Contents:
Week in Energy
Policy updates:
- Minister calls for debate on impact of green levies on bills
- Businesses call for buildings energy infrastructure initiative
- Defra confirms emissions restrictions for medium plants
- Scottish government supports fracking ban
Industry updates:
- Government statistics show energy records being broken
- Powerhouse 2050 report gives energy recommendations for the North
- Universities off track to hit 2020 emissions targets
Week in Energy
Monday 02/10 – The government confirms a consortium of seven universities will receive funding for research into the next generation of battery technology. Speaking at a fringe event at the Conservative Party Conference, Climate Change Minister Claire Perry calls for a debate on the impact of green levies on bills. National Grid announce that overnight the carbon intensity of the electricity on the grid was just 73gCO2/kWh, the lowest level on record.
Tuesday 03/10 – The Scottish government announces that it will not support the development of unconventional oil and gas in Scotland, effectively imposing a ban on fracking. Speaking at a fringe event at the Conservative Party Conference, Energy Minister Richard Harington suggests the government is likely to rethink the Hinkley Point C funding model for future nuclear projects.
Wednesday 04/10 – Energy industry stakeholders warn of the possibility of unintended consequences of the domestic energy price cap plans announced by Prime Minister Theresa May. New research finds that an East Coast Carbon Capture and Storage network could boost the UK economy by an estimated £160bn between now and 2060.
Thursday 05/10 – Energy UK releases a report on the opportunities and challenges for investment in the future energy system, finding that if the government provides certainty and stability, then investors and the energy industry feel they can deliver the investment required. Analysis by WWF Scotland finds that on Monday 2 October, wind turbines in Scotland generated more than double the country’s energy demand.
Friday 06/10 – An IRENA report calls for electricity storage to play crucial role in enabling the next phase of the energy transition. New research from the Energy Technologies Institute reveals that bioenergy has the potential to help the country meet future energy demands and mitigate climate change.
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Policy 1 | Minister calls for debate on impact of green levies on bills
Speaking at the Conservative Party Conference, Climate Change Minister Claire Perry has said an element of the energy costs debate that needed to be properly articulated is the impact of “green levies” on bills.
Perry was addressing a fringe event on energy policy and the industrial strategy on Monday, 2 October. She was asked about the energy price cap, later announced by the Prime Minister during her keynote speech. Perry said that evidence had shown whilst green levies had increased certain energy costs, especially for industrial users, overall energy bills had decreased.
Perry explained this was being driven by energy efficiency improvements, something that will also be important as the government sets out how to tackle emissions in the UK’s industry and gas heating networks. Perry confirmed that plans to toughen up standards on business energy efficiency, as well as new home building and waste heat, are set to play a role alongside Carbon Capture and Storage (CCS) in the Clean Growth Plan. Perry said CCS was a “vital technology” and should be deployed “at an appropriate cost”. The Clean Growth Plan itself, Perry said, will lead a series of government energy programmes. It will be followed by a review of industrial energy costs led by Professor Dieter Helm and the government’s Industrial Strategy, Perry confirmed.
With regards to renewables, both Perry and fellow BEIS Minister Richard Harrington spoke of a potential return for onshore wind to compete in auctions for renewables subsidies. The ministers said that if costs are competitive and have local support, then onshore wind projects could yet play a role. Onshore wind has been effectively barred from further deployment since 2015.
Harrington acknowledged that renewables did want to move away from subsidies, drawing on how they were “for a purpose for a time” and not the long-term. Harrington said his priority was that no sector would become too reliant on long-term subsidies. The renewables sector wanting to move away from them is something that will be built on in the Industrial Strategy, Harrington added. Harrington outlined how renewables had not often been seen as part of the industrial mix, nor taken seriously. The minister felt this was now integral and not just something that made the government look good. He said that decarbonisation could soon “be as big as coal”.
The conference also saw the creation of a battery research institute. A consortium of seven universities will receive government funding for research into the next generation of battery technology. Backed by £65mn from the Industrial Strategy Challenge Fund, the Faraday Battery Institute will form part of the government’s £246mn of investment in battery technology through the strategy.
Speaking on the announcement, Business and Energy Secretary, Greg Clark, said that the institute would play a key role in stimulating innovative research partnerships between the UK’s universities and businesses, making the technology both more accessible and more affordable.
