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British Gas owner Centrica warns financial outlook is uncertain

The owner of British Gas has warned investors it has faced a difficult start to the year, weeks after sacking hundreds of its engineers through a controversial fire and rehire scheme to help turn the business around.

Centrica told its shareholders its financial outlook for the year was uncertain after the impact of the Covid-19 pandemic continued to drag on the business, which has struggled in recent years due to rising competition in the energy market.

In the first quarter of this year, demand for electricity was 15% lower than the year before among the company’s business customers, the company said in a trading update ahead of its annual shareholder meeting. Home boiler repairs and installations were 11% lower than the same time last year because non-essential home service visits were postponed to help prevent the spread of Covid-19.

The slump in home energy services was also due to a long-running series of strikes by thousands of its engineers in response to the company’s plan to toughen its employment contracts in an effort to boost productivity and become more competitive.

Under the fire and rehire plans, most of Centrica’s 20,000 staff were told to accept the new conditions, which would increase working hours for its engineers, or lose their jobs.

The company confirmed that 460 engineers were dismissed last month, as a result of what the GMB trade union has called “a dirty, bullying tactic”. A survey by the union found that more than three-quarters of the public believe that fire and rehire schemes should be made illegal.

Chris O’Shea, who became Centrica chief executive last year, said his plans to modernise the company remained on track and “the difficult, but necessary process to move colleagues on to new terms and conditions is now complete”.

“We are pleased that 98% of UK colleagues have accepted the new contracts which will enable us to better serve the needs of our customers. Although the external environment remains uncertain, our tight focus on cash and on fixing the basics across the group leaves us well placed as we continue the turnaround of our company,” O’Shea said.

O’Shea hopes to save £100m in operational costs this year as part of a plan to stem the steady decline of the FTSE 250 energy company in recent years. British Gas has lost about 3 million household energy customers in the last decade following an influx of successful new energy startups. Centrica crashed out of the FTSE 100 after losing more than 70% of its market value in the last five years.

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‘93% of stakeholders back UK grid charging reform’

Over 90% of stakeholders support reform of the current transmission charging regime to support the UK’s legally binding net zero emissions target, according to a survey by SSEN Transmission.

 

The company said the existing regime currently results in Scottish generators paying a higher cost for use of the transmission network compared to other areas in the UK.

 

For example, while a wind farm in the north of Scotland pays £5.50 per unit of energy, an equivalent wind farm in Wales will get paid £2.80 per unit, it said.

SSEN Transmission said that following the publication of a Transmission Network Use of System (TNUoS) charges discussion paper earlier this year, it has published a follow up summary report this week which analyses and outlines the feedback received from stakeholders on the paper’s findings.

 

It said 93% of all stakeholders agreed that some form of TNUoS reform is required, while 84% told SSEN that TNUoS acts as a barrier to the delivery of their renewable projects in Scotland.

 

SSEN Transmission head of whole system Andrew Urquhart (pictured) said: “Our generation customers and wider stakeholders have been consistently telling us that charges for transmission access in the north of Scotland, as well as uncertainty about future charges, are acting as a barrier to the commercial viability of renewable energy projects.

 

“This, in turn, is making it difficult for us to determine system investment needs for our transmission network.

 

“It is clear from our analysis and engagement to date that there is overwhelming support for TNUoS reform and that urgent action is required to address current barriers in the context of the climate emergency.

 

“Given the level of concern raised by our stakeholders, we hope the feedback outlined in our report will help to encourage action on the need for an urgent review of the current regime to support the UK’s ambitious net zero targets and green recovery goals.”

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Octopus Energy reveals plans to expand into green hydrogen

The Octopus Energy Group is set to expand into the green hydrogen sector, touting the benefits of the technology for “parts of the economy electrification can’t reach”.

It is planning to bring to market a locally distributed ‘green hydrogen as a service’ proposition as part of a new division of the company, Octopus Hydrogen.

Set to launch in Autumn 2021, the green hydrogen is designed to serve sectors such as heavy goods transportation, energy storage, industrial applications and aviation.

