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RWE absorbs innogy activities in final move of E.On asset swap

RWE has today (2 July) taken over the activities of innogy, marking the conclusion of its asset swap with E.On.

The German energy company sold its remaining stake in innogy to E.On as part of the deal, but has today integrated innogy’s renewables and gas storage businesses into its own operations, with over 2,700 employees switching over.

“The new RWE has been completed,” RWE’s CFO, Markus Krebber, said. “It is a new, bigger and more diverse company, with a clear goal.

“We have a wonderful starting point: a huge worldwide renewables portfolio, two teams that complement each other perfectly with many years of experience, and a strong investment programme,” he continued.

Innogy’s stake in the Austrian power utility Kelag has also been transferred today, which RWE said supplements the portfolio “perfectly” with its hydroelectric power business.

The swap – which was been in the works since 2018 and was approved in September 2019 by the European Commission- also saw RWE acquire E.On’s renewable energy activities in 2019.

RWE is aiming to be carbon neutral by 2040, and now is largely focused on power generation over its networks business, which has been transferred to E.On.

Meanwhile, E.On saw a sharp increase in its sales and earnings in Q1 2020 which it said was due to its takeover of innogy and npower, a marked improvement in light of the latter causing its net income to fall by 49% in its financial results for 2019.

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Centrica launches new Energy as a Service bundle to help businesses build back better

Centrica Business Solutions (CBS) has launched a new Energy as a Service bundle, specifically for those that are looking to make an investment in energy saving technologies.

The capital-free energy generation product is designed to help businesses ‘build back better’ in response to COVID-19.

It will offer a bundle to companies that includes the design, installation and financing of on-site power generation, helping them to decarbonise and reduce their energy bills without the upfront capital expenditure of equipment.

Typically, this would see CBS installing on-site generation technology such as Combined Heat and Power units for a customer, which it will then manage as well as providing any top up electricity or gas needed. The business repays the cost of the technology through the energy savings across the length of the contract.

Additional savings will be made through the use of the generation technologies in wholesale and demand response markets, said CBS.

According to the company, by choosing the bundle, savings can be made in the short term that can then be used to support more long term carbon cutting measures, such as the installation of PV panels or enabling electric vehicles.

“For many organisations, the last few months have been extremely challenging and so reducing costs and improving business resilience will be critical to recovery,” said Alan Barlow, director of UK & Ireland for CBS.

“By helping with the upfront investment in energy solutions, we can support them towards improved energy security and cost savings. Our aim is to support customers who wish to Build Back Better, by transitioning to a sustainable future without the need for significant capital.”

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EDF preparing cost-cutting plan worth up to three billion euros: sources

PARIS (Reuters) – French state-controlled utility EDF (EDF.PA) has started preparing a cost-cutting plan worth between 2 and 3 billion euros ($1.13 billion), two sources told Reuters, confirming a report by French newspaper Le Monde.

The savings plan could entail divestments of major assets or a hiring and investment freeze, while seeking cost cuts at all levels, Le Monde said on Monday.

An EDF spokesman told Reuters there was a savings plan in the works, but said it was too early to provide details.

EDF, which operates all of France’s 57 nuclear reactors that account for around 70% of the country’s electricity needs, earlier withdrew its financial targets for 2020 and 2021 as the fallout from the coronavirus outbreak hit key areas of its businesses.

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Good Energy sees ‘first signs’ of pick-up in demand; underlying profit meets expectations

Renewable electricity supplier Good Energy reported that underlying profitability in the year to date had been in line with management’s expectations and said it had started to see the ‘first signs’ of pick-up in demand. A range of ‘planned efficiencies and management initiatives,’ offset the short-term gross margin impact resulting from wholesale energy price reductions, leading to an underlying profit performance in line with the board’s expectations, the company said. Good Energy also said it was starting to see the first signs of increased demand pick up in some half hourly business segments, following weakness in prior months. ‘Overall demand within the energy supply segment remained lower in June, in line with April and May, with an increase in domestic supply largely offset by a decrease in SME volumes, with half hourly business volumes also remaining below normal,’ it added.

