BEIS makes CM supplier payments voluntary but warns of immediate bill on market reinstatement

Energy suppliers will not be subject to mandatory payments to meet Capacity Market levies while the fate of the market is being determined, BEIS has decided. But suppliers will be invoiced and have to pay in full within a few weeks of any ‘triggering event’ that reinstates the market. BEIS will enable suppliers to make “prudent provision in the interim, including through making voluntary payments to the ESC”, to ensure they can pay the full amount of supplier charges promptly when they become due.

Payments will be held in an interest-bearing account until the market’s future is clear (although suppliers can make provision for themselves), and suppliers will be able to request information from on their post-standstill liability.

Responding to a consultation, BEIS also promised to hold the T-1 auction planned for January in summer this year, allowing pre-registered parties to retain their registration but also allowing them to withdraw from the auction.

It also set out a variety of adjustments for companies that have Capacity Market contracts, including extending deadlines for ‘financial commitment milestones’, connection agreements and various testing and metering requirements.

To give effect to these plans draft Regulations (two separate sets are necessary) have been  laid before Parliament and should come into force in late March. They must be debated and agreed by both Houses.

BEIS makes it clear that the decisions do not address all the implications if the EC does not grant State Aid clearance for the Capacity Market, or if the EC requires changes in the Market. At that point it would “take all steps necessary” including further consultation, BEIS said.


Wholesale energy prices fall as mild weather sees demand drop

Wholesale gas and electricity prices tumbled last month as unseasonably mild weather left demand trailing normal levels, a report shows today.

The Naturgy Energy Review and Forecast shows that wholesale gas prices fell 18 per cent last month from January’s levels, while electricity prices were 31 per cent down.

Warmer than normal weather in February contributed to the fall in the wholesale prices of gas and electricity as demand for both was lower than usual.

Naturgy points out that there was also an oversupply of natural gas last month. At the same time, cheaper renewable-generated electricity accounted for 47 per cent of the electricity generated in Ireland in February.

The company, an independent energy supplier, believes that prices will remain low this month.

Bearish outlook

“While energy prices and in particular gas prices have shown significant growth up to year end 2018, we predict the outlook on prices for March to remain bearish with mild weather set to continue and security of supply continuing, due to liquid natural gas deliveries expected in the UK,” said energy analyst Lauren Stewart.

Day-ahead prices for natural gas averaged 47.6 pence sterling a therm (the unit in which the fuel is traded) in February, down 18 per cent on the previous month, Naturgy said.

Seasonal contracts for natural gas supplies in summer and winter 2019 were also down.

Day-ahead prices for electricity fell to 2.76 cent a kilowatt hour, their lowest since the introduction of a new market in October, on February 17th.

Good wind speeds, which boosted supplies of renewable-generated electricity, combined with the falling prices, saw Ireland export power to Britain via a connecting line running underneath Irish Sea.


UK sector deal expected ‘this week’

UK energy department BEIS is expected to publish the long-awaited offshore wind sector deal this week, according to industry sources.

The sector deal aims to deliver at least a third of the country’s electricity from offshore wind by 2030, equivalent to 30GW of installed capacity.

“The offshore sector deal will likely be published this week,” a source told reNEWS.

“BEIS is leading on this and it is likely to be the back end of the week,” the source added.

The sector deal will set out how the industry will employ 27,000 people by the end of the next decade.

The plan will also set a blueprint for the global market for offshore wind products and services provided by UK-based companies to be worth nearly £5bn a year.

The industry had hoped BEIS would publish the sector deal last month but sources said the detail of documents had yet to be finalised by the joint industry-government body, the Offshore Wind Industry Council.

BEIS has yet to respond to inquiries from reNEWS.


UK carbon emissions down six years in a row

The UK’s carbon dioxide emissions fell for the sixth year in a row last year, the longest continuous run of reductions on record, analysis suggests.

Emissions fell to 361 million tonnes, their lowest level since 1888, when the first Football League match was played and Jack the Ripper stalked London’s streets, excluding years with major strike action.

The amount of carbon pollution per person was 5.4 tonnes, the lowest it has been since 1858, the analysis by energy and climate website Carbon Brief indicates.

