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Government sidesteps Committee’s call for Scottish oil and gas sector deal

09 May 2019

The Government’s response to the Scottish Affairs Committee’s report on the future of the oil and gas does not directly address the Committee’s call for a sector deal, and instead states that the Government’s relationship with the sector is already “well-established.”

The Committee today publishes the Government’s response to its report on the future of the oil and gas industry. The Government sidesteps addressing the Committee’s headline recommendation of an ambitious sector deal to ensure Scotland’s energy industry can navigate the challenges of its future and continue to prosper.

Chair’s comments

Chair of the Committee, Pete Wishart MP said:

“Though there are some positive noises from the government, such as their enhanced funding for carbon capture and storage technologies and the recently announced centre of underwater engineering, we are disappointed by its reluctance to give a clear answer about whether it will implement an over-arching sector deal that would truly transform the oil and gas industry in Scotland. A sector deal would provide the coordinated approach needed to support transition to a new clean energy industry. The last thing the industry needs now is continuing uncertainty, so I have written to the Minister to press for more clarification on the Government’s stance on a sector deal.”

Sector deal

The Committee recommended an oil and gas sector deal that has the detail and ambition needed to support the industry’s challenging future and reflect the Government’s climate change targets by setting out a coordinated way for the sector to transition to green energy production. However, the Government response merely “acknowledges” the Committee’s support for a sector deal and argues that the Government already has a “well-established relationship” with the sector.

The Government suggests that a phased approach to funding and supporting the sector may be preferable to a formal deal. The Chair of the Committee has written to the Energy Minister, Claire Perry MP, to press the Government for more detail on its approach to supporting the industry, including its stance on a formal sector deal and to ask how it will ensure its phased approach does not lead to areas of less immediate economic benefit to the sector, such as work on energy transition and carbon capture, being neglected in favour of the areas of the deal that promise a more immediate economic return.

Climate change and new technologies

The Committee’s report outlined that one of the biggest challenges facing the industry is climate change and called on Government and industry to take a visibly more proactive approach to limiting the sector’s carbon footprint. The Government’s has responded positively to the Committee’s recommendations for increased support for carbon capture, usage and storage (CCUS) technologies.

In particular, the Government highlights its enhanced funding for CCUS innovations through the BEIS
call for funding applications for feasibility studies, industrial research and experimental development.

The government recently announced its support for a new underwater engineering centre at Aberdeen, which would bring together industry and academia from across the UK to develop new technologies which would enable the sector to move towards a low carbon economy. The Committee called for this in its report, however suggested it should be part of a more structured sector plan.

Decommissioning and skills transfer

The Committee’s report recommended that decommissioning – the process by which oil and gas infrastructure is shut down, or reconfigured, after oil and gas production ceases – should be made a central part of a sector deal. While the Government response acknowledges that decommissioning expertise presents a global economic opportunity for Scotland’s industry, little tangible progress has been made. The Government response points to the launch of a call for evidence on decommissioning in spring 2019, however this announcement had already been made in the 2018 Budget, marking a significant delay in opening the consultation.

Additionally, the Government does not make it clear whether it supports the Committee’s recommendation to set measurable targets for skills transfer as oil production ceases and industry professionals seek new work in clean energy technologies. The Chair of the Committee asks the Minister to provide more information on what the Government is doing to support decommissioning and skills transfer as the sector prepares for its future.

Commenting on the response, Pete Wishart MP said:

“Though the oil and gas industry will have a challenging future, these new circumstances could bring
significant opportunities and help the Government meet the UK’s climate change targets.  If the economic potential of decommissioning and cleaner energies is to be harnessed, the Government must act now by providing strategic vision, and support for the industry.”

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Ofgem announces strategic review of microbusiness energy market

3rd May 2019
Information types

Policy areas

  • Ofgem is concerned some microbusinesses are struggling to engage with the market and paying more for their energy than they should.
  • Our evaluation of the impact of the CMA’s price transparency remedy suggests that wider issues remain in the £3.5 billion microbusiness energy market.
  • Ofgem presents its initial analysis on consumer harm and seeks further views and evidence on the challenges microbusinesses face.

Ofgem has announced its strategic review of the microbusiness energy market to better understand and address the issues faced by microbusinesses.