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Almost 40% of households report increase in utility bills since Covid-19 began

Almost 60% of Britons say the overall cost of life has increased during the pandemic, according to a new survey

Almost 39% of people globally say their utility bills, including water, electricity, heating, air conditioning, phone, internet and TV services, have increased since the Covid-19 pandemic began.

This is just one of the findings of the latest global Ipsos survey, which shows a majority of people in 26 countries say the costs of food, goods and services have increased since the coronavirus outbreak started.

Almost 60% of the respondents in the UK believe the overall cost of living has increased during the pandemic.

By region, 75% of people in Latin America were most likely to say costs have risen, followed by 72% of those in the Middle East and Africa – more than a third also said transportation and fuel costs had decreased, as a possible consequence of less travel and lockdown restrictions.

Around 56% of people in Turkey said costs have risen, followed by 52% of Malaysians, 51% of Britons and 50% of Canadians.

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Swansea tidal lagoon backers call for Boris Johnson to greenlight project

The chief executive of the Swansea Tidal Lagoon has called for Boris Johnson to give the go ahead to the renewable energy project, saying that the UK will need to use “every green project we can” if it is to decarbonise its energy system.

Currently, the project is waiting for the Department of Business, Energy and Industrial Strategy to approve a decommissioning plan which would allow work to begin on site.

However, if the plan is not signed off in the next eight days, the planning consent for the £1.3bn project will be lost. 

Speaking to City A.M., Mark Shorrock said that the development needed someone in Whitehall to push it over the line.

“We need the Prime Minister to say to Whitehall, ‘I want to do this project – take that decommissioning plan out of the drawer”.

Johnson has previously spoken out in support of the Swansea lagoon, which would power 155,000 homes at least, when he was running to be the leader of the Conservative party.

 “He’s said he wants to see Swansea get going. He has said Britain’s recovery is all about jobs, apprenticeships and long term investment and we have this wonderful project that’s on the cusp of being able to break ground at the end of the week with our global alliance partners”, Shorrock told the BBC.

“We can turn the tide on economic downturn with tidal. We hope the Prime Minister can get behind us.”

Over the weekend the Daily Mail reported that a group of 25 backbench Tory MPs were lobbying business secretary Alok Sharma to push the plan through.

Former party leader Iain Duncan Smith, who is one of the group’s leaders, said that the lagoon was the type of “shovel ready” project the government should be embracing to create jobs after the coronavirus pandemic.

Shorrock told City A.M. that the project presented the government with a chance to develop a world-leading industry in the UK with developments all around the country, thus pushing its levelling-up agenda.

Back in 2017, a review of the project by former energy minister Charles Hendry concluded that moving ahead with the pilot project was a “no regrets policy”.

The Swansea project will support 2,200 jobs, but expansion to a second project at Cardiff would mean a further 11,000 jobs. 

Looking further ahead, a fleet of four Welsh tidal lagoons would lead to 33,500 positions being created and six tidal lagoons across the UK would mean employment for 71,000.

The initial project will require a subsidy of £18m from the government, but the subsequent lagoons would pay for themselves, Shorrock said.

“The national significance is enormous if we get Swansea away. Then we can do it at Cardiff and Colwyn Bay, but not with any subsidy. That’s already £13.7 billion into the UK economy”, he added.

Furthermore, the cost of the energy the lagoons would provide has now been lowered to the point where it is now cheaper than nuclear.

In addition, he said, working with supply chains across the UK would mean that 84p out of every £1 spent on the billion-pound project would be spent in this country.

Shorrock said that he already had a team working on two tidal lagoon projects in France, demonstrating the export value of the proposition.

If it is given the go-ahead, the lagoon will be built by a consortium of some of the UK’s biggest construction companies, including Costain, Atkins, GE and Keltbray.

According to Shorrock, BEIS officials had already approved the decommissioning plan back in March, but the firm is still awaiting proper sign-off. 

A government spokesman said: “Any proposed project like the Swansea Bay Tidal Lagoon must provide value for money for the consumer, which we have been clear about since this project was first proposed. Following extensive analysis, the project did not meet this criteria.”