But 2018 saw the smallest fall in the series of emissions reductions since 2012, suggesting the run may be coming to an end.

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Domestic solar plus battery storage: a revolution in the electricity market

Guest blog post by Erica Charles, CEO, Spirit Energy

NB. None of the figures or statistics in this article have been independently verified by Energy Saving Trust.

It’s an exciting time for the UK energy sector.

Older fossil fuel and nuclear power plants are due to be de-commissioned by 2025, at the same time as electrification of the transport system is proceeding at a steady pace, fuelling a significant increase in the demand for electricity. It is hardly surprising that the ‘capacity margin’, the buffer between electricity supply and demand, is tightening.

Furthermore, with the advent of renewables, balancing supply and demand within the National Grid is becoming ever more challenging, with irregular peaks and troughs according to the weather conditions.

Enter battery storage, and in particular, home battery storage.

Spirit Energy first started installing battery storage systems for homeowners three years ago.  At that time, system functionality was limited, and there weren’t that many systems to choose from. It generally cost more to store a unit of excess solar electricity than it did to buy one off the Grid. Only the greenest ‘early adopters’ were prepared to sign on the dotted line.

Since then, the big boys of energy (such as Shell, BP, E.ON and EDF) automotive (Nissan, Tesla) and of battery storage itself (Duracell) have all entered the energy storage market, prices have fallen, and the whole landscape has transformed.

Most exciting for the homeowner is that batteries now have management systems enabling a multitude of potential applications:

  • storing excess generation from the homeowner’s solar system
  • buying cheap electricity at night and storing it for use in the day
  • interacting with the grid to provide grid balancing services and wholesale electricity trading
  • providing a back-up in the event of a power cut.

All of this is made possible thanks to the roll out of smart meters, which enable two-way metering of electricity (import and export) and the introduction of a number of ‘time-of-use’ tariffs whereby home owners pay different rates for electricity purchased at different times of day.

Hundreds of thousands of domestic solar systems have been installed in the last 10 years under the Feed-in Tariff scheme for solar PV.  The systems typically export around 60-70% of the electricity generated back to the Grid.

But because historically there has been no ‘export metering’ for small systems, system owners are paid a ‘deemed’ export tariff (currently 5.24p / kWh) in respect of 50% of the electricity generated by the system, regardless of whether or not the electricity is actually exported.

So it really makes sense to use as much solar electricity on site as possible. An appropriately sized storage system will increase the proportion of solar electricity used on site from around 35% to 75%.

Buy Cheap, Use Peak

Across the nation, electricity demand reaches a high in the late weekday afternoons (4-7pm), and then falls to a low overnight. However, to date most domestic properties have paid a single rate electricity tariff which doesn’t reflect the peaks and troughs of demand. Some domestic properties are on an Economy 7 (or Economy 10) tariff with a ‘peak’ rate (15-20p per kWh) and an ‘off-peak’ rate (7-9p per kWh).

In January 2017, Green Energy UK introduced a ‘TIDE’ tariff with a banded tariff reflecting the national demand and supply profile and the true ‘underlying cost’ of electricity.  At the time of writing the tariff structure is as follows:

 Time of Day Cost per kWh
12pm – 7am (Mon-Fri and Weekends) 7.91p
7am – 4pm (Mon-Fri) 16.27p
4pm – 8pm (Mon-Fri) 32.55p
8pm-12pm (Mon-Fri) 16.27p
7am – 12pm (Weekends) 16.27p

With the advent of smart meters, able to record half hourly electricity use, the market is likely to witness the gradual introduction of many more such ‘time-of-use’ tariffs.

Most battery systems allow the homeowner to set timed charge and discharge windows, thus enabling the system to ‘buy cheap’ (i.e. charge at night) and ‘use peak’ (discharge in the day), avoiding the punitive day time rates as far as possible.  If the homeowner has an electric car they can set the car to charge overnight at the low rate (7.91p per kWh for TIDE), and, based on a typical performance of 3 miles per kWh, their car will cost less than 3p per mile to run.

Grid Services: Frequency Response and Wholesale Electricity Market Trading

National Grid has to balance electricity supply and demand.  In order to do this, National Grid pays fees to ‘demand response’ assets such as batteries that it can call upon to discharge (thus increasing supply), or charge (thus increasing demand) as required.

