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Vattenfall wins Midlothian Council energy partnership

Midlothian Council, which has declared a Climate Emergency, has appointed Vattenfall as the preferred bidder for its energy partnership

The partnership between Midlothian and Vattenfall will focus on delivering a wide range of energy projects across the area.

This first project is expected to save over 2,000 tonnes of CO2 per year, the equivalent of taking 1,200 petrol/diesel cars off the road. It will be a fourth-generation, innovative low carbon district heating network to the new Shawfair town in the north of the council area on the outskirts of Edinburgh.

The network will benefit from heat supplied by FCC Environment, which operates the councils’ (Edinburgh and Midlothian) state of the art energy from waste facility (EfW) near Millerhill. The EfW is fuelled by residual waste collected by the local councils of Midlothian, Edinburgh and East Lothian.

In addition to setting up a long term ESCo, Midlothian Council aims to sign a 40-year agreement with the ESCo to supply heat to the new public buildings to be built at the new Shawfair town.

The new company will negotiate final contracts with its main initial partners, FCC Environment and Shawfair LLP. FCC will supply the low carbon heat and Shawfair LLP will facilitate the connections to new domestic and commercial developments in the town.

The details of agreements are now being worked up with a view to signing the contract by the middle of this year.

A £20m energy project

This first £20m project will benefit from financial support of up to £7.3m from the Scottish Government’s Low Carbon Infrastructure Transformation Project, which is part-funded by the European Regional Development Fund. The council also benefits from a close working relationship on the project from Scottish Futures Trust.

Future projects to be undertaken by the ESCo will include the potential expansion of the district heating network into areas of East Lothian and Edinburgh, creating a network similar in scale to those delivered in major cities throughout Europe, such as Amsterdam.

The network will bring the latest in heat network technology to Scotland, built as a low-temperature network.

Low-temperature heat networks bring with them many benefits, including lower costs, maintenance, and an ability to adapt to take heat from many sources of waste heat, e.g. sewage works and data centres.

Working with the Coal Authority, the potential for utilising the former Monktonhall Colliery for heat storage and supply will also be investigated.

Projects valued over £100m

Beyond district heating projects the ESCo may be asked to consider Solar PV, Electric Vehicle charging and direct wire electricity supplies to commercial properties. Over the lifetime of the ESCo projects to the total value of over £100m are anticipated.

Midlothian Council’s cabinet member for economic development, Councillor Russell Imrie said: “We’re very excited to be working with Vattenfall to set up an energy services company for innovative new projects benefitting local residents and businesses in the area and setting us well on our way to a carbon-neutral future.”

A sustainable new town

Tuomo Hattaka, senior vice president of Vattenfall Heat said: “We’re delighted to have been selected by Midlothian Council for this long term energy partnership that puts low carbon, fossil-free living front and centre of its ambition.

“Any organisation or company serious about reaching net-zero has low carbon heating at the top of its to-do list, and this energy partnership is no different.”

Mike Reynolds, managing director of Vattenfall Heat UK adds: “Midlothian has an abundance of local, low carbon heat potential which means that we can begin the partnership’s work with the installation of a state-of-the-art heat network that will deliver affordable, low carbon heating to local homes at the Shawfair development.”

Paul Taylor, group chief executive of FCC Environment said: “This news is a hugely positive step enabling, as it will, the use of the heat that the combustion process creates improving yet further the efficiency of the plant.

“Feeding into the planned district heating network on the plant’s doorstep will allow, not just us at FCC Environment, but all parties involved to realise a vision of the future place for Energy from Waste facilities such as Millerhill across the UK.”

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Government launches new business support campaign

The new business support campaign is designed to help businesses in England find out about the full range of available support.

The government has today (17 February 2020) launched a new business support campaign, designed to help businesses to find the right support as part of our ambition to make the UK the best place in the world to work and grow a business.

As part of the campaign, government support will be advertised across a range of media, from billboards and newspapers to radio and social media.

From today, all of the government’s business support schemes will be accessible via the new Business Support site, making it easier for businesses in England to find out about the full range of support available to them. (Business support in Scotland, Wales and Northern Ireland is provided by the devolved administrations so this site covers business in England only.)

Business Secretary Alok Sharma said:

We want to make the UK the best place in the world to start and grow a business. As part of delivering this ambition we are putting all of government’s business support together in one place to ensure more businesses can unleash their potential.

