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Future Charging and Access programme – consultation on refined residual charging banding in the Targeted Charging Review

In November 2018, we published our minded-to decision and draft Impact Assessment on the Targeted Charging Review (TCR) covering proposed reforms to residual charges and non-locational Embedded Benefits. In June 2019, we consulted on further matters, including updated analysis on the Capacity Market and system costs, and the findings of the Balancing Services Charges Task Force.

We received over 130 responses to our minded-to decision, and a further 23 representations to our supplementary consultation. Having considered these responses, we wish to update stakeholders on refined proposals for reform of residual charges and provide the opportunity to comment on them, before we make our final decision.

Alongside this letter, and following requests from some industry participants, we are also publishing a sensitivity analysis we have undertaken on the implications of our proposed reforms on renewable generation.

We welcome any stakeholder feedback on the proposals and additional analysis outlined in this letter by email to TCR@ofgem.gov.uk by 25 September 2019.

Great Britain power system disruption review

Details

On Friday 9 August 2019 a power disruption resulted from the operation of Low Frequency Demand Disconnection relays on the Great Britain power system at about 4.54 pm. It impacted hundreds of thousands of customers, and caused significant secondary impacts in particular to the transport network. Though demand was fully restored within 90 minutes, the secondary impacts continued to be felt for much of the day.

The Secretary of State for Business, Energy & Industrial Strategy has commissioned the Energy Emergencies Executive Committee (E3C) to undertake a comprehensive review of the incident. The review should identify lessons and recommendations for the prevention and management of future power disruption events. In particular E3C will:

  • assess direct and secondary impacts of the event across GB electricity networks
  • Identify areas of good practice and where improvements are required for system resilience
  • consider load shedding in regard to essential service customers and prioritisation
  • consider timeliness and content of public communications during the incident
  • make recommendations for essential service resilience to power disruptions

E3C will submit a final report to the Secretary of State within 12 weeks, with an interim report within 5 weeks. These will be published here. BEIS will provide the secretariat for the review.

E3C is a partnership between government, the regulator, and industry, which ensures a joined up approach to emergency response and recovery.

Documents

French regulator puts EDF Flamanville nuclear plant on safety watch

PARIS (Reuters) – French nuclear regulator ASN said it has put EDF’s Flamanville 1 and 2 reactors under increased surveillance following a series of shortcomings in maintenance and contractor oversight

The ASN’s action is the latest in a long series of technical and operational issues that have bedevilled EDF in recent months and raised new concerns about the state-controlled utility’s safety culture.

The regulator said in a statement there had been a high number of significant shortcomings in the Flamanville plant’s maintenance and in the oversight of contractors in the plant, as well as insufficient quality of documentation. It added that it had summoned the plant’s director and ordered him to submit an action plan to improve plant operation.

EDF (EDF.PA) did not dispute the ASN’s ruling.

“We accept the ASN’s diagnosis and we accept its decision. That is why we submitted an action plan in August to resolve the problems,” an EDF spokesman said.

EDF’s Belleville nuclear plant on the Loire river has also been under increased surveillance since 2017.

The problems at the Flamanville 1 and 2 reactors are not directly related to the many problems with a third nuclear reactor that EDF is building on the same site. Flamanville 3 is a decade behind schedule and its cost has tripled to nearly 11 billion euros and is likely to rise further.

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French regulator puts EDF Flamanville nuclear plant on safety watch

PARIS (Reuters) – French nuclear regulator ASN said it has put EDF’s Flamanville 1 and 2 reactors under increased surveillance following a series of shortcomings in maintenance and contractor oversight.

The ASN’s action is the latest in a long series of technical and operational issues that have bedevilled EDF in recent months and raised new concerns about the state-controlled utility’s safety culture.

The regulator said in a statement there had been a high number of significant shortcomings in the Flamanville plant’s maintenance and in the oversight of contractors in the plant, as well as insufficient quality of documentation. It added that it had summoned the plant’s director and ordered him to submit an action plan to improve plant operation.