Homeowners can access income from these ‘Grid Services’ by allowing their battery to be controlled remotely by a third party (usually a utility such as EDF) and pooled with other batteries to make a large enough asset to bid for the National Grid contracts.

Back Up

Many people think of back-up being a primary requirement of a home storage system, and of course it would be good to be able to keep the lights on and the kettle boiling in the event of a power cut.

For example if a homeowner reserves 33% of a 12kWh battery (4kWh) as a back-up, then they should be able to watch TV, use their laptop and keep the lights and freezer working for almost four hours, whilst enjoying a few cups of coffee in the process.

However, the cost of such ‘power cut insurance’ is that for 365 days a year, that 4kWh of their battery capacity will not be available for the other applications outlined above. The initial installation is also more costly. Whether or not this sacrifice is worth it depends how often the power cuts happen, how long they last, and how much hassle the homeowner feels they cause.

Does Battery Storage Make Sense Economically?

It is clear from the above that the economic benefit of battery storage is dependent on a few things:

  • whether the home has excess solar electricity;
  • the choice of electricity tariff;
  • income available from allowing the battery to be used for balancing the grid and trading electricity;
  • whether the homeowner drives or expects to drive an electric car which could benefit from cheap rate electricity at night, thus leveraging the ‘off-peak tariff’;
  • the size of the property and electrical load – there are economies of scale with larger solar and battery systems.

For larger properties, battery storage generally makes sound economic sense. For smaller properties, the factors set out above will determine economic viability.

However there are utilities claiming that the combination of solar, battery storage and a ‘grid service’ tariff could cut the average homeowner’s electricity bill by as much as 70%.  Watch this space.


Shell to buy UK energy tech company Limejump

The firm manages one of the largest portfolios of batteries through its “virtual power plant” system

Shell has agreed to buy a UK-based energy technology company Limejump.

The firm manages one of the largest portfolios of batteries through its “virtual power plant” system, which combines demand side response (DSR) and flexible grid management services.

Last year, Limejump was granted approval by Ofgem to compete in National Grid’s Balancing Mechanism market alongside major power plants, becoming the first aggregated unit to do so.

Its technology gives smaller renewable generators, battery storage and DSR providers direct access to the Balancing Mechanism Market, which has largely been dominated by power plants and distribution sites with a generation licence.

Upon completion of the transaction, Limpejump will be a wholly-owned subsidiary of Shell.

Brian Davis, VP Energy Solutions at Shell New Energies said: “We are impressed by the Limejump team and their track record of building a digital energy platform that connects and optimises a diverse range of assets.

“Together, we can offer more choices to our customers in the UK as we accelerate the building of a customer-focused energy system in support of Shell’s strategy to offer more and cleaner energy solutions to customers.”


Shell rumoured to be ‘keen’ on UK offshore wind

Oil giant Shell are rumoured to be keen on entering the UK offshore wind market, according the the firm’s new energy president.

Mark Gainsborough, executive vice president of Shell New Energies, told Reuters during an interview last week that his firm intends to buy up UK seabed leases or buy up stakes in existing projects.

Shell recently bought a majority stake in a floating wind project planned for 2020

Originally investing 33% in the ‘TetraSpar’ floating foundation demonstrator turbine last year, Shell will now own 66% of the project.

Shell also pledged up to £1.4billion in new renewable energies last year.

Mr Gainsborough told Reuters: “We absolutely would like to get a position in the UK offshore (wind) market.

“To make sure we stay relevant in the energy transition, we need to look at how we can bring lower-carbon solutions.”

He added that Brexit was unlikely to “dampen” his firm’s intention to move into the UK offshore wind marketplace.

Mr Gainsborough said: “The thing that is more important is there continue to be supportive government policies.”

In December, Shell and renewables developer EDP Renewables joined forces to compete for offshore wind projects as Mayflower Wind Energy.

A 50/50 joint venture, the deal will see Mayflower compete in upcoming offshore wind auctions.


Autonomous management system will ‘transform’ UK grid

An autonomous power management system designed to maximise network capacity without the need for centralised manual control is set to be trailed on the UK electricity grid for the first time.

