Carbon pricing, flexibility and scaling-up hydrogen: UK energy sector unveils net-zero innovation plans

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.”


Euston Energy Ltd, trading as Northumbria Energy: Final Order

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.


Energy UK asks government to enable payment holiday scheme

UK energy companies are asking the government to support a £100m loan scheme that will enable businesses and households affected by the Covid-19 coronavirus pandemic to take a payment holiday.

As reported by the Financial Times, energy industry trade body Energy UK has allegedly consulted with the UK Government to set up the programme, as the number of people cancelling their direct debit plans increases.

An Energy UK spokesperson said: “We have been in contact with the Government, Ofgem and Citizens Advice on what actions, protections and practical steps suppliers can take to support customers during these challenging times. Suppliers will be doing all they can to identify customers in vulnerable circumstances and provide support where possible on a case-by-case basis.

“On behalf of the industry, we have been also having discussions with the Government to explore if any additional financial support could be required to help these customers over the coming months.”

The plan would be for the government to lend money to energy suppliers that will repay once customers resume their payment plans.

The UK Government had already put in place a set of financial measures to help the economy during the pandemic, unveiling on 17 March its plan to give out £330bn in loans to businesses.

As reported by the Financial Times, the Department for Business, Energy and Industrial Strategy said: “We have been clear we will do whatever it takes to get us through this pandemic and have put in place an unprecedented package of support for businesses, including £330bn of loans and guarantees and paying 80 per cent of the wages of furloughed workers.

“We continue to engage with the energy sector to understand how suppliers and their customers could be further supported.”

The energy sector has already set up contingency plans to help customers during the pandemic.

Energy UK chief executive Audrey Gallagher said: “The sector is very conscious of the potential consequences for customers confined to their homes for prolonged periods.

“In particular, customers in vulnerable circumstances and those on prepayment meters may need additional help and support with repayments or keeping meters topped up.”


Energy firms’ request for a bailout is rebuffed by ministers

Cash-strapped energy firms have been denied a state bailout amid concerns they could go bust if thousands of customers are unable to pay their bills.

Suppliers had sought a special taxpayer-backed rescue fund as British workers brace for economic hardship and businesses shut their doors – but the Government has refused to provide one and is instead directing them to a rescue loan scheme already on offer to other companies, emails show.

Last week, trade organisation Energy UK approached the Government to request its own loan scheme worth £100m a month which could be used to offer repayment holidays for struggling customers.

But energy suppliers have instead been told to rely on support already being made available more widely.

In an email to the energy suppliers, Dan Monzani, director of energy security at the Department for Business, Energy and Industrial Strategy (BEIS), said: “I would like to draw your attention to the business support measures announced by HM Treasury on March 17.

“We are aware that energy companies do not always think they are eligible when in fact you may be.”

The email then goes on to describe the range of support measures available to companies in the UK, including the Covid Corporate Finance Facility for the biggest firms and the Coronavirus Business Interruption Loan Scheme for smaller players.Small companies and the self-employed | Numbers to call

The Government has so far been reluctant to offer special assistance to individual industries, instead pointing to these £330bn lifelines.

But there is some concern among energy suppliers that vulnerable customers will not be able to pay for their gas and electricity in coming months if they are unable to return to work. The small business loan scheme has also faced criticism for being slow to deliver cash.

A number of suppliers have already seen some customers cancel direct debits, an early indication they are struggling to make payments.

A string of energy companies have large debts and virtually no safety net after several years of aggressively chasing new customers and charging ultra-low prices. 

Industry sources have said that some smaller, profitable energy suppliers are frustrated that large loss-making firms appear to be seeking ways to get a bailout without having to get their bank to approve a business plan. 

Doug Stewart, chief executive of provider Green Energy, said: “There should be no need for further intervention at present.

“The Covid-19 measures are not about supporting companies with poor business models.”Business Briefing Newsletter REFERRAL (Article)

Last week Energy UK requested that firms provide detailed information to support their claims that customers are falling behind. 

