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Low-carbon energy makes majority of UK electricity for first time

Rapid rise in renewables combined with nuclear generated 53% in 2018

Low-carbon energy was used to generate more than half of the electricity used in the UK for the first time last year, according to official data.

A rapid rise in renewable energy, combined with low-carbon electricity from nuclear reactors, made up almost 53% of generation in 2018, the government’s annual review of energy statistics revealed.

Renewable energy sources set a new record by meeting a third of the UK’s power generation last year after the UK’s capacity to generate power from the sun, wind, water and waste grew by 10%.

The UK’s use of coal fell by a quarter to a record low of just 5%, according to the report.

The government’s annual “energy bible” confirms a string of record green energy records broken in recent years, as the UK undertakes more renewable energy projects and shuts down old, polluting coal plants.

National Grid said earlier this year that the UK had recorded its greenest ever winter due to windy weather and dwindling coal-fired power.

This followed the second greenest summer, which fell narrowly short of the 2017 record for renewable energy due to a long heatwave. Very hot weather can have a negative impact on renewable energy generation because high pressure weather systems can suppress wind speeds, and solar panels produce less electricity if temperatures climb too high.

The rise of renewables has edged out coal and gas plants which together made up less than 45% of the UK’s electricity last year.

Gas generation fell to 39.5% of the generation mix last year, from 40.4% in 2017. Coal generation continued to decline, falling to 5.1% last year after the Eggborough coal plant shut and Drax converted one of its units to burn biomass instead.

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Only five coal plants will be left running by the end of the coming winter after SSE announced plans to shut its last coal plant at Fiddler’s Ferry near Warrington, Cheshire, in March 2020.

Emma Pinchbeck, the deputy chief executive of Renewable UK, said the record-breaking figures “clearly show that investment in renewables and the government’s championing of offshore wind is delivering rapid change to our energy system”.

“As well as helping keep prices down for consumers and boosting the competitiveness of our businesses, renewables are a huge economic opportunity, bringing employment and investment to all parts of the UK,” she said.

The government threw its weight behind the offshore wind sector earlier this year by promising developers the chance to compete for a share of £557m of state subsidies in exchange for industry investment of £250m over the next 11 years.

The deal could help offshore wind grow to 30% of the UK’s electricity by 2030 as the UK works towards a 2050 target to cut emissions from the economy to net zero.

But ministers have refused to lift a block on support for new onshore wind farms, which are unable to compete for subsidies despite being one of the cheapest forms of electricity.

“To achieve its net zero ambitions, the new government needs to go further and faster – and the first steps should be removing the barriers to onshore wind which is our cheapest source of power, and building on our successes in innovative technologies like tidal energy and floating wind where the UK can be a world leader,” Pinchbeck said.

Source: https://www.theguardian.com/environment/2019/jul/25/low-carbon-energy-makes-majority-of-uk-electricity-for-first-time

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Chernobyl 2.0 fears as nuclear expert warns against re-opening cracked UK reactor

Nuclear experts have warned against re-opening a 43-year-old Scottish nuclear reactor riddled with cracks over fears of a meltdown.

Hunterston B nuclear power plant was shut down last year after it was found that Reactor 3 had almost 400 cracks in it – exceeding the operational limit.

EDF, which own the plant in Ardrossan, Ayrshire, are pushing to return the reactor to service at the end of June and July and want to extend the operational limit of crack allowed from 350 to 700.

However, the plans to reopen the plant have sparked fears it could lead to a nuclear meltdown similar to the 1986 Chernoybl disaster .

Experts have warned that in the very worst case the hot graphite core could become exposed to air and ignite leading to radioactive contamination and evacuation of a large area of Scotland’s central belt – including Glasgow and Edinburgh.

According to Dr Ian Fairlie, an independent consultant on radioactivity in the environment, and Dr David Toke, Reader in Energy Policy at the University of Aberdeen, the two reactors definitely should not be restarted.