The move follows Octopus Energy Group acquiring Octopus Renewables, bringing a portfolio of more than 300 clean energy assets with a combined capacity of 2,800MW across six countries together with the company’s supply business which currently serves two million domestic customers.

Its Kraken platform is now used by 2.2 million customers in the UK alone, with the software used by energy companies including E.On and Good Energy in the UK, and companies like Origin Energy and Hanwha Corporation in Australia.

Together, its large renewables portfolio and Kraken platform means the Octopus Energy Group is “uniquely positioned to drive down costs and help customers drive the transition to a competitive and 100% green economy”, the company told Current± in a statement.

Green hydrogen picks up pace in the UK

Green hydrogen is increasingly drawing focus from both the government and companies looking to invest in a solution for decarbonising challenging sectors. In March, the UK government announced a £171 million Industrial Decarbonisation Fund for green tech projects focused on hydrogen and carbon capture and storage (CCS), which built on the National Infrastructure Strategy announced in November 2020.

Among the nine projects set to be funded by the scheme are Zero Carbon Humber – which will include one of the world’s first at-scale low carbon hydrogen production plants, as well as CO2 and hydrogen pipelines – and the South Wales Industrial Cluster – which will see solar giant Lightsoure bp develop solar powered green hydrogen for direct use in the steel manufacturing on site.

Other energy suppliers are also becoming increasingly interested in the sector, with ScottishPower submitting a planning application for up to 40MW of solar along with up to 50MW of battery storage and a 20MW electrolyser as part of its Green Hydrogen for Scotland project this April. Hydrogen companies are also expanding their operations, with Logan Energy announcing former SSE CEO Ian Marchant is to become chair of the board this week.

In a report produced by the International Renewable Energy Agency in March, it suggested that if global warming is to be curbed, green hydrogen must take over from fossil fuels in a number of sectors. It expects 30% of electricity to be dedicated to green hydrogen and the fuel’s derivatives such as ammonia and methanol by 2050. In order to reach this point, the green hydrogen sector needs to scale up massively, with almost 5,000GW of hydrogen electrolyser capacity needed, up from just 0.3GW today.

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Government reveals true scale of Green Homes Grant farce

ARLA Propertymark says there should be a long term appropriately funded strategy to help the private rental sector and home owners improve energy efficiency and combat climate change.

Its call follows the government revealing figures relating to its ill-fated Green Homes Grant programme which was scrapped recently, a year earlier than expected.

Data released by the Department for Business, Energy & Industrial Strategy shows that despite receiving over 100,000 applications – many from landlords seeking to improve their properties – only a small number of pay-outs were actually made. Since its launch in September 2020, the scheme saw 113,700 applications, with 10,300 measures installed but only 6,700 homes receiving the money from the scheme.

The target for this period had been 600,000 homes to have had measures installed.

ARLA says the data shows that while there is an appetite to make these improvements, this needs to be backed up by sufficient funding and a well-thought-out strategy.

“Without providing landlords and homeowners with incentives and access to sustained funding, it is unlikely that energy efficiency targets for the private rented sector and a reduction in emissions will be met” warns ARLA policy and campaigns manager Timothy Douglas.

“We are hopeful for a new solution to be on the horizon and would encourage cross-departmental working to analyse the scheme’s shortcomings and introduce something more fit for purpose.”

Earlier this month the government announced that £300m previously allocated for the Green Homes Grant would instead go into a programme administered by local authorities, targeted at lower income households.

There was no suggestion this would include any private rental sector properties.

After the GHG scheme was scrapped at short notice the House of Commons Environmental Audit Committee chair Philip Dunne MP – a Conservative – said: “We have been clear all along:the Green Homes Grant was a good initiative but was poorly implemented.

“This government has shown its willingness to be an environmental world leader, but I fear its green credentials risk being undermined by poor policy decisions.

“Actions speak louder than words, and simply abandoning a critically important decarbonisation scheme when cracks appeared sets a poor example in the year we aim to show climate leadership.

“Cutting emissions starts at home. The homes we live in contribute a huge amount of the UK’s greenhouse gas emissions, so undertaking effective retrofits and stemming those emissions is key to reaching net zero by 2050.

