Monthly Archives: April 2020

The body representing the UK’s electricity and gas transmission and distribution sector has set out its plans for reaching net-zero by 2050, concluding that this ambition will only be achieved if a “whole-systems” approach to transformation is adopted.

In its Energy Networks Innovation Strategy, the Energy Networks Association (ENA) lists the net-zero transition as a key theme around which current and future innovations must be centred.

The ENA praises policymakers and businesses across the utilities sector for investing in green innovation, noting that 1,100 grid innovation projects were underway as of the end of March. Among these projects are the UK’s first grid-injected hydrogen trials, currently underway at Keele University, virtual power plants in Yorkshire and West Sussex and the Social Constraint Managed Zone, whereby businesses have partnered with fuel poverty charity National Energy Action to provide low-income homes with the ability to sell flexibility services to the grid.

But the ENA ultimately concludes that broader, more rapid and more joined-up action is needed if Great Britain’s energy and gas networks are to align with the UK’s long-term climate targets while addressing consumer vulnerability and preserving energy security.

In the electricity sector, the Innovation Strategy states, priority in the coming years must be given to bringing more low and zero-carbon generation onto the grid – enough not just to meet current needs, but future demand, which will rise significantly as sectors such as heat and transport are electrified. This uptick in generation must be matched with investment in technologies which enable smart and flexible systems, such as large and small-scale energy storage and other demand-response methods, optimised by technologies such as artificial intelligence (AI).

Aside from these measures – which have all been repeatedly urged before by various corporates in the energy sector and by industry bodies and think-tanks – the ENA is calling on businesses to research the operational impact of long-duration reserve services, which would need to become more commonplace as the electricity mix shifts in favour of renewables.

Electricity firms should additionally collaborate with gas firms, policymakers, academics and other bodies to co-create a national methodology for calculating the cost of carbon, the ENA recommends.

Life’s a gas

In the gas sector specifically, the ENA is recommending that businesses begin “actively developing” networks and products which are both hydrogen-ready and capable of supporting a broader array of green gases.

The Committee on Climate Change (CCC) has repeatedly advised that hydrogen is a necessity, not an option, for decarbonising heat and transport in line with the UK’s net-zero target.

But the global and domestic clean hydrogen industries, a recent Bloomberg NEF analysis concluded, are “tiny”, and will need significant long-term support from business and policymakers. Moreover, the analysis found, such support must frame hydrogen as only one piece of a wider decarbonisation puzzle, rather than a “silver bullet” for all emissions.

To that end, the ENA is calling on businesses to develop not only the technologies but the market mechanisms needed to enable the clean energy transition in the gas sector. Policymakers will need to see evidence that the transition can ensure resilience and reliability, without dramatically increasing costs for consumers, the Strategy states. Moreover, sector coupling with industries such as the built environment and transport must be considered.

All of the ENA’s calls to action are ultimately underpinned by recommendations for implementing a whole-systems approach, in which ambition and action gaps are not allowed to widen. In order to shift to this approach, gas and electricity companies alike must collaborate on solution development and scaling; the creation of cost-benefit analyses; the development of regional plans and forecasts; and improving access to and visibility of data.

ENA chief executive David Smith said all recommendations have been drafted “following extensive consultation with a range of different groups across Britain’s energy sector”, making them ambitious yet achievable.

“From connecting ever greater levels of renewable energy to finding the new solutions we need for decarbonising heat and transport; our energy network infrastructure is already at the centre of delivering a world-leading net-zero economy,” Smith said.

“That role is set to grow, as that infrastructure takes on new responsibilities to deliver decarbonisation. We need to ensure our network infrastructure is future-ready, that our approach is transparent and accountable and that it is focussed as much on local needs as it is on national ones.”

On 10 January 2020 the Authority published a notice of proposal to issue a final order on Euston Energy Ltd (“Euston”) in accordance with section 26 (1) and (2) of the Electricity Act 1989 and section 29 (1) and (2) of the Gas Act 1986.

The Authority had been in discussions with Euston regarding the requirement to become a DCC User (as defined in standard licence conditions 42.11 and 48.11 of the gas and electricity supply licences respectively).

Standard licence conditions 42.8 of the gas supply licence and 48.8 of the electricity supply licence require licensees to become DCC Users by 25 November 2017. As highlighted in the Authority’s open letter from December 2017, those suppliers who entered the market following the 25 November 2017, should not exit Controlled Market Entry (CME) without being a DCC user.

The particular behaviour of concern giving rise to the proposal to make a Final Order was that Euston failed to become a DCC User by the deadline and remains non-compliant. By failing to be a DCC User in accordance with the licence condition, its existing customers with smart meters are suffering harm because they do not have smart meter functionality. There will also be harm to customers who will lose their smart functionality on switching to Euston.

Representations or objections with respect to the proposed final order were invited to be made to the Authority by 10am 3 February 2020.