Called the Faraday Grid the new technology is composed of individual units called exchangers that have been designed as “plug and play” replacements for existing transformer infrastructure.

The exchangers are a new form of smart technology and can communicate with each other, automatically regulating energy flow across the grid to ensure maximum capacity and minimal energy loss.

UK Power Networks has agreed with Faraday Grid to install 10, 500KV Faraday Exchanger units across the country as a proof-of-concept.

Faraday Grid founder and chief technical officer Matthew Williams told New Civil Engineer: “The exchangers are able to control voltage, remove harmonics, control power factors and balance the grid, all within a single device.

“The Faraday Grid uses autonomous decentralised control architecture, essentially the same principle that the internet works on in that you don’t have a centralised controller.

“Every exchanger is its own boss and does what it needs to do, it does not need the context of the whole system, but each exchanger is looking to achieve a common goal and will work together, it makes the system scaleable and highly adaptable.”

UK Power Networks head of innovation Ian Cameron added: “We have recognised that Faraday’s technology has the potential to be transformational for distribution networks and the wider energy system. The technology is aligned to our ambition to become an energy platform business. We are delighted to be the company’s lead UK partner for testing and demonstrating its impacts in a distribution network.”

Some of the new units will be trialled on the London network in early 2019.

Faraday Grid has previously received £1M in funding from the UK governments Innovation agency, Innovate UK.


UK Export Finance helps Siemens deliver energy security for Iraq

UK Export Finance (UKEF) supports a €30.2 million contract for the initial refurbishment of the Al Mussaib power station, ensuring secure power supply in Southern Iraq.

UKEF will support a €30.2 million contract for the refurbishment of Al Mussaib power station in southern Iraq, the UK government announced today (21 February). The support will enable the rehabilitation of a 320 megawatt (MW) turbine, that will help improve the overall efficiency and output at the power station.

Al Mussaib power station, located close to Baghdad, is one of the main providers of electricity for the city. Increasing its output will help secure the supply of basic electricity to Baghdad residents.

Minister of State for Trade and Export Promotion, Baroness Fairhead said:

I am delighted that UK Export Finance is supporting the first phase of the refurbishment, which will have such a significant impact on the supply and security of electricity in southern Iraq.

The demand for UK expertise on complex projects like this highlights the UK’s leadership in this sector and I am delighted that UK Export Finance is supporting projects that will have such a direct impact on improving the country’s infrastructure and the lives of the Iraqi people. I encourage likeminded businesses to get in touch with UKEF to learn more about the kind of financial support we can provide.

This announcement follows the agreement between the governments of the UK and Iraq signed in March 2017, which re-affirmed the UK’s commitment to Iraq’s continued economic development.

Darren Davidson, Managing Director – Power Generation Services, Power & Gas, Siemens UK said:

The refurbishment of the Al Mussaib power plant will be hugely important both for the citizens of Baghdad and for our international business. UKEF’s support demonstrates the UK government’s commitment to improving Iraq’s infrastructure and the UK’s energy sector.


UK Export Finance is the UK’s export credit agency and a government department, working alongside the Department for International Trade as an integral part of its strategy and operations.

Our mission is to ensure that no viable UK export should fail for want of finance or insurance from the private market. We provide finance and insurance to help exporters win, fulfil and ensure they get paid for export contracts.

Sectors in which UKEF has supported exports include: aerospace, healthcare, infrastructure, telecommunications and transport.

UKEF has a national regional network of 24 export finance managerssupporting export businesses.

Our range of products includes:

  • Bond insurance policy
  • Bond support scheme
  • Buyer & supplier credit financing facility
  • Direct lending facility
  • Export insurance policy
  • Export refinancing facility
  • Export working capital scheme
  • Letter of credit guarantee scheme

UK Government Withholds ‘Brexit Energy Price Hike’ Information From Welsh Ministers

The UK Government has refused to share its assessment of the impact of Brexit on energy prices, the Welsh Government has revealed.

Questioned about fuel poverty by Labour’s Joyce Watson at the Senedd on Tuesday (19 Feb), energy minister Lesley Griffiths said the UK Department for Business, Energy and Industrial Strategy (BEIS) has assessed the likely scale of price increases after Brexit – but has not shared that information with Wales.