Our initial analysis shows that market information is often inaccessible, resulting in customers paying high prices and struggling to make informed decisions.

Microbusinesses play a central role in the UK economy. According to government data, there were over five million microbusinesses in the UK in 2018, accounting for a third of employment and 21% of turnover. Last year microbusinesses paid £3.5 billion in total in electricity and gas bills.

Ofgem has concerns that the energy market isn’t working as well as it should for these customers.

The complexity of the market with the wide variety of contracts and lack of accessible helpful information about prices means many microbusinesses find it hard and costly to engage in the market to find a better deal.

Ofgem has found that microbusinesses who do not engage in the market still pay a higher “loyalty penalty” than disengaged domestic consumers.

Following its investigation into the energy market, the Competition and Markets Authority ordered suppliers in 2016 to provide clear prices to microbusiness customers through a quotation tool on their websites or through price comparison websites to help them engage in the market.

Ofgem implemented the remedy in 2017 and today has published an evaluation of its effectiveness. The regulator has found while the remedy has improved the level of price information that is available to microbusinesses, it has had a limited impact on microbusiness engagement levels and has failed to address some of the fundamental problems in the market.

We will gather further evidence through the call for inputs and other evidence gathering activities before publishing our action plan in winter 2019.

Ofgem has already introduced a number of reforms to help microbusinesses get a better deal. This includes stopping suppliers from automatically rolling over microbusiness customers onto expensive deals, banning suppliers from backbilling microbusiness customers for energy used more than 12 months previously and introducing an overarching principle to treat microbusiness consumers fairly.

The review and any subsequent actions will complement other reforms being taken forward by Ofgem and government focused on micro and small businesses including smart meters, and the half hourly settlement and switching programmes.

Anthony Pygram, director of conduct and enforcement at Ofgem, said: “Microbusinesses are the backbone of the country’s economy. Yet too many are still finding it hard to navigate what is a complex and at times opaque market to get a better energy deal and are suffering significant consumer detriment as a result.

“Our review announced today, combined with our continued work with the government and industry, aims to deliver a properly functioning competitive retail energy market which works for all microbusinesses.”

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‘Zombie firms’ a major drag on UK economy, analysis shows

A rising number of underperforming “zombie firms” are creating a major drag on the UK economy and threaten to exacerbate a future downturn, says a new analysis by KPMG.

As many as one in seven UK firms are potentially “under sustained financial strain” and had been able to “stagger on” partly thanks to low interest rates, the accountancy firm warned. These struggling firms are crowding out healthy rivals, when under more normal economic circumstances they would probably have ceased trading.

In a report issued on Monday, KPMG warned that “the rise of zombie firms in the UK could spell trouble ahead”.

The authors said there were differing views as to what constituted such a firm, but that in their view it was a company where turnover was static or falling, profitability was persistently low, margins were being squeezed, cash and working capital reserves were limited, leverage levels were high, and there was a limited ability to invest for the future.

The authors looked at 21,000 UK companies, using information from their last three sets of annual accounts, and found that 8% of UK firms were displaying “zombie-like symptoms”. However, they added that based on the latest figures and other economic data, the proportion of such companies across the UK could be as high as 14%.

The highest concentrations of zombie firms were in the energy, automotive and utilities sectors.

In the energy sector, many firms will have been hit by the 2018 oil price slump, while carmakers and utility firms were facing fierce competition from start-ups and technological developments.

KPMG argued that in previous recessions, businesses that were not productive enough would have ceased trading, thereby eventually making way for “new dynamic companies” and ensuring capital was invested in high-growth businesses.

Construction group Carillion is a high-profile example of a UK firm that is said to have been in financial difficulty for several years prior to its collapse in January 2018, but which had managed to limp on, taking on contracts that could have gone to its financially healthier competitors during those years.

On 2 May, Bank of England governor Mark Carney warned that a modest recovery over the next three years would warrant higher interest rates than financial markets were currently anticipating.

KPMG said if interest rates were to rise further, some of these businesses might soon find their loans more difficult to repay, and if the economy continued to stutter, they would be left especially vulnerable to adverse market forces or a tightening of liquidity.

Yael Selfin, KPMG’s chief economist, said: “The threat that zombie companies pose to the wider economy is very real, regardless of what the post-Brexit environment looks like. Many unproductive businesses have been able to stumble on in recent times, generating just enough profits to continue trading but without the innovation, dynamism or investment necessary to sustain bottom-line growth. This has [created], and will continue to create, a drag on UK productivity.”

