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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.

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All-Ireland electricity market sparks negative pricing

The new all-Ireland electricity market that came into effect last October has led to increased volatility in prices in the wholesale market, and a number of occasions when power companies were forced to pay commercial customers to accept their excess energy, according to Dublin-based energy trading company.

Under the Integrated Single Electricity Market (I-SEM), designed to boost efficiency and align Irish energy costs more closely with those in Europe, all generators, including wind companies, are required to price and sell their electricity output 12 to 36 hours ahead of actual delivery.

However, wind companies are often unable to accurately forecast their output up to 36 hours in advance.

“[When] wind output is very high we begin to see more circumstances whereby conventional power plants begin to offer their output for a negative price in an effort to avoid switching the unit off and having to go through a maintenance intensive operation to restart the facility when they are required ,as wind reduces,” said Ronan Doherty, chief executive of ElectroRoute, a Dublin-headquartered energy trading company.

Mr Doherty said that there have been 556 half-hour periods of negative pricing between October and mid-April in a market for power that has not been traded in advance. This is known as the balancing market.

Smart meters

While big companies can take advantage of power market fluctuations and secure negatively-priced energy, this is not currently an option for households. Still, Mr Doherty said that advent of smart meters, which will give consumers greater control over energy use, may in time provide an opportunity for households to benefit from periods of negative pricing in the balancing market.

Every domestic electricity meter in Ireland is set to be replaced by a smart meter by the end of 2020, according to ESB Networks.

While negative pricing is a common feature of the European energy market, it is a new phenomenon in Ireland.

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Courts shut down renewable energy investment company

Darlington company that sold investment opportunities in renewable energy plants has been shut down after it failed to pay back millions of investors’ funds.

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Alternative heat solutions: converting a town to low carbon heating

Details

As part of its wider research into heat decarbonisation, BEIS commissioned Ramboll Energy to explore possible technologies able to convert a UK town to low carbon heating and to analyse the costs, practical constraints and challenges associated with each of them.

The technologies analysed were:

  • hydrogen with carbon capture and storage combined with electric cooking
  • hybrid heat pumps with gas cooking
  • electric heat pumps and electric cooking
  • district heating from biomass and heat pumps

Read more here:

https://www.gov.uk/government/publications/alternative-heat-solutions-converting-a-town-to-low-carbon-heating

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Ofgem threatens Avro Energy with customer ban

Ofgem has threatened Avro Energy with a ban from taking on new customers if it has not signed up to a new smart meter wireless network by the end of May.

The energy watchdog warned that the restriction will continue until it has become a user of the Data Communication Company (DCC), the operator of the new smart meter infrastructure.

To accelerate the installation of the next generation of smart meters all energy suppliers were required to become DCC users by November 25, 2017, however Avro failed to meet the deadline and is still not a DCC user.

The measure was part of a larger project to roll-out smart meters to all consumer and small business customers across the UK by the end of 2020.

Ofgem said smart meters that do not have a DCC connection will operate as traditional meters with customers needing to provide manual meter readings and unable to access the benefits of the new smart meters.

It said this could “cause consumer detriment” and “undermine consumer confidence in the smart meter programme and the switching process”.

The energy regulator said Avro submitted a plan to become compliant by July 25, but to “avoid the risk of harm to consumers”, Ofgem is considering issuing a final order to the company to ensure it becomes DCC compliant by that date.

The final order will be consulted on for 21 days before Ofgem may issue it to Avro.

Gillian Guy, chief executive of charity Citizens Advice, said Avro’s failure to join the DCC means it is “unprepared” for the smart energy roll-out, leaving customers with first generation meters that will lose smart functionality if they switch suppliers.

“Suppliers shouldn’t risk consumer confidence in the programme by giving their customers a sub-par experience. Smart meters are critical for the long-term development of our energy infrastructure and it is vital that we get it right.”

Ms Guy called on the Government to publish to a new cost-benefit analysis on the roll-out as there has been “substantial delays” and “costs are escalating”.

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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.

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BILL HIKE EDF Energy to hike gas and electricity bills by 7.2% from June – adding £78 a year

It’s the second price rise in less than six months and it will add an average of £78 a year to bills for 1.5million customers

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Hurricane Energy shares soar after it makes “largest undeveloped” UK oil find in waters west of Shetland

North Sea oil exploration company Hurricane Energy has made what it describes as the “largest undeveloped” oil find so far in the UK’s waters.

Hurricane has proven its Halifax prospect and nearby Lancaster field are part of the same huge reservoir that could contain 1bn barrels of recoverable oil.

The company’s shares whipped up a storm after the announcement, climbing throughout the day to close up 8.76 per cent at 59p, up from a closing price of 54.25p per share on Friday. This time last year, Hurricane’s stock was worth around 11p per share.

Read more: Open offer and £70m share placing whips up a storm for Hurricane Energy

In February, Hurricane said its initial 300m barrel estimate from the Lancaster field was too conservative and that it was expecting a “material uplift” in anticipated reserves.

An analysis of the Halifax well found a column of oil-bearing rock of at least 1,156m, which was described as “very significant”. The company had expected a prospect of a 700m oil column.