International Trade Secretary Liz Truss said:

We want British exporters to make the most of our status as an independent trading nation, now that we have left the EU. This government will provide the tools and support to ensure these businesses are ready to trade.

How we can help your business

Schemes are divided into 4 areas.

Finance and business planning

Funding for new businesses and support to help existing business grow, dealing with late payments, and equity and debt finance .

Leadership and talent

Mentoring schemes, help with recruiting, developing leadership skills or joining a network.

Innovation and technology

Funding for innovation, adoption of new technology, intellectual property and finding partners for innovation.

Exporting

Support for doing business internationally and expanding online.

More information

The website also provides access to a Business Support Helpline and a LiveChat function. More information about specific schemes in these areas can be found on the website.

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£90 million UK drive to reduce carbon emissions

Households and businesses will benefit from £90 million to cut carbon emissions in industry and homes.

  • £90 million package announced to tackle emissions from homes and heavy industry – including funding for Europe’s first hydrogen plants which could generate enough clean energy to heat over 200,000 homes
  • local energy projects across the country could reduce housing emissions by up to 80% and save consumers money on their energy bills
  • renewable energy to power industry instead of fossil fuels, removing 3.2 million tonnes of CO2 from the atmosphere by 2030

Households and businesses will benefit from £90 million to cut carbon emissions in industry and homes, Energy Minister Kwasi Kwarteng announced today (18 February 2020).

£70 million will include funding for 2 of Europe’s first-ever low carbon hydrogen production plants – the first on the banks of the Mersey, the second planned for near Aberdeen. A third project will develop technology to harness offshore wind off the Grimsby coast to power electrolysis and produce hydrogen.

Hydrogen is a low or zero-emission alternative to fossil fuels which could power future industry and transport. The investment will also fund projects to trial cutting-edge technologies for switching industrial production from fossil fuels to renewables in industries such as cement and glass production.

The remaining £20 million will be used to fund projects aimed at cutting household emissions and bills through nine UK-wide local “smart energy” projects. Over 250,000 people could have their homes powered by local renewable sources by 2030 – which could lead to their energy bills reducing by as much as half, thanks to this government funding.

If successful, the 10 community pilot projects from Rugeley near Stafford to Coleraine in Northern Ireland could revolutionise local energy generation – allowing local communities to join the frontline in the fight against climate change.

In Rugeley, a coal fired power station is to be demolished and turned into a sustainable village of 2,300 homes. Residents will benefit from thermal storage units instead of traditional gas boilers, enabling them to draw, store and heat their homes with geothermal energy from local canals and disused mine shafts.

In Coleraine, a micro-grid of nearly 100 homes will be established, powered entirely by local wind power. It will help lower household electricity bills by as much as 50% and boost the contribution of renewables to the local energy mix by a quarter.

Visiting the Gigastack project in Grimsby today, Kwasi Kwarteng, Minister for Business, Energy and Clean Growth, said:

Cleaning up emissions from industry and housing is a big challenge but today’s £90 million investment will set us on the right path as we develop clean technologies like hydrogen.

This is an important part of our world-leading efforts in eliminating our contribution to climate change by 2050 while also growing our economy, creating up to 2 million green collar jobs across the country by 2030.

This investment in low carbon innovation will be crucial to help us end our contribution to climate change by 2050.

The news comes just 2 weeks after the Prime Minister announced plans to bring forward the phase-out of coal to 2024 as we continue to ramp up our Year of Climate Action ahead of the UN Climate Change Conference (COP26) this November.

Notes to editors

1. The complete funding package forms part of the Department for Business, Energy and Industrial Strategy’s £500 million innovation fund, which is dedicated to harnessing and rolling out cutting edge technology to fight climate change.

2. Currently difficult and expensive to produce in bulk, hydrogen could be vital in the fight against climate change as a low carbon alternative to fossil fuels used by heavy transport and industry.

3. Of the £70 million being invested in these technologies, £28 million will be for projects developing hydrogen production, including the 2 plants.

4. A further £18.5 million of funding is being awarded to projects developing and trialling technologies to move industrial concrete and glass production away from fossil fuels and onto renewables.

5. The projects have the potential to be scaled up and rolled out across industry, meaning houses and roads could be built using low-emission concrete by 2030. This would prevent 3.2 million tonnes of CO2 a year from polluting the environment – equivalent to taking 679,000 cars off the road.

6. The remaining £22 million of funding will go to top UK scientists and engineers to conduct cutting-edge research into decarbonising industry, focusing on emission-heavy transport and heating.