EDF (EDF.PA) did not dispute the ASN’s ruling.

“We accept the ASN’s diagnosis and we accept its decision. That is why we submitted an action plan in August to resolve the problems,” an EDF spokesman said.

EDF’s Belleville nuclear plant on the Loire river has also been under increased surveillance since 2017.

The problems at the Flamanville 1 and 2 reactors are not directly related to the many problems with a third nuclear reactor that EDF is building on the same site. Flamanville 3 is a decade behind schedule and its cost has tripled to nearly 11 billion euros and is likely to rise further.

Separately, EDF said on Tuesday it had found problems with weldings on the steam generators of some existing reactors, sending its shares down 6.8% on fears that the faults could lead to reactor closures.

The shares recovered some of the losses to rise 5% on Wednesday. They are down 28% over the past 12 months, making EDF the second-worst performer in the Stoxx European Utilities index .SX6P

SAFETY CULTURE

“There is a chain of control from reactor builder Framatome, to nuclear plant operator EDF and regulator ASN, but it has been demonstrated over and over again that this chain of control is malfunctioning. Every few months there is a new problem,” World Nuclear Industry Status Report author Mycle Schneider said.

Schneider said there had been no follow-up to a 2018 French parliament investigation into nuclear safety and security.

A parliament report reut.rs/2kE2IQ7 published in July 2018 concluded that France’s nuclear plants are a safety threat because of their excessive reliance on outsourcing, the risk of terror attacks and a lack of operational rigour.

Unlike the US, Russia and Japan, France has had no major nuclear nuclear accidents such as Three Mile Island, Chernobyl or Fukushima and its regulator ASN is seen as independent.

But EDF’s long series of problems – both at its existing fleet of 58 nuclear reactors and at the EPR reactors under construction in Flamanville and in Olkiluoto, Finland – have tarnished EDF’s image as a leader in nuclear technology and weighed on its ability to sell nuclear plants abroad.

While Russian rival Rosatom here has a $133 billion order book here reactors worldwide, EDF’s only foreign project is for two EPR reactors at Britain’s Hinkley Point, in a contract with its own UK arm, EDF Energy.

“Sometimes there are weak signals, but we are putting in place procedures. Safety is our number one concern, it is in our DNA,” the EDF spokesman said.

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Eversmart Energy collapses to leave 29,000 customers without supplier

A green energy firm with more than 29,000 customers has collapsed, becoming the sixth supplier this year to go bust.

Eversmart Energy confirmed it had ceased to trade in a short note on its website on Friday.

Industry regulator Ofgem said it would appoint a company to take on all of Eversmart’s customers, advising them not to switch to a new provider until this process was completed.

The collapsed firm supplied energy to 29,000 households and “a very small number” of businesses, Ofgem said.

 

Philippa Pickford, the regulator’s director for future retail markets, said: “Eversmart Energy customers do not need to worry, as under our safety net we’ll make sure your energy supplies are secure and domestic customers’ credit balances are protected.

“Ofgem will now choose a new supplier for you and whilst we’re doing this our advice is to ‘sit tight’ and don’t switch. You can rely on your energy supply as normal. We will update you when we have chosen a new supplier, who will then get in touch about your new tariff.”

Eversmart did not say why it had ceased trading, but the Energy Ombudsman said complaints about the Manchester-based firm had soared from 55 last year to 225 in the first eight months of 2019.

Energy Ombudsman chief executive Matthew Vickers said: “We have seen a significant increase in complaints about Eversmart Energy, receiving four times as many complaints so far this year as we did in the whole of last year.

“Billing and switching problems have been the main drivers of unresolved complaints about the company.”

Eversmart was named the second worst supplier for customer service in a report by the Energy Ombudsman last year.

Last year the firm was criticised for launching a low-cost tariff in which households had to pay about £1,000 for a year’s worth of energy up front.