Euston made written representations on 3 February 2020. The Authority has noted the representations received from Euston in the context of the consultation undertaken pursuant to section 26(1) of the EA89 and section 29(1) of the GA86. The Authority notes the progress Euston has made to becoming a DCC User since leaving CME and that Euston anticipates becoming a DCC User before the end of March 2020. However, the fact remains that Euston is not compliant with the Relevant Condition despite the fact that Euston should have been compliant before exiting CME.

Therefore, on 6 March 2020, the Authority made the final order, pursuant to section 25 (1) of the Electricity Act 1989 and section 28 (1) of the Gas Act 1986, requiring Euston:

• to become a DCC User by no later than 31 March 2020;

• not to acquire any new customers or add any customer accounts by upgrading to dual fuel from the date that the Final Order is made until Euston can demonstrate that it is a DCC User.

As soon as Euston becomes a DCC User, the sales ban will be lifted and the Authority will begin the process of revoking the final order.

On 1 April 2020, the Authority received satisfactory evidence from The Smart Energy Code Administrator and Secretariat (SECAS) that Euston had completed all the required steps to become a DCC user and had therefore met the requirements set out in the Final Order for it to be able to acquire new customers and add new customer accounts by upgrading to dual fuel.

On 9 April 2020, the Authority published its notice of proposal to revoke the Final Order imposed on Euston on 6 March 2020. The Authority was satisfied that the Final Order should be revoked because Euston became a DCC User on 1 April 2020 and is therefore compliant with standard licence conditions 42.8 of the gas supply licence and 48.8 of the electricity supply licence.

The Authority gave this notice in accordance with section 26(6) of the Electricity Act 1989 and section 29(5) of the Gas Act 1986. Any representations or objections with respect to the proposed revocation are to be made to the Authority by 5pm on 8 May 2020.

The owner of British Gas has replaced its chairman and ousted its outgoing chief executive with immediate effect amid deepening financial woes.

Centrica has appointed its chief financial officer, Chris O’Shea, as the interim chief executive while its new chairman, Scott Wheway, hunts for a permanent replacement.

Wheway replaces Charles Berry, who is stepping down from the board after taking medical leave last month.

Centrica’s outgoing chief, Iain Conn, had expected to remain in his role until a permanent replacement was found. He agreed to leave the company last summer as it swung to a loss for the first half of 2019 and slashed shareholder payouts.

The decision to hasten his exit comes weeks after Conn revealed a £1bn loss for the full financial year, and the lowest ever revenues from the British Gas business.

It marks the end of a difficult five-year tenure for Conn in which the supplier struggled against rising competition in the energy market and a government cap on prices.

The new leadership team is expected to face a difficult financial situation after the collapse of global oil prices and ongoing market gloom caused by the coronavirus pandemic. Those challenges have already pushed the market value of the biggest UK energy supplier to its lowest levels since Centrica was formed in 1997.

Wheway said: “I’m acutely aware that I’m taking this role at a time when we need to navigate our way through the current volatility caused by the impact of coronavirus. Protecting our employees and customers is a priority for us, particularly those who are vulnerable.”

He said Centrica would remain focused on “structural simplification”, improving its efficiency and growing its customer-facing businesses. “I will immediately be concentrating on completing the search for a CEO for Centrica, which includes both internal and external candidates,” he said.

Centrica was forced to write off £476m against its North Sea oil and gas business, Spirit Energy, last year after oil prices fell to an average of $64.36 (£53.17) a barrel from an average of $71.34 a barrel in 2018.

In recent weeks oil prices have plunged, and remained at a four-year low of just below $30 a barrel on Tuesday. The drop threatens to derail Centrica’s plans to sell the North Sea business as part of its financial turnaround plan.

The company had expected to receive bids for its 69% stake in Spirit Energy by the end of this month, but an industry source said it would not be possible to determine its value during the current market volatility and the bidding “would most likely be delayed”.

Centrica is also in talks with a consortium of investors to sell its stake in the UK’s nuclear power reactors, a process which could also be delayed by the macroeconomic impact of Covid-19 and ongoing technical trouble at two of the reactors.

The share price of the FTSE 100 energy firm – which is supported by an army of small shareholders – has tumbled to below 40p, the lowest price in more than 20 years and around one tenth of its value in 2013.

Around 1.5 million individuals bought shares in British Gas for 135p when it was first privatised in the late 1980s after the “Tell Sid” campaign. About 600,000 individuals continue to hold shares in Centrica, which became the supplier’s parent company a decade later.

The company has been considered a takeover target by industry analysts for years because of the steady decline of its share price, and its latest financial woes have reignited concerns over its long-term future.

Wheway also thanked Conn for his “continued commitment and resilience in the face of unprecedented challenges during his tenure as CEO … The board wishes Iain well and thanks him for his contribution.”