7. Breakdown of funding:

  • Hydrogen Supply programme – £28 million for 5 demonstration phase projects
  • Industrial Fuel Switching programme – £18.5 million for 4 demonstration phase projects
  • UKRI Local Smart Energy Designs – £21 million for 10 demonstration phase projects
  • UKRI Key Technology Components for Local Energy Systems – £3 million awarded to various demonstration phase projects
  • UKRI Research funding – £22 million for research into challenges in reaching net zero posed by: heating, transport and global fuel markets

8. Hydrogen projects awarded funding:

ProjectLeading bodyFunding received
Dolphyn ProjectEnvironmental Resources Management Ltd£3.12 million
HyNetProgressive Energy Limited, in collaboration with Johnson Matthey, SNC Lavalin and Essar Oil£7.48 million
GigastackITM Power Trading Ltd, in collaboration with Orsted, Phillips 66 and Element Energy£7.5 million
AcornProject Pale Blue Dot Energy£2.7 million
HyPERCranfield University, in collaboration with Gas Technology Institute and Doosan£7.44 million

Find more details of the Hydrogen Supply Competition projects.

9. Fuel switching projects funding:

ProjectLeading bodyFunding received
HyNetProgressive Energy Ltd, in collaboration with Pilkington, Unilever and Essar£5.27 million
Hydrogen Alternatives to Gas for Calcium Lime ManufacturingBritish Lime Association£2.82 million
Switching fuels for cement productionMineral Products Association£3.2 million
Switching Technologies for the Glass SectorGlass Futures Ltd and partners£7.12 million

Find more details of the Industrial Fuel Switching competition projects.

10. Local smart energy projects awarded UKRI funding (more information available from UKRI):

ProjectTown / City
West Midlands Regional Energy System OperatorCoventry
GIRONAColeraine, Causeway Coast and Glens
Peterborough Integrated Renewables InfrastructurePeterborough
Green Smart Community Integrated Energy Systems 2Islington (London)
Zero Carbon RugeleyRugeley
GM Local Energy MarketGreater Manchester
Project REMeDYSouthend
Energy KingdomMilford Haven
Multi-vector Energy ExchangeLiverpool
REWIRE-NWWarrington

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Water industry hits back at Ofwat over price determinations

Two more water companies have referred Ofwat to the Competition and Markets Authority (CMA) today over its five-year financial plan for the sector, after Yorkshire Water did so on Monday.

Both Anglian and Northumbrian Water have referred the regulator’s price determinations, with the latter claiming that the plan runs “contrary to the long term best interests of customers and doesn’t provide for sustainable investment going forward”.

Anglian’s chief executive Peter Simpson said: “As we do not believe the Final Determination enables us to meet these needs, we are making use of the next step in the regulatory process and asking the CMA to consider if the right balance has been struck between bill reductions and investment”.

Kip Meek, CMA inquiry group chair said, “Everyone needs water, so it’s really important that customers’ bills are not set too high, but at the same time the water companies have enough money to deliver an efficient and high-quality service.

“The CMA will look closely at whether Ofwat’s decision strikes the right balance in this and other areas and will make changes if not.”

Ofwat’s latest financial plan would see companies forced to cut their debt and reduce bills for customers by an average of £50 from April.

Last week it was announced that bills for households will be cut around £17 this year as the new price controls come into effect.

The move is widely seen as an attempt to take on an industry which has come under fire for paying large dividends despite mounting debt, increasing household bills, and being responsible for instances of serious pollution.

The plan would also see companies invest a combined £51bn over the next five years to reduce pollution and leaks.

On Monday Yorkshire Water’s chief executive Liz Barber said the plan meant companies would be “forced to focus on short term performance at the expense of longer term capital investment”.

Although it was widely expected that most of the water industry would challenge Ofwat’s plans, both Thames Water and South West Water – which is owned by Pennon – accepted the determinations.

In a statement, Thames Water said that although the settlement was “most challenging” and would not allow for “essential resilience upgrades”, a “CMA referral would lead to significant management distraction at a time when the company is seeing improvements in customer service and leakage reduction”.

Rachel Fletcher, Ofwat’s chief executive, said that the regulator was “ready to fully engage with the CMA”:

“This price review lays down a major challenge for the sector to transform: introducing a demanding set of new performance targets backed by investment for the future, including £13bn dedicated for the environment and future generations. This is the greenest price review ever.

“We have been clear that shareholders’ rewards will only be earned through a new standard of operational excellence. Some investors have accepted this scale of ambition and change, but others need to face up to the new reality.