Britain’s productivity has been persistently poor since the financial crisis, and is about 16% below the average for advanced G7 economies. Business investment has been falling for the past year, according to the Bank of England, which predicts muted productivity growth in the near term.

 

Of the 21,000 private companies analysed by KPMG, 60% were said to display one or more of the symptoms associated with such underperforming firms, while 8% displayed three or more.

Blair Nimmo, head of restructuring at the firm, said that in the event of a liquidity squeeze, many of these businesses would fail. If that happened, “the potential for contagion is very real, creating broader challenges for an economy already struggling to deal with a plethora of issues”.

Others define a zombie firm as one that has been around for several years but is unable to cover its debt-servicing costs with its profits – a definition that, looking at well-known companies, could arguably be applied to firms such as Tesla, which recently announced it had lost $702m (£534m) in the first three months of the year and ended the quarter with about $10bn in debts.

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‘Zombie firms’ a major drag on UK economy, analysis shows

A rising number of underperforming “zombie firms” are creating a major drag on the UK economy and threaten to exacerbate a future downturn, says a new analysis by KPMG.

As many as one in seven UK firms are potentially “under sustained financial strain” and had been able to “stagger on” partly thanks to low interest rates, the accountancy firm warned. These struggling firms are crowding out healthy rivals, when under more normal economic circumstances they would probably have ceased trading.

In a report issued on Monday, KPMG warned that “the rise of zombie firms in the UK could spell trouble ahead”.

The authors said there were differing views as to what constituted such a firm, but that in their view it was a company where turnover was static or falling, profitability was persistently low, margins were being squeezed, cash and working capital reserves were limited, leverage levels were high, and there was a limited ability to invest for the future.

The authors looked at 21,000 UK companies, using information from their last three sets of annual accounts, and found that 8% of UK firms were displaying “zombie-like symptoms”. However, they added that based on the latest figures and other economic data, the proportion of such companies across the UK could be as high as 14%.

The highest concentrations of zombie firms were in the energy, automotive and utilities sectors.

In the energy sector, many firms will have been hit by the 2018 oil price slump, while carmakers and utility firms were facing fierce competition from start-ups and technological developments.

KPMG argued that in previous recessions, businesses that were not productive enough would have ceased trading, thereby eventually making way for “new dynamic companies” and ensuring capital was invested in high-growth businesses.

Construction group Carillion is a high-profile example of a UK firm that is said to have been in financial difficulty for several years prior to its collapse in January 2018, but which had managed to limp on, taking on contracts that could have gone to its financially healthier competitors during those years.

On 2 May, Bank of England governor Mark Carney warned that a modest recovery over the next three years would warrant higher interest rates than financial markets were currently anticipating.

KPMG said if interest rates were to rise further, some of these businesses might soon find their loans more difficult to repay, and if the economy continued to stutter, they would be left especially vulnerable to adverse market forces or a tightening of liquidity.

Yael Selfin, KPMG’s chief economist, said: “The threat that zombie companies pose to the wider economy is very real, regardless of what the post-Brexit environment looks like. Many unproductive businesses have been able to stumble on in recent times, generating just enough profits to continue trading but without the innovation, dynamism or investment necessary to sustain bottom-line growth. This has [created], and will continue to create, a drag on UK productivity.”

Britain’s productivity has been persistently poor since the financial crisis, and is about 16% below the average for advanced G7 economies. Business investment has been falling for the past year, according to the Bank of England, which predicts muted productivity growth in the near term.

 

Of the 21,000 private companies analysed by KPMG, 60% were said to display one or more of the symptoms associated with such underperforming firms, while 8% displayed three or more.

Blair Nimmo, head of restructuring at the firm, said that in the event of a liquidity squeeze, many of these businesses would fail. If that happened, “the potential for contagion is very real, creating broader challenges for an economy already struggling to deal with a plethora of issues”.

Others define a zombie firm as one that has been around for several years but is unable to cover its debt-servicing costs with its profits – a definition that, looking at well-known companies, could arguably be applied to firms such as Tesla, which recently announced it had lost $702m (£534m) in the first three months of the year and ended the quarter with about $10bn in debts.