Speaking about the cracks in the barrels, they warned: “This is a serious matter because if an untoward incident were to occur – for example an earth tremor, gas excursion, steam surge, sudden outage, or sudden depressurisation, the barrels could become dislodged and/or misaligned.

“These events could in turn lead to large emissions of radioactive gases.

“Further, if hot spots were to occur and if nuclear fuel were to react with the graphite moderator they could lead to explosions inside the reactor core.

“In the very worst case the hot graphite core could become exposed to air and ignite leading to radioactive contamination of large areas of central Scotland, including the metropolitan areas of Glasgow and Edinburgh.”

A planned inspection of the graphite bricks that make up the core of reactor three in March last year uncovered new “keyway root cracks”.

Around 370 hairline fractures were found, which the BBC reports equates to about one in every 10 bricks in the reactor core.

EDF Energy said these have now grown to an average of 2mm wide.

The operational limit was 350 cracks but the inspection found this had been exceeded.

Cracks to the graphite blocks is known to occur but legislation is in place to ensure they do not threaten the structural integrity of the reactor.

EDF is now hoping to prove it is safe to use and would stand up to the most stringent tests and wants the ONR to increase the upper operational limit to 700  cracks.

The reactors have been closed since October 2018, but EDF Energy said yesterday it was confident its Hunterston B nuclear plant would eventually reopen.

Station Director Colin Weir said: “Nuclear safety is our overriding priority and reactor three has been off for the year so that we can do further inspections.

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Renewable energy jobs in UK plunge by a third

The number of jobs in renewable energy in the UK has plunged by nearly a third in recent years, and the amount of new green generating capacity by a similar amount, causing havoc among companies in the sector, a new report has found.

Prospect, the union which covers much of the sector, has found a 30% drop in renewable energy jobs between 2014 and 2017, as government cuts to incentives and support schemes started to bite. It also found investment in renewables in the UK more than halved between 2015 and 2017.

The union compared the situation to the devastation caused to coalmining communities in the 1980s and demanded instead a “just transition” to clean energy.

The Prospect report analysed and collated data taken from various sources, including the government, surveys and industry.

Sue Ferns, the senior deputy secretary general at Prospect, told the Guardian: “The government’s market-led approach has failed, and resulted on offshoring green jobs while UK workers are left behind. Without a proper industrial strategy from government that promotes low-carbon generation like renewables and new nuclear, we will be unable to secure the future of our energy supply, which is under threat in the coming decade.”

The focus on Brexit had not helped, she added. “The government’s tunnel vision on Brexit means the real challenges facing our country have been neglected for too long. We need a sensible deliverable strategy that provides a stable long-term pathway to decarbonisation.”

The drastic fall in jobs came as the government effectively shut down schemes that rewarded consumers for buying solar panels, withdrew subsidies for onshore wind and reduced incentives for low-carbon energy. Ministers have argued that as the costs of renewable energy have fallen sharply in recent years, the industries should no longer rely on public subsidy, but multiple redrawings of government schemes in recent years have helped to create turmoil and a lack of certainty for companies.

Government support has taken the form of various schemes across the last decade, including feed-in tariffs for consumers with solar panels, a renewables obligation forcing the big energy suppliers to invest in renewables, and most recently, contracts for difference. The latter were meant to overhaul the whole energy sector by setting up auctions by which companies would bid for generation contracts favouring low-carbon energy, but early troubles meant dirty energy such as diesel generators were often the inadvertent winners, and while the scheme still operates it has enjoyed little support from successive chancellors.

Between 2016 and 2017, there was a sharp fall in investment in UK renewables, which fell 56% to the lowest level since 2008, according to the as-yet-unpublished Prospect report that has been seen by the Guardian. Last year, the annual rate of addition of renewables capacity fell to its lowest level since 2012, which the union said was driven by the collapse in solar and onshore wind deployment. Without the significant rise in bioenergy capacity that took place in 2018, the fall in new renewables would have been much greater, the union said.