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British Gas scraps rise in minimum meter top-ups after public outcry

British Gas has scrapped an increase in the minimum top-up amount for its pre-pay energy meters after a public outcry over the move which opponents argued forced some vulnerable families to choose between eating and heating.

More than 90,000 people signed a petition calling for the UK’s biggest energy supplier to reverse their decision to raise the minimum top-up amount from £1 to £5 which was put in place on 1 January this year.

Activist group 38 degrees, which helped to spearhead the campaign, said the hike meant homes that rely on small top-ups to ration their heating costs between pay days were forced to choose between staying warm and buying food.

British Gas, which recently revealed its worst ever full-year profits for 2019, justified the hike by pointing out that only a small number of its pre-pay customers would regularly top-up their meter with less than £5 at a time. The supplier added that rivals at Ovo Energy and Bulb Energy have set a £5 limit to keep costs low.

Sarwjit Sambhi, the boss of British Gas, said “customers are always at the heart of the decisions we make” and the “aim of this move was to keep our costs down in order to offer our customers the best value”.

“But I am happy to change this decision whilst we continue to look at ways that we can help our most vulnerable customers,” he said.

About 91,000 members of the public signed a petition set up by Preet Kaur Gill, the MP for Birmingham Edgbaston, which called on British Gas to reverse their decision. Hundreds of people also contacted the supplier to share how they were affected.

Trevor, a British Gas customer from Stafford who signed the online petition, said: “I am disabled and so rely on benefits to get by. Sometimes you just haven’t got that fiver to top up the meter – because you’re not getting paid until the end of the week – so you can’t. It means choosing between things like food, and heat – and in cold weather it’s even worse.”

Gill said the British Gas U-turn is “a vital win for the thousands of people affected by British Gas’s decision to raise the minimum pre-pay top-up”.

“Our campaign revealed the extent of the fuel poverty crisis under this government. Much more needs to be done to ensure that no one has to choose between eating and heating their home. I urge other energy providers to follow suit,” she added.

Ruby Earle, a campaigner at 38 degrees, said: “This goes to show the power ordinary people can have when we come together.”

BP boss plans to ‘reinvent’ oil giant for green era

New BP boss Bernard Looney has said he wants the company to sharply cut net carbon emissions by 2050 or sooner.

Mr Looney said the 111-year-old company needed to “reinvent” itself, a strategy that will eventually include more investment in alternative energy.

BP will have to fundamentally reorganise itself to help make those changes, said Mr Looney, who took over as chief executive last week.

It follows similar moves by rivals, including Royal Dutch Shell and Total.

Mr Looney said: “The world’s carbon budget is finite and running out fast; we need a rapid transition to net zero.

“Trillions of dollars will need to be invested in re-plumbing and rewiring the world’s energy system.”

“This will certainly be a challenge, but also a tremendous opportunity. It is clear to me, and to our stakeholders, that for BP to play our part and serve our purpose, we have to change. And we want to change – this is the right thing for the world and for BP.”

He outlined his plans in a keynote speech on Wednesday.

“Providing the world with clean, reliable affordable energy will require nothing less than reimagining energy, and today that becomes BP’s new purpose,” he said. “Reimagining energy for people and our planet.”

“We’ll still be an energy company, but a very different kind of energy company: leaner, faster moving, lower carbon, and more valuable.”

BP’s announcement that it intends to become a zero carbon emissions company by 2050 was not short of fanfare. It’s new boss, 49-year-old Irishman Bernard Looney, delivered what the company described as a landmark speech in front of hundreds of journalists and investors.

But while he was clear what he wanted and why, he was less clear on how and when. There was a commitment to reduce the company’s investments in oil and gas exploration, and increase investment in zero and low-carbon energy over time.

But there were no commitments to specific targets in the intervening 30 years. Indeed he said that BP would still be in the oil and gas business three decades from now but in a sustainable way.

Ultimately, it will fall to his successors to make good on promises made today. But Mr Looney said in order to start a journey you need a destination. His critics would say you need a more detailed map on how to get there.

Presentational grey line

On Instagram, which Mr Looney recently signed up to, he said: “Rest assured – a lot of time – and listening – has gone into this.”

“All of the anxiety and frustration of the world at the pace of change is a big deal. I want you to know we are listening. Both as a company – and myself as an individual.”In the longer term, BP’s plans will involve less investment in oil and gas, and more investment in low carbon businesses.

