Week in Energy
Monday 18/09 – Prime Minister Theresa May reconfirms the UK’s commitment to a phase out of coal by 2025. BEIS establishes a taskforce of senior financial experts to accelerate the growth of green finance and the UK’s low-carbon economy. A report commissioned by the Liberal Democrats argues that the current UK target of reducing emissions by 80% by 2050 is not in line with the Paris Agreement.
Tuesday 19/09 – Lawrence Slade, Chief Executive of Energy UK sets out the 10 key priorities for the energy industry that should be considered as part of the Helm cost of energy review. A study by the University of Edinburgh finds the Scottish and UK oil industries could be entering their final decade of production. The Scottish government provides £1.8mn of grant funding to support the creation of Scotland’s first deep geothermal district heating network.
Wednesday 20/09 – The Commons Business, Energy and Industrial Strategy Committee announces an inquiry into the implications of leaving the EU for British business, starting with the civil nuclear sector. Research by TheCityUK and Imperial College Business School argues the UK should seize the opportunities presented by its position as a leading centre for green finance.
Thursday 21/09 – The government invites businesses to apply for a share of £20mn to support development of technologies that would allow a range of vehicles to be zero emission. The Business, Energy and Industrial Strategy Committee announces an inquiry on electric vehicles, in terms of their impact on the electricity grid.
Friday 22/09 – An audit by Newcastle University of the offshore renewable energy industry in the North of England and Scotland demonstrates the strong contribution the region makes to the UK's position as a global leader in innovation in offshore renewable energy. Scottish Energy Minister Paul Wheelhouse says it is vital for the UK government to "get on board" with carbon capture and storage and set out how it could support the technology.
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Policy 1 | Renewables freeze could cost consumers £2.6bn by 2025
The Green Alliance has urged the government to close the clean power gap and spare consumers added costs in a new report.
Published on Wednesday, 13 September, the research explained the UK had suffered a "policy freeze" on renewable energy. Between 2017 and 2020, there is forecast to be a 95% fall in investment, it predicted. This will push the UK off track when it comes to meeting its climate targets. The research also revealed there is a queue of 65TWh of renewable power waiting to be developed. This equates to around 20% of UK energy demand and could be built for less than the cost of gas plants.
The Green Alliance warned that if the government continues to hold back clean power, then it could end up costing energy users £2.6bn by 2025, compared to the alternative of building gas plants. In contrast, continuing to build renewables and pursue energy efficiency measures could save consumers up to £5.3bn a year by 2030.
It urged the government to hold clean power auctions as this would enable renewables to scale up quickly before 2025. It explained a total of £1.7bn in auction spending would be needed by 2025 – requiring an additional £970mn on top of the £730mn the government has already committed.
The report highlighted that nuclear and tidal plants have been pushed back to the late 2020s, and could yet be delayed further, while renewables deployment is restricted by policy. New onshore wind is currently curtailed by planning guidelines, while large-scale solar power was last allowed to participate in a renewables auction in early 2015. No auctions taking place in 2016 were said to explain a slowdown in offshore projects in the early 2020s. Meanwhile, the 2017 "Contract for Difference" auction spent less than two-thirds of the available budget for offshore wind. This was despite offshore wind being at its lowest cost ever.
Offshore wind delivered a price far lower than had been predicted, and the report said it could deliver almost half of the necessary new low carbon generation required in the 2020s at half the cost of existing plans. To do so, the Green Alliance said offshore wind would have to grow from 10% to 30% of electricity supply between 2020 and 2030. This would require government to use the £730mn it has committed for clean power auctions, rather than restricting them. The government should also commit a further £250mn, the report said. This was due to a consistently higher wholesale price and falling levelised costs meaning doubling offshore wind generation will only cost £110mn after 2025. This makes it the cheapest option.
The report also said the government can meet carbon targets for the power sector without major investment in conventional nuclear plants after Hinkley Point C. It said cheap renewables will increasingly shape the space for other power sources. To maximise their benefit will mean ensuring low or zero carbon flexibility is available. This is something nuclear designs are not intended to offer currently – making them vulnerable to low cost renewable competition. If the government continues backing nuclear, the Green Alliance said it should ensure future nuclear is cheap and flexible enough to support a high renewables future.
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Policy 2 | Energy UK calls for faster EV rollout in new report
In the first of a series of reports from Energy UK on electric vehicles (EVs), the trade association called for an acceleration in the infrastructure and support required to faster progress the rollout.