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Ofgem caps UK power balancing costs

UK energy regulator Ofgem has decided to cap balancing service payments to help market participants manage increased balancing costs owing to the Covid-19 pandemic.

The Balancing Services Use of System (BSUoS) price will be capped at £15/MWh (€6.56/MWh) in each settlement period until 31 August, and any under-recovery of revenue will be recovered through BSUoS charges equally across all settlement periods in 2021-22. This will take effect from 25 June.

Balancing costs are rising as the National Grid Electricity System Operator (ESO) takes a number of measures to help it deal with reduced demand, including paying a unit at the Sizewell B nuclear station not to run.

The ESO in May forecast total BSUoS costs for May-August at around £826mn, under an assumed fall in demand of 15-20pc. This was an increase of £441mn compared with a forecast made in February.

But UK power demand has since recovered to around 5-10pc below normal levels, Ofgem said.

The ESO this month reduced its forecast BSUoS costs for May-August to £593mn-£656mn, assuming demand remains 5-10pc lower than usual.

Ofgem expects deferred payments will be less than 5pc of total BSUoS charges from 25 June-31 August.

If the amount of deferred costs exceeds £100mn, Ofgem will examine how to mitigate the ESO’s exposure to the loss on revenue.

The deferred charges would have totalled £8.5mn last month, had the cap been in place, from 112 settlement periods, the regulator said.

By Killian Staines

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

The body representing the UK’s electricity and gas transmission and distribution sector has set out its plans for reaching net-zero by 2050, concluding that this ambition will only be achieved if a “whole-systems” approach to transformation is adopted.

In its Energy Networks Innovation Strategy, the Energy Networks Association (ENA) lists the net-zero transition as a key theme around which current and future innovations must be centred.

The ENA praises policymakers and businesses across the utilities sector for investing in green innovation, noting that 1,100 grid innovation projects were underway as of the end of March. Among these projects are the UK’s first grid-injected hydrogen trials, currently underway at Keele University, virtual power plants in Yorkshire and West Sussex and the Social Constraint Managed Zone, whereby businesses have partnered with fuel poverty charity National Energy Action to provide low-income homes with the ability to sell flexibility services to the grid.

But the ENA ultimately concludes that broader, more rapid and more joined-up action is needed if Great Britain’s energy and gas networks are to align with the UK’s long-term climate targets while addressing consumer vulnerability and preserving energy security.

In the electricity sector, the Innovation Strategy states, priority in the coming years must be given to bringing more low and zero-carbon generation onto the grid – enough not just to meet current needs, but future demand, which will rise significantly as sectors such as heat and transport are electrified. This uptick in generation must be matched with investment in technologies which enable smart and flexible systems, such as large and small-scale energy storage and other demand-response methods, optimised by technologies such as artificial intelligence (AI).

Aside from these measures – which have all been repeatedly urged before by various corporates in the energy sector and by industry bodies and think-tanks – the ENA is calling on businesses to research the operational impact of long-duration reserve services, which would need to become more commonplace as the electricity mix shifts in favour of renewables.

Electricity firms should additionally collaborate with gas firms, policymakers, academics and other bodies to co-create a national methodology for calculating the cost of carbon, the ENA recommends.

Life’s a gas

In the gas sector specifically, the ENA is recommending that businesses begin “actively developing” networks and products which are both hydrogen-ready and capable of supporting a broader array of green gases.

The Committee on Climate Change (CCC) has repeatedly advised that hydrogen is a necessity, not an option, for decarbonising heat and transport in line with the UK’s net-zero target.

But the global and domestic clean hydrogen industries, a recent Bloomberg NEF analysis concluded, are “tiny”, and will need significant long-term support from business and policymakers. Moreover, the analysis found, such support must frame hydrogen as only one piece of a wider decarbonisation puzzle, rather than a “silver bullet” for all emissions.

To that end, the ENA is calling on businesses to develop not only the technologies but the market mechanisms needed to enable the clean energy transition in the gas sector. Policymakers will need to see evidence that the transition can ensure resilience and reliability, without dramatically increasing costs for consumers, the Strategy states. Moreover, sector coupling with industries such as the built environment and transport must be considered.