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Share Watch: Balancing the rise of low-profit renewables with fall of fossil fuels

It took a while for the oil industry to hunker down and identify the new trends, but it is happening and especially in our target company this week, the UK giant British Petroleum (BP).

There is a lot that BP would like to leave in the past. Its origins as a tool of the UK empire is one, not to talk about the series of ecological disasters it has left in its wake over half-a-century and more.

It was a key part of the once fabled ‘Seven Sisters’ oil giants which controlled the world’s oil industry from the 1940s to the late 1970s.

The ‘Seven’ are now reduced to a ‘Supermajor Four’ but they still call the shots in this vast industry.

BP itself trades in 70 countries, has 11 refineries and 15 chemical plants producing petrol, natural gas, aviation fuel, employs 74,000 people worldwide and is valued by the stock market at $110bn (€97.35bn).

Its near collapse following a Gulf of Mexico ecological disaster nine years ago has faded and today the group is stronger than at any time in the last nine years.

Oil prices are at their highest since 2014 and its shares are at a level not seen in the last eight years.

Perhaps more importantly, BP has spotted that the energy business is in revolutionary mode.

Oil and coal, which were central to 20th century business, are now giving way to something different.

A recent study stated that within the next 20 years, solar and wind power (renewables) will account for more than half of global power generation.

Electric cars, vans and small trucks will be the vehicles of choice while oil and gas demand will decline.

Interestingly, this is not a study from environmentalists, but from a world renowned firm of consultants.

To calm worries as to its lack of investments in renewables, BP two years ago acquired Lightsource Solar, Europe’s largest developer and operator of utilities-style solar projects.

It has also invested in Store Dot, an Israeli quick-charging battery company.

However, BP’s alternative energy strategy is still relatively small, while it continues to expand its vast global network of petrol stations, investing in convenience stores and developing its new oil/gas discovery in Egypt.

The company’s strategy to rein in spending, pay for its enormous penalties/clean-up costs and focus on higher margins, has paid off.

Revenues for the year were $303bn with net profit of $9.6bn, a profit margin of 3pc propelling the shares to a yearly high but they have since retreated.

Unfortunately, the company has been unable to cut debt levels as it absorbs the cost of its recent purchase of US shale assets.

The problem facing BP is how to strike a balance between low-profit renewables and its very profitable oil and gas business while coping with investor and consumer pressures for climate change.

While the group has recovered from its near collapse, I wouldn’t be parking my cash on BP shares right now; other oil majors are more attractive.

Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.

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5 renewable energy developments to look out for in 2019

2018 was a record-breaking year for the UK, with renewable energy leading the charge. In fact, it was the greenest year on record for UK energy generation. 2018 was also a significant year for Opus Energy (you can read more about that here).

There were several record-breaking events in the world of energy. The UK’s renewable energy capacity exceeded that of fossil fuels; there were new generation records set for wind and solar over the summer months as the UK enjoyed a heatwave.

With such an impressive year behind us, we’re hoping to see more of the same in 2019 and beyond. Here are some of the other exciting prospects in the world of renewable energy that we’re hoping to see next year.

Storage becoming increasingly viable

With the growing demand for electric cars helping to drive the production of better batteries, prices are falling, and consumers are beginning to experiment with solar and storage solutions at home. Equally, storage is necessary for the consistent supply of energy to the Grid. Renewable sources can be intermittent, so saving the energy for when the weather isn’t favourable is important.

Drax is one of the companies at the forefront of this and has proposed the development of new gas generation assets at its Yorkshire power plant. This would be accompanied by two battery storage facilities, as well as a power station the stores energy from pumped hydro power.

Opus Energy, too, has signalled its intent to be a part of the storage revolution. We’re currently running a trial with one of our customers to explore the benefits of battery storage for our customers and our business.

The potential success of storage goes beyond the UK; it is expected to help prove the viability of renewable energy as a major player in the generation mix of many countries, including Egypt and Ireland. Watch this space.

Progress in Central and South America

South America is quickly catching up with the rest of the world, with continued economic growth driving increased energy consumption, and an ever-more urgent need to ensure that our demand for energy doesn’t cause stress to the planet.