While some sectors have remained buoyant, such as offshore wind, new capacity in onshore wind in England slowed markedly after the government withdrew financial support and changed planning laws to make the construction of windfarms more difficult.

Luke Clark, head of external affairs at the trade body RenewableUK, said: “We’re expecting the number of direct jobs in offshore wind to treble to 27,000 by 2030, as part of the landmark offshore wind sector deal we’ve agreed with government, as this provides long-term certainty for the industry. However, as onshore wind remains excluded from government-backed auctions for contracts to generate power, the UK is missing out on employment and investment opportunities offered by this technology. The auction process has also failed to bring forward new technologies like tidal energy projects, so there is huge potential to ramp up employment in renewables as we move to net zero emissions.”

The trade union said the dismal picture for jobs in much of the sector contrasted with government rhetoric on issues such as moving to a net zerocarbon target and parliament declaring a climate emergency.

Ferns told the Guardian: “Successive governments have promised us a green jobs revolution, but after an initial upsurge we have now started going backwards. This is deeply worrying for the future of the energy sector and for low-carbon jobs in the UK.”

She added: “The Committee on Climate Change has recommended zero carbon by 2050 and others are pushing for even more ambitious timescales. We need a just transition for all the workers affected and this means we need to work proactively to ensure that the damage inflicted on coal communities in the 1980s is not repeated.”

A spokesperson for BEIS told the Guardian: “We’ve seen the number of green collar jobs soar to approximately 400,000, with clean growth at the heart of this government’s modern industrial strategy. This figure could more than quadrupled to 2m by 2030. We’ve injected £2.5bn into low-carbon innovation and [the] deal with the offshore wind industry will see up to £40bn infrastructure investment.”

Green collar jobs are defined by BEIS as those in clean growth, which means activity that increases the national income while reducing emissions. The number of people working in green jobs in the UK was estimated at 1m in 2012, by the UN.

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Britain’s energy bosses back UK bid to host key 2020 climate talks

Bosses at the UK’s leading energy firms are urging the Government to ensure the UK is picked as the venue for key international climate talks in 2020.

Britain is bidding to host the UN climate change conference next year, the biggest since the Paris agreement was signed in 2015

Under UN rules the COP (Conference of the Parties) next year should be hosted by a European nation and take place in the first year the Paris agreement would come into full effect.

The conference will mark a crucial deadline for countries to comply with their commitments in Paris on reducing greenhouse gas emissions and move on to tougher targets for the decade to 2030.

If successful, the move would be a strong signal of the UK government’s determination to retain its role on the world stage after Brexit.

‘Strong record of leadership’

In a letter to ministers and opposition leaders, the bosses of companies including Centrica, ScottishPower, National Grid, Drax, BP and Shell said hosting the UN meeting would give the UK an opportunity to be seen as a green leader.

In addition 162 MPs have signed a letter to Prime Minister Theresa May, saying the country’s “strong record of leadership and ongoing commitment on climate change” makes it the ideal place to hold them.

Energy and Clean Growth Minister Claire Perry revealed last December that she had officially written to express the UK Government’s interest in hosting the talks in 2020.

A decision on where in Europe to hold the “Cop26” talks at the end of next year is expected in June.

‘Maximise the opportunities’

The UN awards the hosting of the COP usually by alternating among developed and developing countries, and different continents, though the rules can be flexible

In the letter from the energy giants – which also include Affinity Water, Anglian Water, Capita, GKN Automotive, Heathrow Airport and Innogy Renewables UK, business bosses back the British bid to host the talks.

“Hosting Cop26 would provide the UK with a platform to further develop and maximise the opportunities of the global shift to clean growth and showcase to the world the best of the UK economy.

“It would be the country’s moment to build further support for an ambitious clean growth trajectory, underscore ambitions for a net-zero economy in line with the Paris Agreement, and set out the opportunity of economic renewal and enhancement through climate action.”