Mrs Watson, who represents the Mid and West Wale region, went on to warn that a ‘no deal’ Brexit would hit Wales’ energy sector, centred at Milford Haven. She also asked the minister to lobby the UK government on the issue of Energy Performance Certificates (EPCs), which unfairly penalise off-grid gas properties in rural areas, she said. The minister said she would raise Mrs Watson’s concerns at the next intergovernmental meeting.

Below is a transcript of the exchange.

Joyce Watson AM:

“Thank you, Minister, for your statement today – and it is clear that the numbers of people living in fuel poverty remain stubbornly high. It’s also distressing that we see this alongside a rise in food banks, a rise in homelessness, and it’s simply a symptom of the last decade of austerity.

“My fear is that Brexit will make things much, much worse. As things stand, around 5 per cent of UK electricity and up to 12 per cent of our gas is imported from the EU, so any import tariffs or barriers would push up costs, and customers would, as always, pick up that bill.

“The trade association for the British energy industry, Energy UK, has warned that household bills are likely to rise as a result of uncertainty over whether Britain will remain in the EU emissions trading system, and there are other pressing uncertainties too. For example, the four power cables that connect Britain to the continent are scheduled to be joined by eight more in the near future. Will that project fall through, and if it does, what cost will that be to the consumer?

“As Lord Teverson, chair of the EU Energy and Environment Sub-Committee said, after Brexit: ‘There will be a divergence and we will not be integrated. What that means is energy trading becomes less efficient and retail prices will go up’.

“We’ve seen again today what was once glibly dismissed as ‘project fear’ being realised throughout the UK car industry and the devastating impact that’s had on those communities, but what’s the cost of Brexit to Wales’s booming energy sector, particularly the key operators at Milford Haven?

“On a final point, you talked about energy performance certificates, or EPCs, in relation to the Welsh housing conditions survey. Many of my constituents are off-grid and they use solid fuel or liquid gas, and that, of course, is much more expensive. But EPC is based on running costs, and as such is not a reliable measure of energy efficiency for those particular areas. I appreciate the EPC structure is a matter for the UK Government, but could I ask you to take up that issue with your counterpart in Westminster and to look at what the Welsh Government can do to redress what is a fundamental unfairness?”

Lesley Griffiths, Minister for Environment, Energy and Rural Affairs:

“Thank you, Joyce Watson, for those questions and observations. I think you’re quite right: a decade of austerity of course has an impact on the number of people living in fuel poverty here in Wales.

“You talk about Brexit, and I am concerned, particularly about the impact of a ‘no deal’ Brexit on energy prices in particular, again in the context of other economic factors that also could come into play if we have a ‘no deal’ scenario. So, we’ve just started having— you’ll be aware of the quadrilaterals I have at an agricultural level with Michael Gove – so, we’ve just started the same engagement with the Department for Business, Energy and Industrial Strategy. I and Ken Skates have been trying to get it up and running for a couple of years. We’ve just had the first meeting. That was chaired by Claire Perry, and I think it was really important that we highlighted our concerns, particularly around a ‘no deal’ Brexit. The UK Government informed us that they have done some assessment around the likely scale of price increases. They haven’t shared that information with us. We need to have sight of that detail so that we can work out any potential impacts on the people of Wales, and also businesses. I think it’s absolutely urgently needed if we are to understand and plan for any potential impacts on fuel poverty levels here in Wales as we come out of the European Union. I think there’s also a need to consider energy prices in the context of cumulative impacts, and consider the interrelationships between energy prices and the other economic impacts we could have post Brexit.

“In relation to your question around EPCs, I’ll be certainly very happy to take that forward with Claire Perry—if not at the next BEIS quadrilateral, I’ll be very happy to write to her.”

The principal Energy Efficiency Rating on an EPC is based on running costs. The lower the energy cost, the higher the ‘energy efficiency’ rating. All energies used to heat homes in off-gas grid areas – heating oil, electricity, solid fuel and LPG – are typically more expensive than natural gas meaning that any building’s EPC will automatically score a lower score than if the same property was in an urban area on natural gas.