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.
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”.
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.
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.
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.
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.
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.
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 CO2 fuels include generation from: wind, solar, nuclear, hydro, and biomass. Biomass has been classified as a low CO2 fuel despite its emissions as Drax, the largest generator using biomass in Great Britain, has a carbon neutral process. The CO2 absorbed by the trees planted to produce the wood for the biomass pellets counteract the CO2 produced 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.
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.
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.
Britain’s exit from the EU, which will finally happen on Friday (31 January), has sparked fears of disruption to its electricity market, from higher bills to supply issues and stalled de-carbonisation efforts.
Britain depends on the European Union for much of its electricity supply.
Its own generation fell in 2018 by 1.6%, according to the latest available statistics.
This reduction stems from the gradual shutdown of coal-fired power plants, which is yet to be fully compensated by a rise in wind power.
Imports of electricity and gas have increased in response, predominantly from France, the Netherlands and Ireland, which now account for almost 40% of Britain’s energy consumption.
Britain’s imminent departure from the 28-member EU and its single electricity market therefore represents a risk for an already fragile network, which suffered a big blackout in August.
It will continue to benefit from existing arrangements during a post-Brexit transition phase, while it seeks a new agreement on everything from energy to security cooperation with Brussels.
But it is not clear if these talks will entirely resolve the issue.
British industry regulator Ofgem has said “alternative trading arrangements will need to be developed”, without giving further details.
It insists that whatever deal is struck, it does not “expect Brexit to interrupt the flows of electricity and gas”.
But at times of peak demand, Britain may find itself at the back of the line for electricity.
“EU countries could get preference,” Weijie Mak, of research company Aurora, told AFP.
As with other areas such as finance, agreeing so-called equivalence on things like CO2 emission rules – so countries who produce cleaner and more expensive electricity are not disadvantaged – will be key.
Uncertainty over equivalence and the possible return of tariffs or quotas if trade negotiations falter has left some sceptical that nothing will change post-Brexit.
“The electricity trade will become more expensive,” said Joseph Dutton, policy advisor at climate change think tank E3G. “It could mean higher bills for consumers.”
Trading in electricity across the Channel is currently based on an auction system, which could be upset by Britain’s EU departure.
Eurelectric, the association representing the industry at the European level, sees it as a “lose-lose situation” because of “less efficient gas and power trading”.
The hazy picture has seen the French government put on hold several interconnector projects aimed at better linking the electric power grids of Britain and the continent.
Under its president, Ursula von der Leyen, the European commission has big plans to address climate change. With a €1tn ($1.1tn) investment package, it hopes to transform Europe into a carbon-neutral economy by 2050.
But much of that €1tn for the commission’s proposed green deal would be generated through financial-leverage effects. In 2020, the EU will formally allocate for such purposes only around €40bn, most of which is already included in the budget from previous years; arguably, only €7.5bn of additional funding under the plan would actually be new.
As with the previous commission’s 2015 Juncker plan, the trick, once again, will be to muster the lion’s share of the quoted sum through a shadow budget administered by the European Investment Bank (EIB). The commission, after all, is not allowed to incur debt; but the EU’s intergovernmental rescue and investment funds are.
In essence, the EU is doing what the major banks did before the 2008 financial crisis, when they circumvented regulation by shifting part of their business to off-balance-sheet conduits and special-purpose vehicles. In the case of the EU, the guarantees offered by the commission and individual EU member states are sufficient for a high credit rating, and thus for the issuance of European debenture bonds. The funds generated will be used for public and private purposes, and sometimes even for public-private partnerships. But should the guarantees be called in one day, eurozone taxpayers will be the ones to foot the bill.
These planned shadow budgets are problematic, not only because they would allow the commission to circumvent a prohibition against borrowing, but also because they implicate the European Central Bank. To be sure, the ECB president, Christine Lagarde, has already announced that she wants the bank to play a more active role in climate-friendly activities within the eurozone. And the ECB is now considering whether to pursue targeted purchases of bonds issued by institutions that have received the commission’s climate seal of approval.
In practice, of course, this most likely means that the ECB would buy up the “green” bonds now being devised by the EIB. Those purchases will then reduce the interest rates at which the EIB can take on debt, ultimately leading to activation of the printing press to provide the money for spending on climate policy.
It is laudable to want to do something about climate change. But under the current plan, the ECB would be pushed into a legal grey area. The institution is not democratically controlled, but rather managed by technocrats on the executive board. Every member state, big or small, appoints its own representative, who then has equal voting rights, personal immunity, and the autonomy to operate free from any parliamentary accountability.
Moreover, under the Maastricht treaty, the ECB board is primarily obligated to maintain price stability, and may support separate economic-policy measures only if doing so does not endanger its ability to fulfil this mandate. In the case of the green deal, the dangers are obvious. If the additional demand created by an expansion of green projects is funded by printing money instead of collecting taxes, it will not withdraw demand from other sectors of the European economy and would therefore be potentially inflationary.
Situations like this serve as a reminder of why article 123 of the treaty on the functioning of the European Union strictly prohibits the ECB from taking part in the financing “of Union institutions, bodies, offices or agencies, central governments, regional, local, or other public authorities, other bodies governed by public law, or public undertakings of member states”. But, of course, the ECB has already circumvented this rule by purchasing around €2tn in public debt from the market, thereby stretching the limits of its mandate to a legally dubious degree.
The latest plans to circumvent the Maastricht treaty will not improve matters. Before the financial crisis, the ECB was concerned only with monetary policy. During the crisis, it turned into a public bailout authority rescuing near-bankrupt banks and governments. Now, it is becoming an economic government that can print its budget as it sees fit.
The impending violation of the spirit of the Maastricht treaty will be twofold: the EU will be assuming debt covertly, and it will be doing so through the printing press. As such, the commission’s plans will further undermine the credibility of the very institution on which Europe relies for its financial and macroeconomic stability and its long-term growth prospects – and this at a time when the world is becoming even more uncertain, competitive and aggressive.
The move will see OVO become the second largest supplier in the UK, with five million customers. It said that gaining SSE’s smart technology and exceptional talent in the form of its 8000 staff will help to accelerate OVO’s strategy to bring clean affordable energy to more households.
OVO bought SSE Energy Services for £500 million, which comprises of £400 million in cash and £100 million loan notes. These loan notes will be issued by a member of the OVO group, have an annual interest rate of 13.25% payable in kind and will be due in 2029 if they have not been repaid earlier.
The transaction will be subject to a deduction of £59m reflecting debt-like items, SSE announced, including SSE Energy Services’ accruals in respect of the Capacity Market Mechanism.
Stephen Fitzpatrick, CEO and founder of OVO said that this marks the end of one chapter for OVO but “more importantly, the beginning of the next one together with SSE Energy Services”.
“We have an integration plan that leaders from both companies have collaborated on since September. There is a lot of work to do to bring the two businesses together, but we have a really strong combination of great talent, technology and customer centricity that will enable us to succeed.
“SSE’s history of excellence at scale combined with OVO’s innovative technology and our Plan Zero commitments mean that together, as one team, we can bring millions more people with us on our journey towards zero carbon living.”
OVO was formed in 2009, and has since grown to become the largest independent supplier in the UK. It has committed to eliminating its customer’s household emissions and fit five million homes with flexible, clean energy technologies as part of a wide-ranging carbon-cutting initiative dubbed ‘Plan Zero’ it announced in 2019.