One of the signatories, John Pettigrew, chief executive of National Grid, said hosting the talks would let the UK send a message to the world that “we are proud to take the lead in the fight against climate change”.

“Our progress on clean energy has seen this country make international headlines; for example, when we recently went over a week without any coal generation for the first time since the 19th century. But we all need to do much more.

“This summit represents an opportunity to get the world to unite behind one of the most important challenges we all face and we look forward to working with the Government to bring COP to our shores,” he said.

Lead signatory of the letter from MPs, Labour and Co-operative MP Alex Sobel said: “Having just announced a climate emergency, MPs from across all parties in the UK Parliament are keen to see bold action taken on climate change.

“Cop26 is a key moment when the countries of the world will also be looking to cross divides to come together and build on their climate change pledges.

“With its diplomatic weight and having passed the World’s first Climate Change Act over 10 years ago, the UK is ideally placed to play this role, guiding even those less ambitious countries towards strong commitments.”

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Developing a framework for assessing whether conditions are in place for effective competition in domestic supply contracts

We are seeking views from stakeholders on our proposed framework for assessing whether conditions are in place for effective competition in the domestic energy retail market. This is for the purpose of recommending to the Secretary of State whether or not the cap on default and standard variable tariffs should remain in place, as required under the Domestic Gas and Electricity (Tariff Cap) Act 2018.

The cap was introduced because the retail energy market was not working well for all consumers. Consumers on default and standard variable tariffs were paying substantially more than those who shopped around for fixed tariff deals. To protect these consumers, the government passed legislation in 2018 for a temporary cap on default and standard variable tariffs. This cap was introduced by Ofgem in January 2019. Alongside this, the government and Ofgem are working towards structural reforms to improve the competitive process in the domestic retail market and outcomes for energy consumers.

With the cap on default tariffs now in place, the Domestic Gas and Electricity (Tariff Cap) Act 2018 requires Ofgem to review whether conditions are in place for effective competition for domestic supply contracts. This review must be published by 31 August 2020 and include a recommendation on whether the cap should remain in place for 2021 or be removed. The Secretary of State will consider this review and make a decision by 31 October 2020. If the default tariff cap is extended into 2021, the process will be repeated in 2021; if the cap is extended into 2022 the exercise will be repeated for a final time in 2022 as the cap will cease to have effect at the end of 2023.

This paper proposes a framework for making that assessment. We would welcome your views on it.

We plan to hold a workshop while the consultation is open, and details will be made available here shortly.

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UK power prices turn negative for nine hours, balancing costs spike during ‘extraordinary’ weekend

UK power prices turned negative for nine consecutive hours on Sunday in what’s been billed as an “extraordinary turn of events” for the country’s electricity system.

Unusually low demand, some 2GW below forecasts, combined with high wind generation to send prices spiralling, and National Grid was even forced into instructing onshore and offshore wind farms to turn down their generation.

Between the hours of 12:00pm and 9:00pm on Sunday 26 May, the UK endured an extended period of negative pricing, with wholesale power prices falling to as low as -£71.26/MWh.

National Grid Electricity System Operator’s daily balancing report for 26 May 2019 reveals that the SO paid more than £6.6 million on balancing costs, having spent just £300,000 the day before, providing an indication as to the scale of the volatility experienced on the system throughout the day.

At nine hours long, it amounts to the longest consecutive period of negative pricing the UK has encountered and has been described as “unprecedented” by energy tech company Limejump, which acts within the balancing mechanism.

In addition, after a slight recovery, the market dipped back into negative pricing between 11:45pm on Sunday and 1:45am on the morning of Monday 27 May, meaning that negative prices were in action for around 11 hours within a 24 hour period.

The instances of negative pricing left the average system price for power on Sunday 26 May at -£12.16/MWh.