Published on Wednesday, 13 September, the report made a series of recommendations including proposing a regulatory framework which provides certainty for future investment and support, more support for innovation and the ability to share data usage, developing smart changing arrangements to manage demand, and backing solutions which ensure benefits, ease of use and freedom for EV owners.
It clarified its stance, explaining that while it applauded the government committing to a 2040 deadline for halting sales of polluting vehicles in the UK, the rate of growth of EV sales and increasing number of manufacturers moving to low-carbon vehicles meant it was time for reforms. Energy UK called for the government to move forward with a tangible timeline for continued growth. It also called for the government to ensure measures are developed to enable the industry to contribute to the UK’s economic growth.
Energy UK explained the industry sees EVs as key to achieving the UK’s climate change and air quality targets. They are also seen as critical for the creation of a holistic framework for a smart flexible energy system.
By speeding up progress, the UK can sooner capitalise on a future where the full benefits of EVs are realised, the report explained. Such benefits could include "large much needed geographically distributed energy storage capacity". This was something that mass uptake of EVs could provide the energy system with, the report said. This could also see a large number of customers engaged to participate in the provision of grid flexibility services, boosting grid stability plus providing financial benefits.
The report also addressed how to mitigate risks associated with concerns networks may have over risks to the energy grid presented by electric vehicle uptake through smart charging arrangements. It said it would be key to consider how to ensure smart charging solutions can be utilised alongside smart meters. Energy UK explained there would be a risk early adoption of a single smart charging solution could only be used for a short period of time before a lack of interoperability and innovation leads to issues, when considering the smart meter rollout.
Chief Executive of Energy UK, Lawrence Slade, labelled EVs as the "perfect catalyst" for a smarter grid that cuts emissions and empowered consumers.
Slade said: "However, the full integration of electric vehicles into UK’s energy infrastructure is a challenge that demands a ‘whole system’ approach. It requires ambition, close cooperation across several sectors and a vision that is based around empowering and benefitting the consumer."
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Policy 3 | BEIS plans to accelerate growth of green finance
The government has launched a new taskforce as it seeks to build on the UK’s global leadership in green finance, as part of the low-carbon transition.
The taskforce, unveiled on Monday, 18 September, will be made up of senior financial experts. It will look to accelerate the growth of green finance which, the government said, relates to private sector investments in technologies, infrastructure and innovative start-ups that can create jobs and allow businesses to expand. These can also boost economic growth as well as reduce greenhouse gas emissions.
The government explained that the green finance market will have to go "even further" to meet climate change commitments, despite the green finance agenda gaining global momentum in recent years. It said an estimated $13.5tn would be required in the energy sector alone, between 2015 and 2030, to meet Paris targets. The government added that it recognised much of this will have to come from the private sector.
Commenting on the announcement, Climate Change Minister Claire Perry said: "Britain has already shown the world that a strong economy and efforts to tackle climate change can, and should, go hand in hand. Now is the time to build on our strengths and cement our position as a global hub for investment in clean growth.
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Policy 4 | DNOs see reduction in allowed revenues
Ofgem has confirmed that the allowed revenues of some of Britain’s electricity distribution network operators (DNOs) will be reduced by a total of £205.85mn following a review of performance in their previous price control (2010-2015).
In a statement issued on Friday, 15 September Ofgem said that the review had assessed how much the DNOs had spent over the price control and what outputs they had delivered. It added that the reduction in allowances will result in lower charges on energy bills during the current RIIO (Revenue=incentives+innovation+outputs) electricity distribution price control (2015-2023).
Electricity demand was significantly lower than expected in the 2010-15 price control, meaning some DNOs did not need to spend as much as expected on reinforcing their grids. Ofgem therefore reduced allowances by a total of around £74mn across some of the distribution networks of Western Power Distribution (WPD), Scottish Power, UK Power Networks (UKPN) and SSE.
Some DNOs also cancelled a number of major investment projects (individual schemes worth £15mn or more), and have spent less than expected on others where they found better ways to complete the work. This led Ofgem to reduce allowances by a total of around £130mn across WPD’s East Midlands network and two of UKPN’s networks.
Industry 1 | Corporate leaders say legislation needed to improve resource productivity
A report by The Prince of Wales’s Corporate Leaders Group (CLG) has found that leading European businesses are adopting new business models that deliver greater resource productivity and reduce waste. However, it added that European Member States urgently need to introduce policies to support and accelerate this transition and maximise the potential economic benefits.
