Informer Issue 586 - 21/02/2023

A record amount of power has been secured in the latest year-ahead Capacity Market auction with the second highest clearance price achieved. The T-1 auction for 2023-24 saw 5.8GW of capacity secured with a clearance price of £60/kW/y, compared to last year’s record of £75/kW/y. An offshore wind project - SSE’s Seagreen - secured its first contract under the auctions with gas, nuclear and battery storage assets also among the notable winners. Ratcliffe-on-Soar 3 was the only coal unit to win a contract. A total of 6.1GW of derated capacity entered the auction. Energy consultancy EnAppSys said the fact that the auction had the highest-ever target capacity indicated that National Grid ESO is putting further emphasis on domestic solutions to energy supply issues. EnAppSys director Phil Hewitt said: “National Grid ESO have procured more capacity than ever before in a T-1 auction and the result is a high clearing price, though the price is likely cheaper than that of the Winter Contingency contracts seen this winter. “Another stand out is that a coal power station unit slated to close has now extended its life for another year showing that coal is not dead … yet.” Read more

The investment climate for low carbon generation has deteriorated significantly in recent months, according to an industry body. The report from Energy UK warns that factors including rising inflation, interest rates, supply chain difficulties, windfall taxes and policy uncertainty are driving costs up for low carbon projects. It said some developers have reported cost increases of 50% for certain projects, putting them at risk of not being built. Energy UK said with an estimated £500bn in additional investment needed between now and 2050 to meet the UK’s Net Zero goals, private sector funding will be crucial. But it warned that the “current hostile environment” risks driving this money elsewhere as both the United States and the rest of Europe move to attract companies and projects to their own territories. Measures called for include a rethink of fiscal policy which could include reforming the proposed Electricity Generator Levy. Energy UK’s chief executive Emma Pinchbeck said: “The UK is in increasing danger of undermining its own ambitions and failing to deliver on its commitments. “We are at a pivotal point right now with other countries actively trying to attract the same companies and investors and it would be unforgivably complacent to think that we don’t need to do the same.” Meanwhile RenewableUK also published a call for action ahead of the Spring Budget, urging measures including speeding up the planning process and investment in new grid capacity to help the UK maintain its global green energy position. Read more

The cost of balancing Britain’s power grid hit £4.19 billion last year, a rise of 250% since 2019 according to new analysis. The Nuclear Industry Association (NIA) said National Grid ESO data showed the total balancing cost for 2022 is equivalent to every household in Britain paying an extra £150. The NIA said balancing costs have spiralled since the beginning of the energy crisis and are a consequence of a shrinking baseload capacity as nuclear stations retire without replacement, coupled with a reliance on expensive imported gas to fill the gaps in electricity generation. Tom Greatrex, Chief Executive of the Nuclear Industry Association, said: “Consumers are now paying the price of Britain not investing in nuclear power. We urgently need to get going with a pipeline of large-scale stations and a fleet of SMRs to provide stable, predictable, clean power alongside renewables, to avoid these extremely costly and very damaging fossil-fuel induced crises. “If we don’t act urgently with a clear policy framework, other countries will leapfrog us in attracting investors who want to develop in Britain, and we risk delivering on energy security and net zero.” Read more

The UK’s pipeline of offshore wind projects now stands at almost 100GW across 130 projects, an increase of 14GW over the past 12 months according to new figures. The total includes 13.7GW of fully operational capacity and a further 13.6GW under construction or with support secured for a route to market: The research published by RenewableUK also showed the global pipeline stands at 1,174GW across 1,417 projects in 38 countries – an increase of 508GW over the past 12 months. Fully developing that offshore wind capacity could meet 20% of global electricity demand. While the UK retains the second largest pipeline, accounting for 8.5% of the global total, it is the first time it has fallen below 10%, reflecting the rapid growth of new markets like Australasia and South America. RenewableUK’s Chief Executive Dan McGrail said: “The UK retains a powerful position in offshore wind, second only to China, but we’re seeing incredible growth in new markets like Australia, the USA and Brazil. “There’s now fierce global competition for investment in not only wind farms, but also manufacturing facilities and supply chains. The US and EU are offering massive financial incentives for renewable energy, while in the UK the Government has been raising taxes on clean energy. These figures underline the need for bold action to attract the billions in private investment we need, otherwise the UK risks being left behind in the years ahead, with money and jobs going to more attractive global markets”.
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Digital twin technologies could help government and regulators develop more effective energy policies, according to a report. The Energy Systems Catapult study said digital twins – which offer virtual copies of systems that behave identically to their real-world counterpart - could present complex energy systems in an accessible way for policymakers and other parties. The technology is increasingly used for system operation purposes, but the report said could also have an important role to play for government and regulators to build evidence and highlight the impacts of future policy decisions. Use cases including simulating the energy system for national security scenarios and testing options for optimising for different outcomes in a net zero system, such as lowest overall system cost, or highest offshore wind penetration. "Policymakers should leverage all available digital tools & techniques - such as DigitalTwins - to demonstrate & evidence implications of energy policy interventions,” said author Greg Johnston. Read more

Ofgem has published details on the Renewable Obligation buy-out price and mutualisation threshold and ceilings for 2023-24. The buy-out price is £59.01 per ROC. More details here.

National Grid ESO has published its response to Ofgem’s consultation on the draft Forward Work Programme for 2023/24. More details here.

BEIS and the new Department for Energy Security and Net Zero has launched a consultation on the design elements of a low carbon hydrogen certification scheme. It closes on 28 April. More details here.

Ofgem has published its authority decision to send back Connection and Use of System Code (CUSC) modification proposal CMP328. CMP328 seeks to put in place specific arrangements for Transmission Connections that could have an impact on the Distribution System by introducing a new Distribution Impact Assessment (DIA) process. More details here.