter says. It points out that inflation, unfavourable exchange rates and the rising costs of raw materials and labour are pushing up prices across the clean power sector where the levelised cost of energy has increased by 20% globally in the past year. “As a result, many project developers and supply chain companies which were already operating within very small margins are now finding that profits are disappearing completely,” the bodies warned. Steps urged include a reform of capital allowances and financial incentives for investment in low carbon energy in response to those being offered by the US in its $216 billion Inflation Reduction Act. RenewableUK’s CEO Dan McGrail said: “If the UK is to stay ahead in the global race for clean energy and drive consumer bills down, we need the Chancellor to adopt bold measures to retain and boost private investment in the energy transition.” Read more

Steps should be taken to prevent future gas price spikes pulling power market prices up with them, according to a new report which claims British consumers paid £7.2bn more than necessary in 2021-22. The report by Carbon Tracker, published in response to a consultation on reforming the power market, suggests policy measures such as utility hedging obligations for future fuel needs to reduce exposure to high gas prices and reform to contracts for difference (CfD) agreements to lower bills. The analysis estimates what GB wholesale market electricity costs would have been if prices were calculated via a “split market” that separates the pricing of power produced by variable supply of renewables, from other sources, as opposed to the marginal pricing design the market currently operates under. When calculated this way, total net power procurement expenditure over 2021-22 turns out around £7.2 billion lower, representing what could have been saved if measures had been in place to protect against gas market price spike influence on the power market. Senior Analyst and report author Jonathan Sims said: “Our findings show the extent to which the global gas market has over the past two years skewed British power prices to levels unreflective of the technological makeup of today’s generation mix. “While continuing with marginal pricing for wholesale power market design is preferable to ensure significant changes do not dent investor confidence in the renewables sector at this crucial juncture, government must protect against any future gas price spikes pulling power market prices up with them.” Read more

Ofgem said customer service from domestic energy suppliers is “just not good enough” following publication of its latest ratings. This latest review looked at customer service and complaints performance from information submitted by 17 of the biggest domestic energy suppliers. The review found issues including weak policies and pathways for the customer service journey, customers left waiting for hours on the phone on several occasions and high rates of customer complaints upheld by the Energy Ombudsman. No suppliers had ‘no weaknesses’ at all.
Neil Lawrence, Director of Retail at Ofgem, said: “This review has highlighted that customer service is just not good enough. In a world where customers need to be confident in consistently great care and support, it is clear that improvements need to be made. “We also know from talking to suppliers that the calls they are getting are more and more complex. But we expect suppliers to respond dynamically to this, updating processes, call handling scripts and having enough people to deal with the current issues and complexities.”
Ofgem said it wants to see further improvement action as a result of the findings, and warned it will take “further, firm action where this doesn’t happen” Read more

Power transfers from Scotland to England are expected to almost triple by 2030, according to the system operator’s latest forecast. National Grid ESO said offshore wind would be the main contributor of growth in Scotland’s renewable generation capacity, but pointed out this is often in areas where the current electricity network is limited and network reinforcement will need to be increased in some areas.
The Electricity Ten Year Statement (ETYS) 2023 publication also forecasts strong capacity growth for the system in North Wales and East Anglia. The system operator said the statement was “important in helping us to understand where investment and development is needed to help us achieve our zero-carbon ambition”. “Since the last publication of the ETYS, the world has fundamentally changed. Both the devastating war in Ukraine and the ongoing cost of living crisis has underlined the importance of reaching net zero,” it said. “A fast transition to net zero will bolster our energy security and reduce our exposure to volatile international fossil fuel prices, by harnessing abundant renewable and low carbon resources. This transition will ultimately minimise the costs for consumers in both the near and future term.” Read more

Energy networks have set out a series of goals to increase the size of and participation in local flexibility markets. The Energy Networks Association’s (ENA) new work plan for its Open Networks programme has laid out 11 ambitions. The programme aims to deliver clear benefits to consumers and the sector including allowing flexibility providers to more easily engage with the market and making energy networks more coordinated and aligned. The targets include standardising flexibility contracts, specifications and products, using consistent standards in carbon reporting, and harmonising data sharing arrangements. Progress towards these targets will be assessed and publicly reported. Dr. Avi Aithal, Head of Open Networks at the ENA said: “The ambitious work plan, and the public goals we have set ourselves, are a testament to how the programme is accelerating and our intention to deliver practical benefits to customers.” Read more

Ofgem has published details of its recent redistribution of the Renewables Obligation Quarter 2 Mutualisation payments in respect of the 2020-21 compliance period. More details here.

Ofgem has published its decision on the proposed modifications to the RIIO-2 Electricity Distribution licences. The licence modifications will come into effect on 1 April 2023. More details here.

The BSC Panel has published its response to a call for input on Energy Code Governance Reform. The panel said it remains very supportive of the aims of the Energy Code Reform project, however it does have concerns over the lack of progress. More details here.

BEIS has published an explanatory memorandum of understanding on offshore energy cooperation between the UK and the North Seas Energy Cooperation. More details here.