Bosses said at the time claimed the tariff was “better value than an Isa or a high street savings account”, but Citizens Advice warned the rest of the industry would be forced to pick up huge outstanding debts if the supplier went bust.

It is not known if the supplier who picks up Eversmart’s customers will honour the 12 per cent interest they were promised, or how many of the 29,000 customers were on the tariff.

Eversmart is the 13th supplier to drop out of the UK market since the beginning of last year. Its collapse comes three weeks after competitor Solarplicity ceased trading.

Gillian Guy, chief executive of Citizens Advice, said: “Our research shows this unlucky baker’s dozen of failed companies has left behind at least £172 million in unpaid costs. These will be picked up by other consumers through higher bills.

“When a supplier goes bust, customer credit balances are protected. But all of us will eventually pay for honouring them through increased bills.

Ofgem warned last month more providers are to go bust or merge after a huge increase in the number of small firms entering the market in recent years. The regulator announced stricter tests on new suppliers’ financial health earlier this year under proposals designed to stem the rising number of failures.

Emma Bush, energy expert at price comparison service uSwitch, added: “With yet another supplier going out of business, Ofgem needs to press ahead with its reforms for regular health checks on existing energy companies to ensure each and every one can finance its operations while upholding a high level of customer service.

“Regular stress-tests for suppliers and ongoing fit-and-proper person assessments would help that.”

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Energy firms plan UK’s first carbon-neutral ‘industrial cluster’

Energy companies have ignited multibillion-pound plans for the UK’s first carbon-neutral “industrial cluster” in the Humber.

An alliance of companies including National Grid, Drax and Norway’s state energy company, Equinor, are leading a campaign to shrink the carbon footprint of Britain’s most polluting industrial zone.

The cluster includes hundreds of refineries, factories and the Drax coal-fired power plant near the Humber estuary, safeguarding 55,000 jobs and a local industrial economy worth £18bn a year. However, it is also responsible for the highest concentration of industrial emissions in the country, undermining the UK’s goal to become a carbon-neutral economy by 2050.

The alliance plans to trial world-leading technology to capture and store carbon emissions from factory and power plant flues before they enter the atmosphere. It also hopes to use carbon capture while breaking down natural gas to create hydrogen, which can be used in industry, heating and transport without creating climate emissions.

Lord Haskins, the chair of the local enterprise partnership, said it planned to work with businesses across the Humber “to make this ambitious plan a reality”.

“This is a huge opportunity to accelerate clean growth in the Humber while also supporting significant industries to adapt for the future. If we can achieve this goal of becoming carbon neutral on the Humber it would make us a brilliant example not just for the rest of the country, but the rest of the world,” said Haskins, a former Labour adviser and boss of Northern Foods.

UK urban centres are also vying for investment to become the country’s first carbon-neutral city. Bristol has joined the race by vowing to cut its carbon emissions to net zero by 2030 through a £1bn climate scheme. The UK’s first European Green Capital hopes to maintain its green lead by attracting investment from major companies and investors to create a carbon-neutral city.

Marvin Rees, the mayor of Bristol, said its City Leap programme was “a world first” that would lead the way on reducing carbon emissions. “We are creating a decarbonised local energy system that Bristol can be proud of. City Leap is leading the way on carbon reduction, while at the same time addressing important social and economic challenges,” he said.

Bristol council voted unanimously in favour of establishing a net zero-carbon city, meaning any climate emissions must be neutralised by schemes that absorb carbon, after becoming the first to declare a climate emergency.

City Leap aims to bring together international organisations, investors and tech companies to help develop low-carbon solutions that can drive down the city’s greenhouse gas emissions.

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United Oil & Gas Confirms Award Of Four UK North Sea Blocks

(Alliance News) – United Oil & Gas Ltd said Monday it has accepted the formal offer from the Oil & Gas Authority for the awarding of four blocks in the UK North Sea in the UK 31st offshore licensing round.