In a letter to the firms, BEIS thanked suppliers for providing evidence on potential risks. It appeared to leave open the possibility of further support by saying that the Government is still considering these cases.

One of the companies that originally approached Energy UK to discuss the bailout was Centrica, the owner of British Gas.

In a statement, the company said: “This is about supporting customers and our immediate focus is on supplying the country with the energy that will help it get through the coming months.

“This is not about propping up financially weak and unsustainable energy supply companies.”

A spokesperson for BEIS said that Government had put in place an “exceptional package of economic support for businesses, including extending the eligibility criteria for the Covid Business Interruption Loan Scheme which will allow more smaller energy businesses to qualify.”

“We continue to engage with the energy sector to understand how suppliers and their customers could be further supported,” they added.


Centrica replaces chairman and ousts outgoing CEO

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.”


Arbnco Partners with Centrica to Improve SME Energy Efficiency

The company is set to deploy a prototype of its SME energy efficiency digital platform in three locations across the UK.

Scottish building optimisation company, arbnco, has won a £641,000 contract for phase two of ‘Boosting Access for SMEs to Energy Efficiency’ (BASEE), the Government innovation competition.

The contract with the Department of Business, Energy and Industrial Strategy (BEIS), through its Energy Innovation Programme, will allow arbnco to develop a prototype of its Digital Energy Efficiency Platform (DEEP) to improve energy efficiency across the UK’s 5.9 million SMEs. Phase two of the project will involve arbnco deploying the prototype for pilots in the central belt of Scotland, the West Midlands and Bridgend, Wales.

Led by arbnco, the project brings together energy and services company Centrica, Energy Systems Catapult, Aston Business School, Durham County Council and sustainable finance company, Cyan Finance.

DEEP will simplify the process of engaging with energy efficiency by automatically optimising a business’ total energy consumption and the energy performance of its premises specifically.

The platform will use a range of data sources such as energy consumption and building energy performance, retrieved automatically or supplied by the SME, to generate a unique list of physical and behavioural energy efficiency recommendations together with costs, trusted suppliers and finance options.

Andrew Stewart, research and development manager at arbnco, said: “The first phase of the project focussed on the technical feasibility of the platform as well as, understanding of the obstacles that SMEs face when it comes to energy efficiency.

“A review of potential business models was conducted by Energy Systems Catapult during the first phase. Bringing Centrica on board for phase two will provide greater insight and access to SMEs as we look to roll the platform out nationwide.

“By providing SMEs with critical insight into their energy use and tailored retrofit recommendations, based on an assessment of the energy performance of their building and patterns in their energy consumption, we can help thousands of businesses become more energy efficient.”

Liam Burlinson, head of business energy efficiency at British Gas Business, said: “SMEs have a critical role to play as the UK strives to meet its net-zero targets, but they often don’t know where to start when it comes to improving energy efficiency.

“Centrica is committed to helping customers become more sustainable and we think arbnco’s platform can help tackle some of the fundamental barriers that exist for SMEs today – such as lack of time, money or internal expertise to make targeted, cost-effective changes.”

Phase two of the project began in February 2020 and will run for 14 months. Following completion in April 2021, the platform will be rolled out nationally.

arbnco has partnered with Energy Systems Catapult on the project, which is providing Business Model Innovation support to improve the functionality and usability of the DEEP prototype.

Rebecca Lane, business modelling analyst at Energy Systems Catapult, said: “Having worked with arbnco on phase one of the project, we are confident we have now identified a strong value proposition from both ends of the value chain.

“As the project moves into phase two, we will be working with arbnco and Centrica to pilot the prototype in three locations across the UK and develop the product ready for its national rollout in 2021.”


Council-backed energy firm working with outsourced telesales centres in South Africa

A COUNCIL-BACKED energy company has confirmed it works with six outsourced telesales contact centres in South Africa that have 90 staff allocated to its campaigns.

But Scottish firm Together Energy says it only has one of its own members of staff based in South Africa, with the other 129 located in Clydebank.

Warrington Borough Council is putting £18 million into the company, as well as providing a £4 million loan to it.