The company said it wanted to be “net zero” by 2050 – that is, it wants the greenhouse gas emissions from its operations, and from the oil and gas it produces, to make no addition to the amount of greenhouse gases in the world’s atmosphere by that date.

It also wants to halve the amount of carbon in its products by 2050.

Mr Looney did not set out in detail how it intended to reach its “net zero” target, something that drew criticism from environmental campaign organisation Greenpeace.

Charlie Kronick, oil advisor from Greenpeace UK, said there were many unanswered questions. “How will they reach net zero? Will it be through offsetting? When will they stop wasting billions on drilling for new oil and gas we can’t burn?

“What is the scale and schedule for the renewables investment they barely mention? And what are they going to do this decade, when the battle to protect our climate will be won or lost?”

Mr Looney addressed this criticism after his speech, saying: “We want a rapid transition. A transition that is delayed, and then suddenly is a right-angle change that disrupts the world, would be destructive to our company.”

“We’re starting with a destination. The details will come,” he said.

When asked whether that meant it’s oil and gas business would cease to grow, Mr Looney said: “BP is going to be in the oil and gas business for a very long time. That’s a fact. We pay an $8bn in dividends [to shareholders] every year. Not paying that is one way to make sure that we’re not around to enable the transition that we want.”

However, he said the existing oil and gas business would shrink over time. Any remaining carbon produced by the use of BP products would have to be captured or offset, he said.

Investor pressure

Climate Action 100+, a group of large investors that is trying to put pressure on major greenhouse gas emitters to clean up their act, said the BP announcement was “welcome”.

“We need to see a wholesale shift to a net zero economy by 2050,” said Stephanie Pfeifer, a member of the action group’s steering committee.

“This must include oil and gas companies if we are to have any chance of successfully tackling the climate crisis,” said Ms Pfeifer, who is also chief executive of the Institutional Investors Group on Climate Change.

She said that Climate Action 100+ investors, which have already been putting pressure on BP, will continue to look for progress from the company in addressing climate change.

“This includes how it will invest more in non-oil and gas businesses, and ensuring its lobbying activity supports delivery of the Paris Agreement,” she said.

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Call for governments to work together to ‘kick start’ energy revolution

New funding needs to be established by the UK and Scottish governments to kick start a “community energy revolution” if climate change targets are to be met, a major new report has claimed.

The report by WPI Economics and SP Energy Networks calls for the UK and Scottish governments to collaborate to support community groups who want to generate their own energy.

But the report comes as the two administrations are at loggerheads over the COP26 climate conference due to be held in Glasgow later this year.

The Future of Community Energy document maps out the benefits the sector could deliver if given support, suggesting that over the next decade the number of community energy organisations could rise to around 4,000 across the UK – bringing a possible £1.8bn boost to local economies and creating over 8,000 jobs.

The schemes could also play a key role in meeting climate change targets by saving 2.5m tonnes of carbon emissions, while community solar panels or wind turbines could power up to 2.2m homes across the UK, and cut energy bills of households involved by up to £150m a year. A Citizens Advice Scotland report has found that one in eight Scots say their energy bills are unaffordable.

According to the report, the government should establish a national community energy strategy with a community energy fund; create new, regional funding streams; and give greater support and resource to groups who want to set up schemes.

Frank Mitchell, chief executive of SP Energy Networks said the report showed “just how much potential there is within our communities in our drive to a zero- carbon future, lowering emissions with the additional benefit of driving up skills and jobs across the UK.”

Last week MSPs on Holyrood’s economy and energy committee were told that more investment was needed if a broader range of people were to benefit from the decarbonisation of energy. A recent Climate Emergency Response Group report also said the Scottish Government needed to generate public and private investment of between £1.8bn and £3.6bn a year, to achieve its carbon emissions goals by 2045.

Community and local energy schemes are being encouraged as a way to increase renewable energy production, taking strain off the national grid, and creating new revenues for local areas. Today the Scottish Parliament also agreed to give rates relief to district heating schemes to encourage more be established.

Mr Mitchell said: “The report also shows what might be possible by highlighting the innovative efforts of communities – notably in Scotland and Wales– where sustained government support and a strong backing from third sector organisations has enabled local energy to lead the way, not only in a UK context but internationally as well.”

He added: “But we’ve only just scratched the surface. Communities across the UK increasingly want to generate their own, low carbon power. As the provider of the energy networks that make this possible, SP Energy Networks is committed to doing more. But we need government and regulators to allow us to do so.