All of the ENA’s calls to action are ultimately underpinned by recommendations for implementing a whole-systems approach, in which ambition and action gaps are not allowed to widen. In order to shift to this approach, gas and electricity companies alike must collaborate on solution development and scaling; the creation of cost-benefit analyses; the development of regional plans and forecasts; and improving access to and visibility of data.

ENA chief executive David Smith said all recommendations have been drafted “following extensive consultation with a range of different groups across Britain’s energy sector”, making them ambitious yet achievable.

“From connecting ever greater levels of renewable energy to finding the new solutions we need for decarbonising heat and transport; our energy network infrastructure is already at the centre of delivering a world-leading net-zero economy,” Smith said.

“That role is set to grow, as that infrastructure takes on new responsibilities to deliver decarbonisation. We need to ensure our network infrastructure is future-ready, that our approach is transparent and accountable and that it is focussed as much on local needs as it is on national ones.”

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Euston Energy Ltd, trading as Northumbria Energy: Final Order

On 10 January 2020 the Authority published a notice of proposal to issue a final order on Euston Energy Ltd (“Euston”) in accordance with section 26 (1) and (2) of the Electricity Act 1989 and section 29 (1) and (2) of the Gas Act 1986.

The Authority had been in discussions with Euston regarding the requirement to become a DCC User (as defined in standard licence conditions 42.11 and 48.11 of the gas and electricity supply licences respectively).

Standard licence conditions 42.8 of the gas supply licence and 48.8 of the electricity supply licence require licensees to become DCC Users by 25 November 2017. As highlighted in the Authority’s open letter from December 2017, those suppliers who entered the market following the 25 November 2017, should not exit Controlled Market Entry (CME) without being a DCC user.

The particular behaviour of concern giving rise to the proposal to make a Final Order was that Euston failed to become a DCC User by the deadline and remains non-compliant. By failing to be a DCC User in accordance with the licence condition, its existing customers with smart meters are suffering harm because they do not have smart meter functionality. There will also be harm to customers who will lose their smart functionality on switching to Euston.

Representations or objections with respect to the proposed final order were invited to be made to the Authority by 10am 3 February 2020.

Euston made written representations on 3 February 2020. The Authority has noted the representations received from Euston in the context of the consultation undertaken pursuant to section 26(1) of the EA89 and section 29(1) of the GA86. The Authority notes the progress Euston has made to becoming a DCC User since leaving CME and that Euston anticipates becoming a DCC User before the end of March 2020. However, the fact remains that Euston is not compliant with the Relevant Condition despite the fact that Euston should have been compliant before exiting CME.

Therefore, on 6 March 2020, the Authority made the final order, pursuant to section 25 (1) of the Electricity Act 1989 and section 28 (1) of the Gas Act 1986, requiring Euston:

• to become a DCC User by no later than 31 March 2020;

• not to acquire any new customers or add any customer accounts by upgrading to dual fuel from the date that the Final Order is made until Euston can demonstrate that it is a DCC User.

As soon as Euston becomes a DCC User, the sales ban will be lifted and the Authority will begin the process of revoking the final order.

On 1 April 2020, the Authority received satisfactory evidence from The Smart Energy Code Administrator and Secretariat (SECAS) that Euston had completed all the required steps to become a DCC user and had therefore met the requirements set out in the Final Order for it to be able to acquire new customers and add new customer accounts by upgrading to dual fuel.

On 9 April 2020, the Authority published its notice of proposal to revoke the Final Order imposed on Euston on 6 March 2020. The Authority was satisfied that the Final Order should be revoked because Euston became a DCC User on 1 April 2020 and is therefore compliant with standard licence conditions 42.8 of the gas supply licence and 48.8 of the electricity supply licence.

The Authority gave this notice in accordance with section 26(6) of the Electricity Act 1989 and section 29(5) of the Gas Act 1986. Any representations or objections with respect to the proposed revocation are to be made to the Authority by 5pm on 8 May 2020.

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Energy UK asks government to enable payment holiday scheme

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

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

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

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

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

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

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

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

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

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

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