The researchers interviewed 14 companies from a number of sectors to find out their experiences and motivations for transitioning towards a business model that delivers greater resource productivity. All of these companies were found to be changing the way in which they operate in a number of ways, such as: redesigning value chains and products to use less materials and last longer, choosing innovative bio-based materials over fossil-fuel based materials, and circling waste back into production processes. Several of the companies were found to be pushing towards renewables or targeting greater energy efficiency. With specific schemes including producing energy from waste material, channelling waste heat into a district heat network and installing energy efficient products. The CLG noted that the EU Commission estimated that waste prevention, eco-design, re-use and similar measures could lead to net savings of €600bn, or 8% of annual turnover, for businesses in the EU. It can also reduce annual greenhouse gas emissions by 2-4%.
The report found that there is a large and growing group of major businesses that are "extremely energised" by the opportunities of the circular economy. To date these efforts have only just begun to implement what is possible, and relatively few companies have been able to incorporate the most ambitious implications of how these approaches can substantially reduce material and energy use. However, more are expected to do so as the economic opportunities and the significant carbon reductions become more evident.
It was found that there are still systematic challenges slowing down progress, such as the perceived secondary materials market failure. All companies recommended increased harmonisation of EU regulations affecting waste definitions, treatment and potential reuse, as well as more sophisticated end-of-life landfill and incineration policies. Cultural changes, including consumer behaviour, were also found to be a challenge, with companies adopting many "nudge" policies to affect consumer choices. There was widespread agreement on the need for more effective EU policies to help companies overcome these barriers, The CLG said that governments can help support and accelerate the transition to a circular economy, guiding it towards the best impact on social and environmental goals.
Seppo Parvi, CFO of Stora Enso – one of the companies involved in the research – said: "For businesses looking to reduce their exposure to supply risks, enter new markets and reduce their carbon footprint, developing new business models based on renewable materials and circular economy principles can bring very real economic and brand benefits. However, stricter policies - for example new ´eco-design´ and public procurements requirements that drive the prioritisation of materials and services with a low carbon footprint - are much needed to catalyse a further market pull and consequently achieve wider societal benefits."
Industry 2 | More global companies commit to 100% renewable electricity
A range of companies have recently signed up to The Climate Group’s RE100 campaign, which commits them to sourcing 100% renewable power across their global operations by 2020.
It was announced on Tuesday, 19 September that Citi, JPMorgan Chase, Califia Farms, Jupiter Asset Management, The Estée Lauder Companies, Kellogg Company, DBS Bank and Clif Bar & Company had all joined the RE100 group. In an announcement that coincided with Climate Week NYC 2017 The Climate Group said that 110 of the world’s most influential companies are now generating demand for over 150TWh of renewable energy annually.
The RE100 initiative, launched in 2014, aims to showcase business action on renewables and encourage supplier engagement, while also working to address barriers that will enable many more companies to reap the benefits of going 100% renewable.
Helen Clarkson, CEO of The Climate Group, said: "This year’s Climate Week NYC is jam-packed with the best examples of corporate leadership – from cleaner, smarter energy choices through to ambitious commitments on electric transport. Companies joining RE100 recognise that renewable power is a smart business decision. Their leadership will help to shape energy markets away from fossil fuels and deliver on the Paris Agreement at speed."
Industry 3 | UK-Belgium interconnector begins installation
Nemo Link, the joint venture between Belgium’s system operator Elia and National Grid, has started laying the first 37 miles of double subsea cable between the UK and its French offshore section.
Elia announced that the cable was successfully pulled-in at the beach of Pegwell Bay in Kent, representing a key milestone for the project. The remaining 44 miles of double subsea cable will be installed in Belgium territorial waters during spring 2018. The interconnector is scheduled to be taken into use in early 2019.
The 1GW project will be the first electrical interconnector between the UK and Belgium. It will consist of subsea and underground cables connected to a converter station and an electricity substation in each country, which will allow electricity to flow in either direction between the two countries. When finished, Nemo Link will give both countries improved reliability and access to electricity and sustainable generation. The UK currently has 4GW of interconnectors, including a 2GW link to France and 1GW to the Netherlands. By the early 2020s the National Infrastructure Commission expects there to be approximately 11.3GW of interconnection between the UK and other countries.
Chris Peeters, CEO of Elia, said: "We are very excited that the project is progressing so well. Nemo Link […] is another step towards further European integration of the electricity grid. A well-integrated electricity grid is for the benefit of the consumers […] as it provides access to cheap, renewable energy anywhere in Europe and allows to export excess energy when necessary."