“It is time for communities to be given a stronger voice in how their areas reach Net Zero. And as this report makes clear, we need new funding streams and reduced regulation in licensing planning to meet this vision”.

Scotland’s Energy Minister, Paul Wheelhouse, said: “Our support for community energy is beyond question – indeed it is internationally recognised. We had a target for 500MW by 2020 which we have exceeded by far, and indeed we voluntarily increased it to 1GW for 2020 and 2GW for 2030.

“Progress has been good against higher target. To date, there are more than 700MW of community and locally owned projects installed, with a similar quantity in the pipeline, but we have been undermined by removal of Feed In Tariffs by UK ministers and have urged them to reconsider reinstating them.

“We have put in place Non Domestic Rates reliefs for community hydro and wind projects and continue with CARES support, but UK ministers ultimately control the ‘route to market’ and have withdrawn any subsidy for onshore wind. We continue to explore and have been encouraging shared revenue models as a means of increasing community involvement in larger projects.”

He added: “We welcome this report and SPEN’s growing interests in community energy. Many of the recommendations included in this report are similar to what we have recently consulted on in our draft Local Energy Policy Statement, for which SPEN submitted a response.

“We are currently reviewing the responses to the consultation with the intention of publishing a final statement, including a delivery framework, in the spring.”

SP Energy Networks said it would launch an “educational toolkit” to provide communities with the information needed to get schemes off the ground and connect to the grid.

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Electricity networks

Background to the report

Electricity networks take electricity from the power plants where it is generated, to homes and businesses where it is used. Each transmission or distribution network company (network company) serves a different region. To prevent network companies from overcharging their customers, and to ensure they provide a good service, their earnings are regulated by Ofgem, a non-ministerial government department sponsored by the Department for Business, Energy & Industrial Strategy (BEIS). Ofgem does this through price controls, which are multi-year regulatory settlements that provide network companies with allowances for their costs, and targets for performance. BEIS has overall responsibility for energy policy and ensuring the UK meets legislated targets for reducing carbon emissions.

Network companies have a crucial role to play to support carbon emissions reductions in the energy sector and the wider economy. By 2050, the overall amount of electricity flowing through electricity networks may need to double, to displace carbon-emitting fuels for transport and heating buildings. Growth in the overall demand for electricity and displacement of carbon-emitting fuels by renewables means that new investment is needed to upgrade electricity networks. While upgrading networks has traditionally meant reinforcing them with new cabling and substations, new technology such as battery storage may offer lower-cost methods of upgrading them. Using this technology will require significant changes to the way network companies operate.

Content and scope of the report

This report examines how effectively Ofgem is using RIIO (an acronym for ‘Revenue = Incentives + Innovation + Outputs’) electricity transmission and distribution network price controls to protect the interests of consumers and achieve the government’s climate change goals. It also comments on the strategic challenges BEIS and Ofgem will face in ensuring electricity networks enable the achievement of government’s climate change goals.

Conclusion on value for money

Under Ofgem’s current regulatory framework, electricity network companies have provided a good service, but it has cost consumers more than it should have. It is now clear that targets were set too low, budgets too high, and the impact of these decisions was compounded by Ofgem extending the regulatory period from five years to eight. In some cases, Ofgem did not use the best information available to it at the time: on financing costs, for example, where better use of evidence could have saved consumers at least £800 million. To Ofgem’s credit, it has sought to learn lessons from these experiences and design the next regulatory period differently.

Electricity networks now have a crucial role to play in helping the UK reach net zero emissions by enabling the system needed for low-carbon heat and transport. An intelligent approach to this transition could spare consumers from significant extra costs: this is illustrated by recent research which estimated that using flexible technology could help to reduce the cumulative electricity system costs, including increasing electricity system capacity, by between £17 billion and £40 billion by 2050. To maximise electricity networks’ value for money in future, Ofgem must ensure it sets stretching targets for network companies in the next regulatory period, while building enough flexibility into the price controls to respond to unexpected developments. The government must help to clarify future network requirements by bringing forward further policies for decarbonising heat and transport. And BEIS will need to ensure that the energy market is governed in a way that provides enough strategic coordination of its many actors.

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ELEXON Insights: The electricity industry – ten years of change

The 2010s were a period of significant change for both ELEXON and the wider industry. The shifts seen during the span of ten years were both unprecedented and unpredicted. ELEXON provides a wealth of data to industry via the Balancing Mechanism Reporting Service (BMRS), ELEXON Portal and through data flows. Using some of this data we have created four graphs that reflect on significant changes to generation, demand and balancing between 2010 and 2019.