Those prices were essentially created by low demand. The average power demand on Sunday was just 25.4GW, while the minimum demand in that period was 19.8GW, recorded between 3:45am and 4:15am, right towards the lower end of minimum demand forecasts within National Grid’s 2019 Summer Outlook.

The event comes just two months after the previous long run of negative system prices, a period of six hours which occurred on Sunday 24 March that witnessed system prices fall to similar lows.

Limejump said in a trading note issued to customers: “The question traders have been asking themselves earlier this year – ‘Are negative system prices an anomaly or are they here to stay?’ – has now been answered without a doubt by these an a number of other observed similar scenarios.”

Speaking to Current±, a Limejump spokesperson said that those operating battery storage plants over the weekend were obvious winners.

“Smart trading strategies deliver great revenue especially those with accurate forecasting. Batteries that were charging during these negative prices time frame, including Limejump’s, were definitely happy recipient.”

It was also a significant weekend for the carbon intensity of the grid, which at times dipped well below the 100g CO2/kWh threshold required to comply with the Fifth Carbon Budget. Sunday afternoon saw carbon intensity dip to just 69g CO2/kWh on the back of surging wind and solar activity.

Coal meanwhile is in the midst of yet another record breaking absence from the UK’s power mix, having not generated for more than 250 hours, equivalent to almost 11 days. Only earlier this month Britain celebrated its first coal-free month since the Industrial Revolution, and coal has now experienced more than 1,500 hours off the grid in 2019.

Wind meanwhile spent large portions of Sunday afternoon providing more than 11GW of power, equivalent to 37-39% of total demand.

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EON confident in assets swap with RWE as Q1 profit drops

German energy giant EON expressed confidence in its planned massive assets swap with RWE’s renewable energy subsidiary, despite weaker first quarter results released Monday.

Essen-based group EON, which suffered terrible losses from 2014 until 2016 due to restructuring and Germany’s abandoning of nuclear power, has since got back in the black, but its figures were down for the first quarter of 2019.

Between January and March, its adjusted net profit — which strips out discontinued operations in the renewables segment, as well as other non-operating effects — declined 11 percent year-on-year to 650 million euros ($730 million).

Its adjusted operating profit also fell eight percent to 1.17 billion euros.

The figures roughly tally with the expectations of analysts from financial services provider Factset, which expected adjusted net income of 626 million euros and adjusted operating income of 1.15 billion euros.

“Aside from the special case of the United Kingdom,” where capped prices and keen competition saw a sharp decline in the group’s profits, “our core businesses delivered a solid performance,” said chief financial officer Marc Spieker.

The German energy giant has confirmed its target for adjusted operating income for 2019 is between 2.9 and 3.1 billion euros.

The adjusted net income is expected to be in the range of 1.4 to 1.6 billion euros.

Last year EON announced plans to take over German rival RWE’s renewables unit Innogy as part of a complex asset swap deal set to shake up the energy sector.

“The planned transaction with RWE is right on schedule,” EON said of the deal that is expected to impact the two energy giants’ financials.

EON added that as expected, the European Commission in March opened an in-depth probe into the deal but that the company was “confident that it will obtain the necessary approvals in the second half of 2019”.

The redistribution of assets allows the two former rivals to specialise in energy distribution and production respectively.

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Yü Energy shares soar after FCA drops investigation

Yü Group’s share price climbed 66 per cent in early trading on news that the Financial Conduct Authority has discontinued its investigation into the company and does not intend to take action.

The business energy and water supplier revealed a hole in accounts last October related to revenue it had booked but that was not actually recoverable from clients. As a result, Yü said would post a loss for full year 2018 and a much reduced profit for 2019. Its share price collapsed by 80 per cent.

Yü then hired PwC and DLA Piper to conduct a “forensic review” of its books, and CEO Bobby Kalar said the company would be “more selective and prudent” about customer acquisition.

Bad debt is a longstanding issue in the business energy market, particularly at SME level. Drax-owned B2B energy suppliers Opus Energy and Haven Power reported a 72 per cent increase in bad debt charges to £31m for the year ended 31 December.