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Policy 2 | Businesses call for buildings energy infrastructure initiative
A new report from Frontier Economics has said the creation of a comprehensive Buildings Energy Infrastructure Programme could decarbonise the UK’s buildings, strengthen the economy and contribute to meeting carbon and fuel poverty targets.
With the right policies in place, the report said buildings can become a key element of the UK’s energy infrastructure and the future clean economy. It estimated raising energy efficiency investment would lead to a net present value to the UK of £7.5bn. This would also bring 100,000 full-time skilled jobs across the country in the 2020s and provide clean growth opportunities, supportive of the Industrial Strategy.
Stimulating further investment and strengthening regulation in energy efficiency would also boost England’s efforts to its fuel poverty target for 2030, while accelerating progress in Scotland and Wales. It would contribute to ensuring the fourth and fifth Carbon Budgets, and the 2050 emissions reduction target, are met efficiently. This would reduce the need for more costly emissions reduction investment elsewhere.
The purpose of the Buildings Energy Infrastructure Programme would be to leverage the needed investment to achieve the cost-effective energy saving potential by 2035. The public investment required would average £1.7bn per year between 2018 and 2030. Frontier said this would be over double the current levels of public investment seen under the Energy Company Obligation.
The report set out an action plan for a Buildings Energy Infrastructure Programme to improve the energy performance of the building stock. It recommended a raft of different policies to implement, including different standards, incentives and partial grants. These, it said, were designed to catalyse £3.9bn of private investment each year up until 2035.
Specifically, the report called for new public investment at a cost of £1.3bn per year to 2030. This would include a 50% capital subsidy for council housing and housing association homes to upgrade their properties to an energy performance C rating, and a 33% capital subsidy for achieving an energy performance C rating for private landlords’ properties which are let to low income tenants.
New incentives would include a revenue neutral adjustment to the Stamp Duty regime. This adjustment would reward higher energy performance through a lower charge. Therefore, it would incorporate energy performance into property values. Another recommendation was a renewed Landlords Energy Saving Allowance for energy upgrades of properties. The report said these new incentives to drive investment should be led by the Treasury and have a budget of £0.4bn a year to 2035.
In terms of a stable regulatory environment, the report called for the minimum energy performance standard in the private rented sector to be increased from E to D from 2025.
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Policy 3 | Defra confirms emissions restrictions for medium plants
The Department for Environment, Food and Rural Affairs (Defra) has issued a clarification after a number of enquiries relating to restrictions under the Medium Combustion Plant Directive (MCPD).
The MCPD brings in emission controls for combustion plants in the 1-50MWth range, aiming to deliver a cost-effective improvement in air quality. In July, Defra confirmed generators with Capacity Arrangements from 2014 and 2015 Capacity Market auctions will be included in transitional arrangements (Tranche A). Tranche A generators have to comply with standard permit conditions only when their agreement comes to an end.
The clarification said that Tranche A generators will stop being classed as Tranche A and move to Tranche B, if they were to enter into a new capacity market agreement or balancing services agreement after 31 October 2017 – and that agreement remains active until after 31 December 2018.
The implication is that any generator that signs up to the upcoming T-1 and T-4 capacity market auctions will lose their transitional arrangement status, making them a Tranche B generator. Tranche B generators are subject to stricter obligations and do not benefit from transitional arrangements.
Defra said without this provision, Tranche A generators would have a competitive advantage over Tranche B generators when bidding for new agreements.
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Policy 4 | Scottish government supports fracking ban
The Scottish government has announced that it will not support the development of unconventional oil and gas in Scotland, effectively imposing a ban on fracking.
Minister for Business, Innovation and Energy Paul Wheelhouse announced on Tuesday, 3 October that a consultation on unconventional oil and gas received 60,000 responses, of which 99% were opposed to fracking. The government said that those opposed to fracking had: emphasised the potential for significant, long-lasting negative impacts on communities, health, environment, and climate; expressed scepticism about the ability of regulation to mitigate negative impacts; and were unconvinced about the value of any economic benefit or the contribution of unconventional oil and gas to Scotland’s energy mix.
A parliamentary vote on the ban will take place in the near future, followed by a Strategic Environmental Assessment.
Wheelhouse said: “Having taken account of the interests of the environment, our economy, public health and the overwhelming majority of public opinion, the decision I am announcing today means fracking cannot and will not take place in Scotland.” He added: ““It is clear that people across Scotland remain firmly opposed to fracking – this government has listened and taken decisive action.”