Changes to how electricity is generated

The first graph shows the rise of low CO2 fuels as a proportion of Great Britain’s fuel mix. In the span of ten years, Great Britain’s fuel mix has gone from 76.3% of generation using fossil fuels to 41.3% from fossil fuels. This has coincided with increases in the proportion of the fuel mix generated from low CO2 fuels, which was 21.6% in 2010 and 49.8% in 2019.

Generation from coal and gas fuelled power stations form the fossil fuel generation type. The low COfuels include generation from: wind, solar, nuclear, hydro, and biomass. Biomass has been classified as a low COfuel despite its emissions as Drax, the largest generator using biomass in Great Britain, has a carbon neutral process. The COabsorbed by the trees planted to produce the wood for the biomass pellets counteract the COproduced in combustion.

The ‘other’ fuel type shown as the pink line on the graph, includes:

  • Generation in Great Britain where we don’t record the fuel type.
  • Generation from outside of Great Britain transferred over interconnectors to meet Great Britain’s electricity demand.

Electricity imports over interconnectors should be considered as part of Great Britain’s fuel mix as it forms the majority of the ‘other’ fuel type. The percentage of Great Britain’s electricity demand met by imports has increased from 2.1% in 2010 to 8.6% in 2019.

Graph number two compares the volume of electricity produced in 2010 to 2019.

The biggest changes in volume of electricity produced relate to coal, which was generating 137 TWh in 2012 at its peak. Coal-fired generation was the second largest producer of electricity in 2010 and 2011, and the largest overall from 2012 to 2014. Since 2015 the decline in coal generation has been rapid and in 2019 it was the sixth greatest generator contributing just 6 TWh.

We are also able to view the significant increase in generation from wind, interconnectors, biomass and solar. These four sources produced 112 TWh of electricity in 2019, compared to 17 TWh in 2010. These fuels have replaced the majority of coal fired generators.

Gas generation still plays a big role as shown in the graph and it is unlikely that our electricity system will ever be run completely without gas power stations. Greater use of carbon capture and storage and alternatives to gas are required in order to achieve Net Zero.

Looking at electricity generation overall, and excluding imports, the total electricity generation per year in Great Britain has decreased from 334TWh in 2010 to 266TWh 2019.

Changes to demand

You can use the day and night filters to see how the annual day time and night time demand has decreased. Annual day time demand has decreased by 38TWh (15.6%) and night time demand has decreased by 16TWh (17.3%).

Demand is calculated as the sum of metered volume from Balancing Mechanism Units where there is net demand. A Balancing Mechanism Unit represents a group of customers’ metering systems used by ELEXON in Settlement.

Small scale generation embedded in a Balancing Mechanism Unit that has overall net demand has some of its demand netted out by solar generation. Embedded generation from wind and solar has increased from 6.4TWh in 2010 to 23.5TWh and is responsible for 31.7% of the total decrease in electricity demand.

As solar can only generate during the day we can also conclude that the 11.6TWh increase in embedded solar generation is responsible for 30.5% of the 38TWh decrease in day time demand.

It is difficult to attribute the rest of the decrease in day and night time demand to a particular source. Part of the decrease in day time demand will be due to a decrease in large scale manufacturing taking place in Great Britain with many companies moving factories overseas to avoid increasing costs. Both day and night time demand will have decreased due to an increase in uptake of energy efficient technology and appliances.

Nonetheless, if the decrease in demand for electricity continues in the next ten years, achieving Net Zero may become easier.

Rising costs for managing the system

The final graph shows the increase in the costs to manage the system through the Balancing Mechanism. ELEXON calculates the cashflows for the Balancing Mechanism as part of electricity Settlement. The annual cost to National Grid ESO of managing the system has increased threefold from £215 million per year in 2010 to £672 million in 2019.

National Grid ESO use the Balancing Mechanism to pay for flexible generation and demand side response providers to increase or decrease their generation or demand. This helps the ESO to manage supply and demand on the electricity system and relieve constraints (for example, when there isn’t enough network capacity to transport electricity that is being produced).

This graph can be filtered to show the annual Balancing Mechanism cashflow during the day and overnight. The cost of managing the system during the day has increased from £171 million in 2010 to £386 million in 2019, while the overnight cost has increased from £43 million in 2010 to £286 million in 2019.