“Businesses need to get behind low-carbon housing and have the confidence to upskill employees. Householders need to get behind low-carbon housing and understand how energy efficiency can be enhanced and heating costs cut.

“Above all, the government must get behind low-carbon housing and comprehend the complexity of decarbonising our housing stock, committing to initiatives essential to make net zero Britain a reality.”

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National Grid launches smart lightbulb that glows green when powered by renewable energy

The Green Light Signal, which costs around £25, emits a green light when the carbon intensity of the UK’s grid is very low, such as on windy or sunny days

National Grid has launched a smart lightbulb that glows green when the electricity grid is being powered by renewable energy, as part of a new campaign to highlight the UK’s transition to low-carbon power.

The Green Light Signal, which costs around £25, emits a green light when the carbon intensity of the UK’s grid is very low, such as on windy or sunny days when high levels of renewable power are generated.

People can use the green light as a “signal” to use power around the home, National Grid’s chief executive John Pettigrew told.

“It’s an opportunity for people to be able to learn to make simple changes in terms of how they behave, and to feel that they are participating in the energy transition,” he said.

“People aren’t going to change when they eat – but they might change when they are going to use the dishwasher, they might change when they use the washing machine or the tumble dryer. So these are small adjustments to the ways that we all behave which can contribute.”

Research by National Grid suggests many people in the UK feel a sense of “hopelessness” about climate change, according to Pettigrew. A poll of just over 2,000 UK adults revealed 42 per cent of people believing that Britain only gets up to 10 per cent of its electricity supplied by zero and low carbon energy sources – the true figure is 55 per cent.

Just over 50 per cent of Brits said they would feel more hopeful about climate change if they understood the steps Britain is taking to cut its emissions.

“What the research shows is that people want to connect with the energy transition, they want to connect with net zero, and they want to be involved,” said Mr Pettigrew. “So what we’re trying to do as an energy company is to give them the opportunity to be involved.”

The bulb will glow green when the carbon intensity of the electricity supplied in the local area is low. It uses a forecasting tool built by National Grid, WWF, University of Oxford, and the European Defence Fund. The bulb is likely to green around 50 per cent of the time based on current levels of renewable power.

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Nearly 15GW of battery storage in UK’s project development pipeline

The UK reached a gigawatt of battery storage deployments in the second quarter of 2020 and the industry has 14.9GW in its development pipeline including 1.8GW of ready-to-build projects and 6.9GW with planning approvals in place.

Mollie McCorkindale, an analyst at Solar Media Market Research writes in an exclusive blog for our sister site Solar Power Portal today that although deployment during 2020 was lower than expected due to construction delays, the milestone 1GW mark was surpassed and total capacity is now close to 1.3GW.

The UK market saw a rush of projects built as deployment began in earnest from 2017, kick started by the transmission operator National Grid’s 200MW auction for the enhanced frequency response ancillary service that it introduced in 2016. After a peak in 2018 and a slowdown in 2019 as the market moved increasingly towards merchant revenue business models, the next 12-18 months could see that 1.8GW of ready-to-build projects commissioned.

Mollie’s blog offers a taster of a webinar Solar Media Market Research is hosting on Thursday 22 April 2021 to discuss industry trends in more detail. It is based on findings from our in-house experts’ ‘UK battery storage project database report’ and the webinar will cover aspects of the market such as the growing average size of projects and the rise of projects co-located with renewable generation.

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Gazprom and Shell sign 5-year cooperation deal

Russia’s multinational energy corporation Gazprom and a British-Dutch oil and gas holding company Shell have signed an agreement of strategic cooperation for a five-year period, expanding the interaction between the two companies.

The signing ceremony was held via a video link in the presence of Alexey Miller, Chairman of the Gazprom Management Committee, and Ben van Beurden, Chief Executive Officer of Royal Dutch Shell.

Particular attention will be given to such areas as research of energy markets, implementation of projects along the entire value chain, cooperation in digitalization of technologies, and reduction of greenhouse gas emissions.

Alexey Miller and Ben van Beurden reviewed the current achievements brought about by the cooperation between Gazprom and Shell. In particular, Sakhalin II was discussed. Last year, a record-high volume of liquefied natural gas – over 11.6 million tons – was produced and shipped to customers under the project.