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Industry 1 | Government statistics show energy records being broken
The government’s latest Energy Trends reports, published on Thursday, 28 September, have revealed a record-breaking quarter – with coal and renewables generation hitting new lows and highs respectively.
The figures revealed that coal’s share of generation fell from 5.9% in Q2 2016, to a record low of 2.1% in Q2 2017. This was attributed to a low-demand for coal fired electricity generation. In stark contrast, renewables’ share of electricity generation hit a record 29.8% in Q2 2017. The report said that this reflected both increased wind capacity and wind speeds, alongside lower overall electricity generation.
Renewable electricity generation was 22.5TWh in Q2 2017, an increase of 13.6% on the 19.8TWh generated over the same period in 2016. Renewable generation capacity stood at 38GW at the end of the quarter, a 13.2% increase (4.4GW) on the year before, with over half of the annual increase coming from onshore wind.
When nuclear output is factored in, low-carbon electricity’s share of generation also reached a record level of 53.4%. Meanwhile, while gas saw imports fall 17.3%, exports grew by 49% to 41.8TWh marking the highest quarterly level since 2011, because of the suspension of injection to the Rough gas storage facility.
Total primary energy consumption for energy uses fell by 3.6%. However, when corrected for weather, this decrease became 1.9% - another record low. Temperature adjusted final energy consumption (excluding non-energy use) fell by 0.7% compared to the second quarter of 2016, with industrial consumption rising.
Total gas demand was 7.6% lower than in the second quarter of 2016, driven by a fall in use by electricity generators and warmer weather, whilst electricity consumption fell 3.9%. Of all electricity generated in the quarter, gas accounted for 41.3%, while nuclear accounted for 23.6%.
BEIS also looked at non-domestic gas and electricity prices. It was found that between Q2 2016 and Q2 2017, average electricity prices in cash terms (excluding the costs of the Climate Change Levy (CCL)) rose by 3.6%. Apart from a fall of 3.7% in the extra-large consumer band (those with a consumption of over 150,000MWh) prices for all other consumer bands increased. The average price including the CCL increased by 3.1%.
Over the same period the average price of gas (excluding the CCL) fell by 5.4%. An increase of 13% was seen in the very large band (those with an annual consumption of between 277,778MWh and 1,111,112MWh), while those in the medium consumer band (2,778MWh-27,777MWh) saw an increase of 1.1%. All other bands decreased. The average price including the CCL fell by 5.4%.
Industry 2 | Powerhouse 2050 report gives energy recommendations for the North
A report by the Northern Powerhouse Partnership has suggested that the North can be world-leading in four specific areas, including energy, and has suggested a number of energy projects that could help to tackle the productivity gap in the North.
These include a £2bn project to replace the entire gas networks of Leeds with hydrogen, produced in the Tees Valley, which the Partnership said would significantly contribute to the UK’s 2050 and Paris Agreement targets. It also proposed spending £1bn to create a new Northern industry in small nuclear reactors. The Partnership said that while the report called for government funding, there would also be a need for businesses to invest and support these, and other initiatives.
Andy Koss, CEO of Drax Power commented: “The North is uniquely placed to deliver the UK’s energy needs. There are huge opportunities for us as a region – not just in terms of potential jobs and the economic benefits, but also the positive environmental impacts associated with decarbonisation.”
Industry 3 | Universities off track to hit 2020 emissions targets
A report by Brite Green has found that universities in England have achieved their best year-on-year reduction in carbon emissions to date, but they are still not on track to meet their 2020 targets.
The report found that if emissions continue to fall at their current rate, English universities will achieve a 13% reduction by 2020 – based on a 2005 baseline. This will be a notable shortfall on the target set by the Higher Education Funding Council for England (HEFCE) of 43%.
Brite Green found that total emission for English universities fell by 7% in 2015/16 to 1,695,557tCO2e, a marked improvement of the 10% reduction seen over the past 10 years. The sectors total emissions have now fallen by 17% compared to 2005. Of the 127 universities analysed, just 52 were found to be on track to meet or exceed their targets.
The 20 Russell Group universities account for more than half of total sector emissions. However, only two were on track to meet their emissions reduction targets: The University of Leeds and the University of Birmingham.
The report called for universities to undergo a robust reviewing process of current performance to realise the need for improvement. With these areas then identified, it would lead to accelerated reductions during this progress, the report explained. It also called for universities to collaborate and benchmark against peers to promote best practice, as well as upgrading management strategies to integrate sustainability initiatives.