In 2010 the ratio of overnight costs to day was 20:80, in 2019 that ratio was 43:57. The increase in the cost of balancing the system overnight has meant that it has become nearly as expensive to balance the system overnight as during the day.

The costs for balancing the electricity system have increased, partly due to the natural unpredictability of when renewable generators will be available. When there is plenty of wind or sun there is an abundance of generation on the system, which is cheaper to produce than electricity from fossil fuels.

If this occurs when demand is low, the ESO may need to pay renewable generators to reduce their output. This can happen in the day time and at night, where a large surplus of wind generation output may be available when demand has tailed off. During December 2019, generation at night was so high at some points that there was a negative Imbalance Price for a record 13 hours, you can read more in our sub-zero electricity prices in December article.

At times of peak demand, renewable sources may not be available to generate and therefore fossil fuel generation has to be increased. As an industry we need to encourage development of electricity storage which can absorb excess renewable generation and export it back to the networks when it is needed.

Conclusions

The 2010s have been filled with rapid change for the electricity system and data such as this provides important insights which both ELEXON and the industry can apply, as we work together to help deliver on the commitment to ‘Net Zero’ carbon emissions

It is difficult to predict exactly how the electricity system will develop. So together with the industry we work to anticipate changes to rules and process that will be needed to support a smarter, greener system and deliver reforms.

This includes our work on the Target Operating Model for moving to Market-wide Half Hourly Settlement which would allow consumers to take up a wider range of ‘time of use’ tariffs. We are also proposing that nationwide electricity ‘flexibility platforms’ are set up so offers of demand-side response, output from electricity storage facilities, and spare network capacity can be traded easily.

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Over £50 million for clean energy projects across Africa

The UK has invested millions in clean technology across Africa, to support the continent’s growing energy needs.

  • over £50 million invested in innovative, clean technology as the UK works with African countries to develop sustainable energy sources, providing thousands of people with clean energy
  • UK will share expertise in green finance and science and innovation to develop solar farms and battery storage projects
  • African energy demand is set to rise 60% by 2040 – clean energy will be central in powering Africa’s growing economies and increasing access to electricity

Green energy supply in Africa is set for a major boost after the UK government announced winners of an investment package for the continent’s clean energy infrastructure at the African Investment Summit today.

Solar farms in Kenya, geothermal power stations in Ethiopia and clean energy storage across sub-Saharan Africa will receive funding and see leading UK scientists and financial experts working with their African counterparts to realise the continent’s huge potential for renewable energy.

With African energy demand set to rise by 60% by 2040, UK experts will help deliver green solutions for the continent’s growing energy needs, bringing clean energy to thousands of people and creating jobs and increased prosperity.

Business and Energy Secretary Andrea Leadsom said:

Our world-leading scientists and financial experts will work hand in hand with African nations to support their quest for energy security, powering new industries and jobs across the continent with a diverse mix of energy sources while promoting economic growth.

Speaking at the summit, Ms Leadsom emphasised the opportunity for many African countries to leapfrog coal power to cleaner forms of energy but stressed that more needed to be done to unlock investment.

A world-leader in reducing carbon emissions at home, today’s investment in global clean energy comes after the Prime Minister, Boris Johnson, announced the £1 billion ‘Ayrton Fund’ for British scientists last Autumn to help developing nations reduce reliance on fossil fuels and reduce their carbon emissions.

As part of the initiatives announced today, the UK will support African countries with the technical skills and expertise they need in order to attract investment in renewable projects, getting innovative projects like wind and solar farms up and running. Close collaboration with African countries will be key as the UK gears up to host the UN climate talks (COP26) later this year.

UK funded projects in Africa include winners of the Energy Catalyst Competition, which has seen solar plants, energy storage batteries and hydro-power built in countries such as Botswana and Kenya; a £10 million programme which matches UK based green finance experts with project developers from developing countries to facilitate investment in clean energy projects; and the Nigeria 2050 calculator, a modelling tool designed by UK scientists to support the Nigerian government’s sustainable development planning.

Kenya is also set to benefit from a £30 million government investment in affordable energy-efficient housing which will see the construction of 10,000 low-carbon homes for rent and sale. This will support the creation of new jobs in Kenya’s green construction industry and help tackle climate change.

Over 50% of the UK’s energy production came from renewable sources last year, and with London’s expertise as the global hub for green finance, the UK is best placed to be Africa’s leading partner and help it harness its wealth of renewable sources as it moves away from coal power.