However, the current energy landscape is failing to keep up with energy demand and consumption. In Argentina in 2015, fossil fuels were 87% of the energy mix (although some companies are trying to change this – for example, this wind  one this Argentinian wind power generator is expanding its portfolio from 100 MW to 250 MW over the coming years.

The story is the same for many South American countries, with the pressing need for an energy revolution driving change – but there is potential everywhere. Chile, for example, has limited fossil fuel resources but benefits from considerable hydropower, solar and wind resource. Making the most of these resources will be vital across the continent.

The continued drive towards energy efficiency

Using energy efficiently and reducing energy use where possible is just as important as using cleaner energy sources.

This is part of the logic behind the UK’s smart meter rollout, helping everyone to become more aware of their energy use and how using energy at different times can be both cheaper and more environmentally friendly.

National Grid, the UK’s energy system operator, has created a carbon-intensity toolwhich forecasts how “clean” or “dirty” electricity will be a few days in advance. Similarly, Drax’s Electric Insights tool provides a near-real time picture of the UK’s energy consumption and its sources.

According to Carbon Brief, an environmental organisation, reduced energy use and the rise of renewable energy sources have been the biggest reasons behind the UK’s reduced greenhouse gas emissions.

Increased efficiency, therefore, will be on the agenda for many businesses and households. Not just to mitigate any price increases – but to help reduce environmental impact.

The Middle East: Falling fossils and the renewable rush

The Middle East is better known for its rich fossil fuel resources, with plentiful oil and gas deposits. Some might say it falls behind the rest of the world in terms of renewable energy investment, but there are reasons to be optimistic.

Downward pressure on oil and gas prices has emphasised the importance of a diversified energy network, and self

As a large geographic region which spans continental borders, the climate of many of the countries is conducive to renewable energy generation.

For inland regions, there exists the strong potential for both conventional ‘photovoltaic’ solar power, and the less widely-used ‘concentrated solar power’, thanks to the high levels of solar irradiance across the region. According to the Renewable Energy Network, a number of solar projects are already in the planning or construction stages.

Electric vehicles hitting the highways

As battery storage technology continue to improve, one of the most visible applications of the technology is in electric vehicles.

In the UK, there are more than 130,000 registered EVs. This increase in the number of electric vehicles on the road has a twofold benefit in terms of energy consumption.

Firstly, it reduces fossil fuel use in the transport sector, which reduces the use of fossil fuels overall. While this electrification places greater demand on the energy sector, the continued reduction in fossil fuel use (in the UK, in particular) means that the average emissions associated with EVs has fallen by 50%.

Secondly, it makes a difference to local air quality. Concerns were repeatedly raised about the effect of diesel and petrol vehicles and the potential dangers caused by their exhaust fumes.

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Pioneering Orkney energy project offers glimpse of fossil fuel-free future

IT is the pioneering project that offers a tantalising glimpse of a cleaner, greener future free of mass pollution.

Experts have launched the first phase of a ground-breaking £28.5 million energy system which it is hoped will eliminate the need for fossil fuels in Orkney — and eventually the whole of the UK.

The scheme includes plans for a locally-powered electric bus and electric bike “integrated transport system” on the islands, as well as the mass roll-out of electric vehicles.

Meanwhile, up to 500 domestic and 100 large-scale batteries will be used to store renewable energy, allowing it to be pumped into the grid when winds drop or the sun disappears.

Dubbed the “energy system of the future”, those involved hope it will prove such a success it will eventually be rolled out across the UK and beyond – helping to create a future powered entirely by renewables.

Mark Hamilton from Solo Energy, one of the firms involved in the ReFLEX (Responsive Flexibility) scheme, said it was a “world-leading example” of how innovation can drive the transition to green energy.

He said: “In Orkney, we’ve got a very high level of renewable generation from wind and solar, and other forms of generation such as wave and tidal.

“All of these renewable generation sources are obviously low carbon, but they are intermittent – so the wind comes and goes, the sun comes and goes.

“The ReFLEX project involves deploying battery systems and smart electric vehicle charging to balance the intermittency of renewables.

“So what Solo does, we have a software platform which we use to control battery systems across the grid to respond to the intermittency of renewable generation.

“So basically, when there’s lots of renewables generating, we charge battery systems across the grid, store that low-cost renewable energy, and then release it back to the grid when renewable generation decreases.”

Mr Hamilton said 25 per cent of the UK’s current electricity needs are met by renewable energy.