Together Energy finished bottom of the Which? energy provider table and has received many complaints from users.

It said it is looking to recruit around 25 members of staff in Warrington and that it recently attended a careers fair in the town to help achieve this aim.

But concerns have been raised from customers following adverts online for vacancies in a South Africa call centre for work on a Together Energy campaign.

However, the issue has sparked a response from the company.

A spokesman said: “We do not have any sites in South Africa.

“We had a customer service function in South Africa to help us with the Supplier of Last Resort volumes which has now been closed and the function moved back to Clydebank.

“We work with six outsourced telesales contact centres in South Africa who have around 90 staff allocated to campaigns for Together Energy including a small sales verification team.

“These companies also sell for many other UK energy suppliers including most of the ‘big six’ energy companies.

“The adverts are for these companies trying to recruit people to work on our campaign.

“They are not our adverts or our employees.

“Our one full-time employee in South Africa manages these relationships and the necessary compliance for these centres.”

The firm says it is not directly recruiting for any field sales agents in Clydebank or any telesales agents in South Africa.

There was also an advertisement online for a national fields associate role in Clydebank to sell Together Energy products.

The spokesman added: “We also work in the UK with two outsourced field sales companies, who sell our tariffs and again recruit for people to sell Together Energy products.

“They are not employed by us and the job referred to is for one of these companies not us.”


Eon lost HALF A MILLION customers in 2019 as households continue to switch away from the Big Six energy suppliers

Eon lost 500,000 customers in Britain last year with its profits also taking a bashing thanks to the energy price cap, its results revealed today.

The Big Six supplier, which is German-owned, is likely to have lost customers as a result of more households switching providers than ever before – with many moving away from the largest suppliers. 

The price cap will also have had an effect as suppliers are only allowed to charge a maximum of £1,162 for standard variable tariff customers.

Despite losing customers, Eon said its total earnings before tax and interest increased to £2.9billion in 2019, and it expects earnings to increase again in 2020.

However, it admitted it hadn’t factored in the current downturn in the economy amid coronavirus fears, adding that it has seen customers across Europe consuming less energy as a result of the pandemic. 

Johannes Teyssen, Eon chief executive, said: ‘Industrial and commercial customers are consuming noticeably less energy. 

‘This will have a temporary impact on our network and sales businesses. There may be delays in our ability to deliver energy infrastructure projects.

He added: ‘Energy utilities have a special significance for critical infrastructure in this crisis and thus a special responsibility. 

‘We will do everything in our power to ensure supply security, even in this situation.’

It said the energy sector ‘won’t be as hard hit by other industries’ but will still feel an impact from the pandemic. 

During the coronavirus outbreak, Eon confirmed that it will not disconnect financially vulnerable customers from its network to ensure continued supply. 

It added that its core business saw operating arms post ‘solid earnings’ last year, although customer solutions saw earnings slip by £90.9million due to price caps and the fall in UK accounts. 

Victoria Arrington at Energy Helpline said: ‘The Big Six has been losing customers for some time – so Eon’s loss of 500,000 UK accounts in 2019 is no big surprise. 

‘Established suppliers are facing intense battles in an ever-changing industry for customer loyalty.

‘The marketplace is becoming more and more competitive. Customers are switching at record rates – and it’s unsurprising, since there are so many bargain tariffs appearing all the time. 

‘That said, Eon clearly recognises that customers crave savings, with their best tariff deal is £318 cheaper than their default tariff.

‘With so many cheap tariffs available, it’s clear that complacency can be costly. 

‘Customers who switch supplier could save up to £378 a year on energy, with the average customer saving £280 annually – so it pays to shop around.

‘Eon has made some intriguing moves recently – from putting all of their customers on to renewable energy, to taking on the customer base of npower. 

‘It will continue to be interesting to see what new developments they bring to the industry.’ 

During the coronavirus outbreak, the Government and energy suppliers have teamed up to put emergency measures in place.

This includes ensuring that prepayment and pay as you go customers who cannot leave home can speak to their provider about staying supplied, steps that should benefit over four million households.