The oil & gas company now holds a 100% interest in blocks 14/15c, 15/11c, 15/12a and 15/13c, which make up Licence P2480. The blocks cover an area of 500 square kilometres, and includes the Zeta prospect which United estimates could contain around 90 million barrels of in-place oil.

The blocks were awarded on the basis of a low-cost work programme involving the purchase of an existing high-quality 3D seismic dataset and detailed geological and geophysical analysis.

In the same licencing round, United Oil & Gas was provisionally awarded a 10% interest in blocks 98/11b and 98/12 in the English Channel. The company said it expects to receive confirmation on those licence in the coming weeks.

“We are delighted with these awards, which, based on extensive technical work carried out over the available acreage ahead of the application were our primary focus for the 31st round,” said Chief Operating Officer Jonathan Leather.

“This is our second successful UK licencing round and our largest award to date. United has done well to be included in the roster of companies which have been successful in this round, including Chrysaor, Equinor, Chevron and Total,” Leather added.

Shares for United Oil & Gas were untraded on Monday, last quoted at 4.07 pence in London.

By Dayo Laniyan; dayolaniyan@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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UK shale gas driller mulling sale due to fracing challenges

LONDON (Bloomberg) – Investors backing closely-held Cuadrilla Resources, which pioneered UK shale gas drilling before becoming mired in red tape, are exploring options including an outright sale of the company.

Shareholders including private equity firm Riverstone Holdings LLC, which has a direct 45% holding, and Kerogen Capital, which holds an indirect stake, have hired the Royal Bank of Canada to study ways to cash out of their investment, said people familiar with the matter, asking not to be named because the information is private.

The bank has been working with the investors for months, they said. No final decision has been made and the deliberations may not lead to a transaction.

Cuadrilla has struggled to produce and sell any natural gas due to widespread opposition to its hydraulic-fracturing technology, also known as fracing. Investors have been waiting for it to finish work on a well in northwest England, which is currently suspended after causing an earthquake registering 2.9 on the Richter scale last month.

Cuadrilla declined to comment. Riverstone and RBC didn’t return requests seeking comment, while an external spokesman for Kerogen wasn’t immediately able to comment.

Kerogen owns 53% of Australian energy-service company AJ Lucas Group Ltd., which holds 48% of Cuadrilla, according to data compiled by Bloomberg and Cuadrilla’s website. Kerogen’s stake in AJ Lucas, built up since late 2011, is now valued at about A$58 million ($40 million). The value of AJ Lucas’s shares has fallen almost 90% over that period.

AJ Lucas, based in Australia, didn’t respond to a request seeking comment outside of business hours.

Cuadrilla has been trying for more than a decade to prove Britain has commercially viable quantities of shale gas. If it does, the country could partly replicate an energy boom seen in the U.S., which reversed its status as a major net fuel importer. However, local opposition in the UK and different regulations governing fracing have made it almost impossible for Cuadrilla to appraise the country’s gas reserves.

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Wind and gas projects keeping the southern North Sea busy

It is arguably leading the energy transition way for the UK, with multi-hundred to gigawatt class wind farms rubbing shoulders with significant gas production.

“We’re very much in the ascendancy,” said Simon Gray, chief executive of trade organisation East of England Energy Group (EEEGR).

“We now have off the east coast of England something like 56% of the UK’s offshore wind generation capacity and this is expected to go on increasing through to 2030.

“As the UK’s offshore wind capacity increases, we’re set to remain around the 50%-plus level.

“The reasons for that are simple and include shallow waters, a decent seabed for installing turbines, a good wind resource and easy access to the largest electricity markets in Britain: London, the south-east and the Midlands.

“And of course considerable quantities of natural gas are still being produced from the Southern Gas Basin, where new field discoveries continue to be made, albeit those are tight resources and therefore harder to develop and produce.

“We still have some of the largest volumes of decommissioning on the UKCS.