He said it would realistically be 20 to 30 years before the country’s entire energy system could become fully reliant on renewables.

He said: “We can have all the wind and solar farms we want but unless we have the means to store and balance renewables we will never fully wean ourselves off fossil fuels and get to the root of the climate change problem.”

The Orkney scheme uses a “virtual power plant” model which sees rechargeable lithium-ion battery systems controlled remotely using special software.

This allows them to be charged when renewable energy – such as wind – is abundant. They can then release that energy when the supply drops.

Orkney is already a world-leader in wave and tidal technology and boasts a high uptake of electric vehicles.

The latest project aims to deploy up to 600 extra electric vehicles and 100 flexible heating systems, as well as a Doosan industrial-scale hydrogen fuel cell which produces eco-friendly energy and heat.

Once demonstrated in Orkney, experts hope the “virtual energy system” – which aims to link up local electricity, transport, and heat networks into one controllable, overarching system – will be rolled out across the UK and internationally.

To encourage uptake, electric vehicles will be provided through a low-cost leasing arrangement, while batteries will be provided free on the basis customers will benefit from lower energy bills.

“50% of the project is being funded privately indicating the appetite that exists within the partners to make this project work.

“Orkney has already demonstrated high commitment for local sustainable energy solutions and the county is well on its way to decarbonising each aspect of the energy system.

“The target for Orkney is to have a negative carbon footprint and this pioneering project will build upon the existing local energy system, local infrastructure and local expertise, to accelerate this transition to a fully sustainable and flexible energy system.”

The Scottish Government aims to generate 50% of the country’s overall energy consumption from renewable sources by 2030.

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Centrica to close British Gas offices and training centre near Armley Gyratory

he British Gas offices and training centre off Armley Gyratory are set to close.

The large complex on Canal Street, where hundreds of staff are based, will be closed down with staff redeployed to the company’s British Gas site in Holbeck, a shock announcement confirmed this afternoon.

Centrica – which runs British Gas and Scottish Gas – confirmed the closure had been announced to staff at the west Leeds site today but added that no job losses had been announced ‘in relation to that site.

However, a staff member at the Canal Street site – who wished to remain anonymous – told LeedsLive that only certain roles would be available in Holbeck.

She alleged: “There is only certain positions available in New Bridge House. Not everyone from Canal Street will be taken over.

“That is all we really know for now though. The management are keeping it very hush hush.”

Centrica is also consolidating its two Glasgow sites with the loss of 400 jobs – a total of 500 jobs will be lost across the UK, a spokeswoman confirmed.

She told LeedsLive: “We’re consolidating our Leeds based sites into one location and our New Bridge House site is situated close by.”

Last year the company announced plans to axe 4,000 jobs – just over half of them in the UK.

The 500 announced today are part of the 4,000 planned.

Armley councillor Alice Smart said: “This is the first we’ve heard about it – the Armley councillors and Rachel Reeves. We’re really concerned about potential job losses.

“There are hundreds of jobs there and there’s a lot of local people that rely on them.”

She also confirmed that Leeds City Council and GMB will be speaking to Centrica and looking for job protection guarantees.

In a statement, Centrica said it had proposed ‘a number of changes across the UK’ to staff, including ‘role reductions to reduce management layers, role reduction to reduce back office functions to improve efficiency’.

She said: “This difficult decision was made because we need to respond to the growing challenges we face. Our customers want more from us. Competition is fierce and we’re operating under a price cap.”

Justin Bowden, GMB National Secretary, said: “GMB is confident that the vast majority of staff affected by these closures can be redeployed within British Gas and we will do everything in our power to ensure that every GMB member who wants to stay with the company has a job.”

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Oxfordshire to trial £40m industry first local energy system project

Oxfordshire will receive £40 million of funding for a project to trial a new smart local energy system – or ‘smart grid’.

The system will explore how the growth in local renewables, electric vehicles, battery storage, and demand side response can be supported and help in reducing charges to consumers.

An industry-first, Project LEO (Local Energy Oxfordshire) comes on top of the £41 million Energy Superhub Oxford (ESO) project, also announced this week. Project LEO will develop a new model for the way in which local energy systems in Oxfordshire are managed and measured.