Production of the area, which is located around 60 miles west of Shetland, is expected to start in the first half of 2019.

Read more: The UK has awarded 25 oil exploration licenses in untapped North Sea areas

Hurricane’s next step will be to procure funding to help it pay for an early production system, which is expected to require several hundred million dollars.

This could take the form of equity fundraising, debt fundraising or a partnership agreement with an oil major – or a combination of these.

“This is a highly significant moment for Hurricane,” said chief executive Dr Robert Trice. “I am delighted that the Halifax Well results support the company’s view that its substantial Lancaster discovery has been extended to include the Halifax licence. We believe that the Greater Lancaster Area is a single hydrocarbon accumulation, making it the largest undeveloped discovery on the UK Continental Shelf.”

Read more: Oil prices edge up on Saudi promise to cut US exports

Shetland, Highlands and Islands Member of Scottish Parliament Maree Todd said Hurricane’s find was “a significant discovery and a welcome reminder of the huge untapped potential that remains in Scottish waters”.

“Perhaps this welcome news for the industry might, at long last, spur the UK government into action in providing long overdue support for Scotland’s energy sector,” Todd added.

SUEZ Announces Completion Of 3 UK Energy From Waste Plants

Waste management company, SUEZ, has announced the completion of four new energy from waste (EfW) plants. Three of which are in the UK.

The fourth is in Poland and, combined, boosts the group’s recovery capacity by an additional 1.2m tonnes of residual waste.

The UK plants are located in Wilton (near Newscastle), Severnside (near Bristol) and Cornwall.

In 2017, SUEZ will recover more than 9m tonnes of waste in 55 EfW plants in Europe, compared with 8.5m of tonnes recovered into energy in 2016.

Seven TWh of energy will be sold, which is the equivalent of the annual consumption of a city with 2m inhabitants, such as Vienna or Hamburg, and will avoid more than 1.5 m tonnes of CO2 emissions, SUEZ says.

Jean-Marc Boursier, Group Senior Executive VP in charge of Recycling & Recovery Europe at SUEZ, said: “Waste can become secondary raw materials. Waste that cannot be recycled is also an energy resource with three benefits as it is local, low-carbon and affordable for both local public authorities and industries.

“We are convinced of the growth potential for the Group in Europe and on international markets. Our ambition is to recover more than 10m tonnes of waste as sustainable energy by 2020”.

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SSE the latest ‘big six’ firm to put its prices up

Customers of SSE are set to see their electricity bills rise by 14.9% from 28 April, as the company became the latest of the “big six” energy suppliers to increase prices.

The firm, formerly known as Scottish & Southern Energy, said its typical dual fuel (gas and electricity) customer will see their annual bill rise by 6.9%, or £73 a year. It blamed its first electricity price rise in three-and-a-half years on government policies that require all energy customers to subsidise renewable energy, and the cost of a smart meter installation programme. Gas prices for the company’s 2.8 million customers remain unchanged.

 

Will Morris, SSE’s managing director for retail, said he “deeply regretted” having to put prices up. “We have seen significant increases in electricity costs, which are outside our control,” he said. “Without an increase we would have been supplying electricity to domestic customers at a loss.”

Four of the other big six suppliers have already announced price rises this year, while British Gas has held its prices until August. Scottish Power’s standard electricity prices will increase by an average of 10.8% and gas by 4.7% on 31 March. Npower is raising its standard tariff electricity prices by 15% from 16 March, and gas prices by 4.8%. EDF Energy cut its gas prices by 5.2% in January, but its electricity prices rose by 8.4% on 1 March. E.ON is increasing electricity prices by an average of 13.8% and gas prices by 3.8% on 26 April.

Mark Todd of switching service energyhelpline described the SSE increase as a hammer blow to households. “SSE lost 130,000 customers last year, and are likely to lose even more as customers switch to beat the hikes. The company announced in February that gas usage was up by 10% and electricity usage was up by 2% in 2016, meaning they benefited from higher usage last year and will now benefit from higher prices in 2017. Customers must not continue to stay loyal to the energy giants. Move to a low-cost fixed-rate tariff and you can beat these price rises.”

 

Todd says a typical SSE standard tariff customer will pay £1,141 a year after this price rise, yet could get a deal as cheap as £834 a year by switching.

A two-year investigation by the Competition and Markets Authority concluded last June that 70% of domestic customers of the big six were on expensive standard variable tariffs and could save more than £300 by switching. As a result, customers have been paying £1.4bn a year more than they would in a fully competitive market, the CMA found.

The government is expected to address concerns about the energy market when it publishes a consumer green paper in the spring. John Penrose, a former minister at the Cabinet Office and a Conservative MP, has called on the government to introduce a relative price cap, where the worst-value standard variable tariffs are no more than a certain percentage more expensive than the best-value fixed deals. He said: “We still get lots of competition, lots of choice, but it does mean the most vulnerable of us or those of us with least time to switch suppliers don’t get ripped off.”

Penrose secured a House of Commons debate this week on energy bills. “In most things in life, if you are a loyal customer you are valued and rewarded. But apparently for your energy bill, loyal customers in the view of big energy firms are there to be exploited and not rewarded – and that doesn’t seem fair,” he said.