Contents:
Week in Energy
Policy updates:
- BEIS sets out details of upcoming energy security auctions
- Government urged to outline post-Brexit nuclear future
- New BEIS committee chair announced, as Brexit energy security inquiry launches
- Government awards innovation funding for vehicle-to-grid projects
Industry updates:
- National Grid finds new technology to have major impact on GB energy system
- Major businesses join renewables initiative
- EIB provides green energy loan to Welsh Water
Week in Energy
Monday 10/07 – Media reports suggest the government faces a growing rebellion of backbench Conservative MPs over the decision to withdraw from the Euratom treaty. Citizens Advice research finds in a system with increased capacity costs, electrified heat and transport and/or the adoption of smart home appliances, Time of Use tariffs could have a value in the range of £150-250mn a year.
Tuesday 11/07 – The House of Lords EU energy and environment sub-committee launches a new inquiry into Brexit energy security. The Climate Group’s RE100 initiative confirms it has reached its milestone of 100 members, three years earlier than expected. Analysis carried out by the European Environment Agency (EEA) finds the UK had the largest number of large polluting facilities (14), such as coal-fired power stations in the EU in 2015.
Wednesday 12/07 – Oxford University Economist Dieter Helm will be selected to carry out the government’s review into the cost of energy in the UK, according to The Guardian. Former Shadow Work and Pensions Secretary Rachel Reeves is elected as Chair of the Business, Energy and Industrial Strategy Select Committee. Businesses are invited to apply for a share of £35mn of funding for projects which support the development of both low-carbon transportation and a UK supply chain.
Thursday 13/07 – The government reveals its Nuclear Materials and Safeguards issues position paper, revealing the UK wants to establish its own new nuclear safeguards regime and believes the UK and EU have a “strong mutual interest” in continuing nuclear cooperation. National Grid releases its 2017 Future Energy Scenarios, in which it says new technologies and evolving business models are rapidly transforming the sector.
Friday 14/07 – The Royal Academy of Engineering reports that biofuels have a role to play in meeting the UK’s commitments to climate change mitigation, especially so-called second generation biofuels made from wastes and by-products of other sectors.
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Policy 1 | BEIS sets out details of upcoming energy security auctions
Business and Energy Secretary Greg Clark has confirmed how much capacity the government is seeking to procure to guarantee energy security in future winters.
The government introduced the Capacity Market to provide an insurance policy against the possibility of future blackouts – for example, during periods of low wind and high demand – to ensure that consumers continue to benefit from reliable electricity supplies at an affordable price. Generators and demand-side response providers bid into auctions to offer their capacity, with the lowest cost options securing agreements. The full cost of this policy is recovered from Britain's electricity consumers – including businesses.
How much capacity will be procured was revealed on Friday, 7 July. The upcoming four-year ahead auction for 2021-22 will procure 50.1GW, with 400MW set aside, while the target for 2018-19 one-year ahead auction is 6GW, with 300MW set aside.
The figures were accompanied by the assessment of the independent Panel of Technical Experts (PTE). The PTE had been tasked with impartially scrutinising and quality assuring analysis carried out by National Grid for the purposes of informing policy decisions for the Capacity Market.
The PTE shared a slight difference opinion in the recommended capacity to procure. For the T-1 auction for winter 2018-19, it said security of supply could be met with no more than 6GW. While over 50GW had been recommended for winter 2021-22 in the T-4 auction, again PTE suggested volume need be no more than 50GW.
The PTE also found there are several potential energy sources that risk non-delivery. These include coal, embedded generation, battery storage ratings, and demand-side response. It came to the view that 3.6GW was an appropriate estimate of the maximum collective risk of non-delivery of contracted capacity.
The report made several recommendations, one of which was developing a derating methodology for energy storage. De-rating means that the supply is adjusted to take account of the availability of plant, specific to each type of generation technology. It reflects the proportion of an electricity source, which is likely to be technically available to generate at times of peak demand. Such a methodology should consider the size of the storage tank in relation to derating factors, the PTE said.
It further said National Grid should consider the extent to which distributed energy resources can incur lower network losses, and the possible implications of this for the estimation of de-rating factors. Distributed energy resources include embedded generation, energy storage and demand side response. It also called for improving data and providing access to the best available data on local embedded generation to be prioritised as a “matter of urgency”.
PTE also advocated National Grid taking a more proactive role in informing the public over the issues in maintaining security of supply. These would include the nature of risk and probability, as well as associated trade-offs.