The system will balance local demand with local supply in a real-world environment and will help to test markets, inform investment models and, assess the benefits of flexibility to the energy system.

The project will demonstrate the potential for individuals and communities to become active participants in the energy systems of the future. Project LEO will enable Oxfordshire based social enterprise, the Low Carbon Hub, to grow its existing portfolio of 40+ energy projects bringing another £16 million of community energy projects to the County.

By creating opportunities for local communities to trade the energy they generate, use and store at a local level, project LEO will show the potential for individuals, businesses and communities to collaborate in the creation of an energy system that’s good for people and the planet.

The project has been awarded £13.8m from the UK Research and Innovation (UKRI), and will be supported by £26m of private funding from the project partners.  It will be led by Scottish and Southern Electricity Networks (SSEN) in partnership with Oxford City Council, University of Oxford, EDF Energy, Oxford Brookes University, Oxfordshire County Council, Nuvve, Low Carbon Hub, Open Utility and Origami Energy.

The recent 2018 Intergovernmental Panel on Climate Change report states that we have just 12 years to act on climate change if global temperature rises are to be kept within the recommended 1.5 degrees Celsius. Oxford City Council has joined other councils across the world in declaring a climate emergency.

Oxford City Council is a member of Low Carbon Oxford, a network of 40 public/private organisations that aims to reduce citywide emissions by 40% of 2005 levels by 2020. To meet these targets, 58% of electricity demand in Oxfordshire must be generated from renewable resources. Project LEO will support Oxfordshire on its journey to meet this target.

Oxfordshire County Council also last month outlined the work that it was doing to tackle carbon emissions which includes ‘solar schools’, energy saving street lighting and waste reduction. Carbon targets will also be reviewed in line with the latest scientific evidence from the International Panel on Climate Change.

The street-lighting project alone is projected to reduce Oxfordshire County Council’s greenhouse emissions from this source by 70%. The 20 Oxfordshire County Council maintained Solar Schools generate electricity to the equivalent needed to power 150 households, saving over 260 tonnes of carbon per year.

Project LEO will bring together significant local, academic and industry expertise, with the project partners working closely with stakeholders in the county, including the district councils.

The partner’s roles in the project are:

  • Scottish and Southern Electricity Networks will establish a neutral market facilitation platform demonstrating data exchange and the purchase of flexibility services to actively balance the network mitigating against local constraints.
  • Oxford City Council and Oxfordshire County Council will provide key infrastructure and local investment projects, including intelligent street lighting, EV infrastructure and responsive heat networks.
  • Leading social enterprise, the Low Carbon Hub, will manage and develop a portfolio of local energy generation and demand projects, informing investment models;
  • Leading academics from the University of Oxford and Oxford Brookes University, will collect and analyse data sources to deliver a model for future local energy ‘whole system’ mapping and planning; and
  • Marketplace Operators Origami, Piclo, and Nuvve will pilot new business models, via innovative market platforms, to deliver local energy trading, flexibility and aggregation;
  • Energy supplier, EDF, will bring customer focused innovations and energy services to more than 5 million customers;

Councillor Tom Hayes, Board Member for A Cleaner and Greener Environment, Oxford City Council, said:“We’re thrilled to see £40 million for Oxfordshire to take back control of energy. Project LEO will return power to the people, so that we can generate clean energy for our own neighbourhoods. By creating opportunities for communities to trade the energy they generate, use, and store at a local level, we hope that Project LEO will empower people, companies, and local areas to build an energy system that works for people and planet.”

Minister Claire Perry, Energy and Clean Growth, said: “We are at the start of a green revolution as we move to more digital, data-driven smart systems that will bring us cleaner and cheaper energy. These projects, backed by government funding, are set to spark a transformation and change the way we interact with energy for the better as part of our modern Industrial Strategy.

“We’re excited to see how these businesses and project partners reveal how innovative tech, such as energy storage, heat networks and electric vehicles, can set us on the path to a smarter energy future. This is tomorrow’s world, today.”

Dr Barbara Hammond MBE, CEO, Low Carbon Hub, said:  “Project LEO provides a brilliant opportunity for us to play a leading role in developing the energy system of the future. One that is sustainable for our planet, will ensure the lights stay on when needed and, crucially, is beneficial for our communities.