“The SNS is where the UK’s offshore story began in terms of gas and a considerable number of the platforms still out there are 30, 40, 50 years old.”
Change is in the air for the membership of EEEGR, whose supply chain membership is probably the most diverse of any energy trade body in the UK.

“Transition is the word on everyone’s lips,” Mr Gray said. “And that’s exactly where we are.

“We’re the part of the UK that is experiencing the greatest migration from fossil fuels towards renewables. And that process in theory needs to have been completed by 2050.

“Although gas is currently on the back foot because of weak prices, it still accounts for 28% of UK electricity generation compared with 2.3% from coal, 20% from nuclear and wind nearly 30%.”

In terms of indigenous UK gas production, the SNS accounts for around 30% via the Bacton terminal in Norfolk.

A major operation is under way to protect this strategically important facility from being engulfed by the North Sea as sea levels rise.

The £20 million-plus “sandscaping” is intended to protect a 5.6km stretch of coast by rebuilding beaches using huge volumes of sand.

Bacton is absolutely vital to current gas basin production and future development potential. And it handles significant volumes of imported gas via the North Sea’s hugely important interconnector network.

Gas has a critical transitional role to play for the next couple of decades at least and the SNS current revival is being usefully stimulated by the Oil and Gas Authority’s Southern

North Sea Tight Gas Strategy published in June 2017.

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UK energy minister questions future of National Grid

UK energy minister Kwasi Kwarteng has questioned whether National Grid should retain its flagship role operating the country’s electricity system following a power cut last month that disrupted more than 1m homes and businesses in England and Wales.

Mr Kwarteng, who assumed his role after Boris Johnson became prime minister in July and visited National Grid’s control centre following the blackout, told the Financial Times: “Frankly I think there is a question about the ESO [electricity system operator] and its role within the National Grid.”

National Grid, which was privatised in 1990, has seen off previous demands that it should be broken up but calls for a rethink have intensified following the outage last month that caused widespread rail disruption, particularly in and around London, and also affected a hospital in Ipswich and Newcastle airport.

The opposition Labour party intensified its demands for National Grid to be renationalised after the power cut but more moderate voices, such as Oxford university professor Dieter Helm, who authored a 2017 report on energy for the government, have also said the job of managing the system should be transferred to a publicly owned body.

The FTSE 100 company avoided a break-up in 2017 when Ofgem, the energy regulator, ruled it should be allowed to keep the electricity system operator role but it should be hived off into a legally separate business. However, it remains within the wider National Grid group.

Mr Kwarteng said he not believe the Ofgem decision was “envisaged as a permanent solution to this question”.

“I think it was seen as perhaps a staging post to another iteration where the two entities might be separate,” Mr Kwarteng said.

“As you know they were very much as one body and then we’ve had this separation within the same institution and people are saying now that there may well be the case that the ESO . . . should be separate. And again, this is a question that we’re looking at.”

National Grid both owns energy infrastructure in the UK and has overall responsibility for balancing electricity supply and demand, which critics say presents a conflict of interest. It has also been developing interconnectors — subsea cables that allow electricity to be traded with countries such as Belgium, France and the Netherlands, which compete with domestic power generators.

Analysts have privately suggested stripping National Grid of the electricity system operator role and creating a public body responsible for keeping Britain’s lights on would be an easy way for the Conservative party to counter Labour’s renationalisation agenda. 

Prof Helm suggested such a move would not only be in the public interest but “arguably also in National Grid’s interests”. 

He said the system operator role was a very small part of National Grid’s overall business, which also includes owning energy networks in the US. However the recent power cut had caused the company reputation damage, even though it has argued the events of August 9 were “extremely rare and unexpected”.

“There is little upside to its shareholders from owning the SO [system operator], and lots of risk, especially reputationally, as the recent power cut has revealed,” Prof Helm wrote in a recent blog.

The government and Ofgem are both investigating the power cut. National Grid has also been conducting its own internal inquiry, the final results of which were presented to Ofgem on Friday and will be published by the regulator on Tuesday.