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Policy 2 | Government urged to outline post-Brexit nuclear future
As Brexit negotiations slowly develop, the issue of Euratom has emerged as an increasingly pressing issue, as the nuclear sector looks for certainty in a post-Brexit world. Last week the Euratom treaty became the focus of Parliamentary scrutiny and media attention.
The European Atomic Energy Community – known as Euratom – regulates the nuclear industry across Europe. This involves safeguarding the transport of nuclear materials, disposing of waste and carrying out research. It aims to contribute to the long-term decarbonisation of the energy system in a safe, efficient and secure way. The nuclear sector is of importance to the GB energy sector, contributing 21.2% of total electricity supplies in 2016.
When the UK first gave notice to leave the EU, it also gave notice that it would withdraw from the Euratom treaty, as both are governed by the same EU Institutions. However, there have been widespread calls for the UK government to revisit its decision to withdraw from Euratom. Media reports suggested a “growing rebellion” of backbench Conservative MPs against the decision to withdraw.
The government has moved to reassure it will avoid any “cliff edge” scenario when defending its position on Euratom. BEIS minister Richard Harrington, speaking during a parliamentary debate on Wednesday, 12 July said the government was working to ensure there would be minimal impact when the UK withdraws from the treaty. Harrington said: “Nobody doubts the UK’s credentials as a responsible nuclear state, and everyone in the UK and elsewhere is keen to see that continue.” The “cliff edge” scenario refers to leaving Euratom without any replacement in place. Should such a situation arise, then British power stations may not be able to source nuclear fuel if unable to legally transport it across borders, while research projects with European workers would face uncertain futures – due to Euratom’s separate guarantees of freedom of movement.
If the UK leaves the treaty, it is faced with coming to new arrangements over all of these issues, something Harrington stressed was being done. Harrington said the government had opened negotiations with the EU and was talking to third countries about bilateral agreements, as well as the IAEA. The government revealed its position in its Nuclear Materials and Safeguards Issues paper, released on Thursday, 13 July, stating the UK and EU have a “strong mutual interest” in continuing nuclear cooperation. It suggested the UK could take ownership of fissile material and Euratom equipment upon leaving.
The nuclear industry’s trade association the NIA commented: “While containing very little detail, the UK government’s position paper demonstrates the complexity of replicating Euratom arrangements in UK regulation and co-operation agreements with third countries which the industry has warned of. Government must therefore make the need for transitional arrangements its starting point in negotiations. Failure to do so will risk precisely the disruption the government state they want to avoid. It remains the UK nuclear industry’s view that retaining Euratom membership will best serve the national interest.”
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Policy 3 | New BEIS committee chair announced, as Brexit energy security inquiry launches
Labour MP Rachel Reeves has been elected the new chair of the House of Commons Business, Energy and Industrial Strategy (BEIS) Committee.
Select Committees check and report on areas ranging from the work of government departments to economic affairs. The results of these inquiries are public and many require a response from the government. Reeves had been on the Business, Innovation and Skills Select Committee when serving as Shadow Pensions Minister, before it was disbanded to create the BEIS committee in July 2016. Reeves will formally take up her position as chair once remaining members of the committee have been named by the House of Commons.
Reeves’ appointment follows the House of Lords EU energy and environment sub-committee launching a new inquiry into Brexit energy security on 11 July.
The inquiry is intending to highlight the issues the government must consider when developing a new energy relationship with the EU “to ensure secure, affordable and sustainable energy”.
It will look to gather views on membership of the Internal Energy Market, interconnection with the EU, energy arrangements with Ireland, implications of withdrawing from the European Atomic Treaty (Euratom) and investment in energy infrastructure and research.
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Policy 4 | Government awards innovation funding for vehicle-to-grid projects
BEIS announced on Saturday, 8 July a new £20mn government investment fund to develop electric vehicles which are capable of returning electricity to the grid.
BEIS believes that the new technology has the potential to bring significant benefits to drivers of electric vehicles as well as creating more flexibility in the energy system as the transition to a low carbon economy continues.
The investment aims to support vehicle-to-grid projects looking at:
- Feasibility studies on how the technology could be used in the future
- Experimental research or product development, and;
- Demonstrator trials investigating the logistical viability of the technology in different locations
The competition process will open in the next few weeks, with the winners to be announced in December and projects commencing in 2018.
Simon Edmonds, Manufacturing and Materials Director at Innovate UK, said: “These competitions present ground-breaking opportunities for UK businesses to develop the next stage of vehicle to grid products and services. The potential of these technologies are huge, both for businesses and consumers.”
Industry 1 | National Grid finds new technology to have major impact on GB energy system
National Grid published its Future Energy Scenarios on Thursday, 13 July, stating that “we are in the midst of an energy revolution.” The document sets out National Grid’s views on how the changing economic and technological landscape will impact the energy sector out to 2050.