“Our work over the past eight years has demonstrated our commitment to building renewable energy projects across Oxfordshire with schools, businesses and communities and we’re so excited for this project to take that work to the next level working with excellent project partners who are expert in their fields.

“Project LEO will enable us to further grow community-owned renewable energy in Oxfordshire, provide new investment opportunities for local people, and allow our communities to have more say in their energy choices.

“The Low Carbon Hub is out to prove we can meet our energy needs in a way that’s good for people and good for the planet and this project will be big step in that journey”

Llewellyn Morgan, Head of Innovation, Oxfordshire County Council said: “This is really exciting news and will build on the county council’s long-running work to enable cleaner technology to thrive in Oxfordshire.

“LEO will create a new energy ecosystem for Oxfordshire that we expect to benefits everyone in the next ten years.

“Oxfordshire is leading the way in the UK by exploring how local renewables, electric vehicles, battery storage and encouraging people to shift their energy use can be supported by a local, flexible, and responsive electricity grid to ensure value for consumers and opportunities for communities and market providers.”

Professor Gupta, Principal Investigator for the initiative, Oxford Brookes University: “We are very excited to be part of this ground-breaking project on smart local energy systems in Oxfordshire. Project LEO will usher in new and radical thinking on developing value streams from distributed energy resources using local flexibility markets.

LEO builds strongly on our recent award-winning research (project ERIC) that demonstrated how distributed generation and smart home batteries, can be managed to reduce peak grid load and increase self-consumption of local generated electricity.

We are really pleased to be collaborating with leading experts to help inform the energy system of the future”.

Principal Investigator Professor Malcolm McCulloch, founder of the Energy and Power Group, University of Oxford, said, “We are excited that this revolutionary project is happening in the UK. It will lead the world in developing new value streams from local energy assets using local markets. This project will transform new thinking in the future of energy systems to a reality and will crystallise large scale investment. This will enable a significant deployment of clean energy resources in Oxfordshire and enable end users to have a lower cost, secure energy supply.”

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UK grid to be ‘zero carbon’ by 2025

The operator and manger of the UK’s electricity supply has announced plans to remove all carbon emissions from the national grid.

Electricity System Operator (ESO), who operates the power network on behalf of National Grid, wants the UK grid to be “zero carbon” by 2025. It plans to do this by using artificial intelligence (AI) and machine learning tools to allow for real-time management of UK energy assets.

ESO currently relies on a mix of fossil fuel-based generation and renewable energy sources to power the grid.

However, ESO has identified major changes that need to take place to ensure that the growing UK renewable energy portfolio can be utilised to its fullest extent.

The changes – outlined in ESO report Zero Carbon Operation 2025 – involve reducing dependence on gas and oil-fired power plants, which are currently heavily relied on.

The operator and manger of the UK’s electricity supply has announced plans to remove all carbon emissions from the national grid.

Electricity System Operator (ESO), who operates the power network on behalf of National Grid, wants the UK grid to be “zero carbon” by 2025. It plans to do this by using artificial intelligence (AI) and machine learning tools to allow for real-time management of UK energy assets.

ESO currently relies on a mix of fossil fuel-based generation and renewable energy sources to power the grid.

However, ESO has identified major changes that need to take place to ensure that the growing UK renewable energy portfolio can be utilised to its fullest extent.

The changes – outlined in ESO report Zero Carbon Operation 2025 – involve reducing dependence on gas and oil-fired power plants, which are currently heavily relied on.

“[ESO will] enhance the forecasting tools for wind, solar, embedded and transmission using AI and machine learning techniques […] to look at a range of scenarios and real-time management of the network,” the report states.

ESO director Fintan Slye, said this change to greater use of renewables will require “fundamental changes” to how we operate our power systems.

“Zero carbon operation of the electricity system by 2025 means a fundamental change to how our system was designed to operate; integrating newer technologies right across the system – from large-scale off-shore wind to domestic scale solar panels – and increasing demand-side participation, using new smart digital systems to manage and control the system in real-time,” he said.

“We will identify the systems, services and products we will need to run a zero-carbon network and design the new competitive marketplaces needed to source these as efficiently as possible, from both new and existing companies. We believe that promoting competition will ultimately lead to better value for consumers.”

ESO is aiming to launch tendering for partners to develop its new tools and integrated AI this winter, and deliver the new upgraded national grid by 2025.

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