 

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Will Corbyn nationalisation kill the National Grid and SSE share prices?

Utilities companies like National Grid (LSE: NG) and SSE (LSE: SSE) have long been seen as reliable income providers, with great visibility of earnings and the ability to translate a high proportion of them to dividends.

National Grid, for example, is expected to provide a dividend yield of 5.6% this year, rising to 5.9% by 2021. SSE’s forecast yield is already even higher at 8.2%. But that would be nowhere near covered by an expected big dip in earnings, and is forecast to drop to 6.7% next year — but still pretty big, if relatively weakly covered.

Debts

SSE is already suffering with rising debts, and that’s added a bit of a drag to the share price. But both of these companies have suffered sharp share price falls in the past month — National Grid shares are down 6.1% with SSE down 7.4%, over a period in which the FTSE 100 gained 3%.

The recent dip was triggered when the BBC published an online article under the headline: “Labour to outline National Grid ownership plans,” reporting on Jeremy Corbyn’s apparent upcoming speech outlining his detailed nationalisation plans. It seems he changed his mind and decided to put off the subject until a later date, and the BBC pulled the article. But the damage was done.

Corbyn hasn’t spoken directly about SSE itself, but he has made clear his intention of nationalising the utilities business.

Popular

Whether Labour will win the next election is completely up in the air — but Corbyn’s chances might be high, with surveys suggesting around three quarters of the UK population are in favour of his nationalisation aims.

But it would be an enormous task. National Grid and SSE are the two biggest, with market capitalisation figures of £28.4bn and £11.8bn, respectively. Adding just the other FTSE 100 utilities firms to the list gets us a total of £56.9bn.

Then there are all the new upstart energy suppliers whose businesses will have to be bought out, and there are going to be plenty of other hefty costs too — so it’s going to be an expensive business.

Payment

Corbyn has mooted the idea of compensating shareholders with government bonds. Now, I don’t know about you, but I certainly don’t want any of those — though I suppose they can be sold easily enough.

One big uncertainty is what prices the companies might be bought out at. But it’s hard to imagine a possibility these days of the government being able to snap them up on the cheap at below market value. But those market values are already being damaged by Labour’s pronouncements.

A buyout of National Grid would be complicated by the fact that half the company’s business in in the USA, though that hurdle is not there with SSE.

Don’t panic

The two things that make me feel shareholders don’t have a huge amount to worry about is that there will surely be big legal challenges to anything institutional investors might feel is unfair, and that I expect it will all take a very, very long time.

In my view, either nationalisation won’t actually happen, or if it does, it will be at a fair price.

Financial Independence, Retire Early

If you’ve ever dreamt of retiring early, or if you’re already retired and protecting your financial independence is your aim, then this could be the report for you!

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Brexit … and your business energy costs

Brexit heralds a new dawn of uncertainty – so what does this mean for your business energy bill?

With potential restrictions on staff, commodities and exports across borders, there’s also the inevitable impact on your business energy tariffs.

Unpredictable energy prices

Whether you were Leave or Remain, there were clear advantages brought by open borders, frictionless trade, unrestricted worker movement, common tariffs and access to Europe-wide energy sources. This helped predict a steady flow of supply and demand. But this may all change soon.

Security of supply

Security of supply and access to energy could become hugely problematic for the UK according to the government’s website when they comment ‘it may be necessary to seek additional powers to preserve security of supply’.

Pipelines bring a large supply of gas into the UK from Europe and free flow of energy across ‘interconnectors’ is vital to keep competition up, and prices down. There is little evidence of a strategy that will address this issue once we leave. Although green and clean energy supply across the UK slowly increases, there is no way it will fill such a big void.

The negotiation period is being extended and we know businesses will be unsure what the future holds. Like yourselves we will watch with interest as the story unfolds. To read more blogs visit our website here.