It has created four energy scenarios based on the so-called energy trilemma; the need to ensure affordable and sustainable energy whilst maintaining the security of supply. The different scenarios vary according to global prosperity and focus on environmental goals. The optimum scenario is identified as Two-Degrees, which sees significant focus on achieving carbon reduction targets by 2050, as well as a favourable economic climate.
National Grid stated the ongoing disruption caused by the UK’s changing energy mix as a significant risk going forward. The growth in distributed and renewable generation is set to continue, bringing with it increased management complexity. For example, in the Two-Degrees scenario, renewables could account for 60% of installed capacity and, under the Consumer Power scenario, up to 50% of energy generation could be coming from distributed sources. The report concludes that to meet these challenges, it will be essential to develop more responsive and flexible balancing products and services.
Electricity storage has the potential to grow quite rapidly by 2050, especially if used in combination with demand-side response (DSR) programmes. The report found that significant investment is required to maximise the utility from both storage and DSR. It suggested that projects co-locating storage and generation assets should be encouraged to optimise the benefits of storage technology.
The increased uptake of electric vehicles (EVs) was highlighted as a risk, alongside growth in air conditioning usage. Both technologies alter the overall demand for electricity as well as the national demand profile. Predictions suggest that there could be 1mn EVs on the country’s roads by 2020, growing to 9mn by 2030. This could mean that peak demand will be 25% higher in 2050 than it is now, with clusters of intensive demand in urban settings. To support this transition to EVs, and in part to encourage it, National Grid states that there needs to be clear policy on EVs as well as investment to create the necessary infrastructure. The report found that more work is needed to identify how consumers with EVs could be incentivised to charge their vehicles at off-peak times, including smart-enabled charging.
The Future Energy Scenarios also covered the decarbonising of heat, for both homes and businesses. The report argued that in order to meet 2050 carbon reduction targets, the decarbonisation of heat needs increase in pace. Whilst it sees a role for natural gas in heating for the foreseeable future, National Grid predicts the growth of electricity for heating via the increased uptake of heat pump technology. It also suggested that hydrogen could be used in place of natural gas, although it acknowledged the commercial viability of this is yet to be proven.
Overall the report focuses on the need for increased flexibility on the energy networks and the early investment in new infrastructure to ensure the trilemma can be achieved.
Industry 2 | Major businesses join renewables initiative
The RE100 initiative of influential businesses committing to using 100% renewable electricity reached its 100-member milestone on Tuesday, 11 July.
The initiative is run by The Climate Group in partnership with the Carbon Disclosure Project and aims to facilitate the large-scale transition to a low-carbon economy.
When it launched in September 2014, the group was comprised of 13 companies but has since grown to include members from a variety of corporate backgrounds ranging from telecommunications and banking to clothing and food.
The group now incorporates some of the world’s biggest mega-corporations such as Google and Unilever. The latest signatories include AkzoNobel, AXA, Burberry and the Carlsberg Group.
RE100 estimates that the cumulative annual electricity demand of its 100 members is around 146TWh; equivalent to the annual electricity demand of Poland. It argues that this gives real momentum to the transition to a low carbon economy, with more than half of its 100 members aiming to go 100% renewable by or before 2020 – and several having already achieved this goal.
Dominic Waughray of the World Economic Forum praised the RE100 achievement, saying: “Reaching the milestone of 100 companies that have committed to 100% renewables and joined RE100 shows the potential for business to lead, and collectively shift markets to a more sustainable future.”
Industry 3 | EIB provides green energy loan to Welsh Water
Welsh Water announced on Friday, 7 July that it has been awarded a £250mn loan facility from the European Investment Bank (EIB) to help it to further expand its onsite renewable energy generation capacity.
The company currently generates enough renewable electricity to power 20% of its operations, through a combination of wind, hydro, solar and anaerobic digestion. It will be using the loan to increase its generation capacity to cover 30% of its operations by 2019.
The loan will allow Welsh Water to invest in new energy generation assets, including the UK’s first project to inject bio-methane gas into the national gas distribution network and the development of an advanced anaerobic digestion plant which creates energy from the waste collected during water treatment processes.
Jonathan Taylor, EIB Vice President, said: “Welsh Water is showing the world how investment to improve wastewater treatment can harness renewable energy from diverse sources. Pioneering innovation such as this is crucial to cut emissions and ensure that companies can contribute to climate action.”
According to its sustainability strategy, Welsh Water is aiming to halve its greenhouse gas emissions by 2035 against 2010 levels.