Special mention was made of the European energy sector decarbonization. It was noted that natural gas, due to its eco-friendliness, can play a significant role in meeting Europe’s climate goals.

“Today, we have made a new step in the development of our cooperation. The very signing of the Agreement proves that our joint work has brought good results and that we establish ambitious goals for both the short term and the long term. Without any doubt, the experience we have accumulated guarantees us new future achievements,” said Alexey Mille

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Arrangements for the 2021 Gas Discretionary Reward Scheme (DRS) under RIIO-GD1

Publication date

12th March 2021
Information type

Policy area

This is our Guidance Document for the 2021 Gas Discretionary Reward Scheme (DRS) under the RIIO-GD1 price control.

The aim of the Gas DRS is to encourage gas distribution networks (GDNs) to undertake activities to help address a range of social, carbon monoxide (CO) safety and environmental issues.

Under the RIIO-GD1 arrangements, the Gas DRS will run every three years, with a maximum reward of £12m available across the GDNs, over the price control. The amount of the reward is determined by a panel.

The final RIIO-GD1 Gas DRS panel assessment will take place in 2021. The panel will assess performance between 2018-19 and 2020-21.

 

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Decarbonising heat in homes inquiry hears from energy companies

The Business, Energy and Industrial Strategy Committee will question energy companies, including from Octopus Energy, Vaillant, Cadent Gas and E-ON, with experience of installing or trialling low carbon heating technologies in homes. This evidence session is part of the committee’s decarbonising heating in homes inquiry.

Witnesses

Tuesday 16 March

At 10.30am

  • Steve Keeton, Director of External Affairs, Vaillant Group UK Ltd
  • Greg Jackson, CEO and Founder, Octopus Energy
  • Michael Lewis, CEO, E-ON
  • Angie Needle, Director of Strategy, Cadent Gas

At 11.30am

  • David Renard, Chair, Local Government Associations’ Environment, Economy, Housing and Transport Board
  • Patrick Chauvin, Executive Director – Assets, Stonewater
  • George Day, Head of Markets, Policy and Regulation, Energy Systems Catapult
  • Randolph Brazier, Director of Innovation and Electricity Systems, Energy Networks Association

Purpose of the session

The evidence hearing is likely to explore issues around the barriers to delivering low carbon heating solutions to homes and how these can be best overcome.

They will also offer a perspective of the Government’s policies to encourage uptake of energy efficiency and low carbon heating in homes, particularly on the Green Homes Grant.

The Committee will also question organisations, including the Local Government Association, Stonewater (a housing association), the Energy Systems Catapult and the Energy Networks Association.

The panel will consider the suitability, and viability, of alternate heating technologies and their delivery in a variety of local-level situations, for example in different geographic areas, home ownership and different building types.

The session is also likely to explore questions around responsibilities for the coordination and delivery of low carbon heating on a local level.

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Ofgem cuts electricity distributors returns by a third in green power push

Ofgem, the UK’s energy regulator, is to cut the profits that electricity distribution companies can make by a third as part of a new green-focused pricing regime.

The regulator said the new arrangements will boost investment to cut polluting greenhouse gas emissions from cars and unlock more flexible local grids.

Surface transport and domestic heating account for 34% of the UK’s greenhouse gas emissions, Ofgem said.

“The new price controls for the DNOs, known as RIIO-ED2, will significantly boost green investment to local networks and drive a major change in the way Britain travels, heats and powers its homes.”

Under the new pricing regime the UK’s 14 DNOs, which are companies such as SSE PLC (LON:SSE), will have the return (profit) allowed from their net assets reduced to 4.4% from 7% currently. DNOs are local monopolies that build and run the infrastructure that carries electricity to homes and businesses.

Revenues will be reduced from current levels, added the regulator, which would cut network charges on consumers bills by 9%.

Jonathan Brearley, Ofgem’s chief executive, said: “Our price control for local electricity networks paves the way for turning Britain’s streets green, unlocking the investment needed to support the UK, Scottish and Welsh Government climate change targets, particularly around the electrification of transport.

“At the same time, these financial arrangements will significantly cut investor returns to make sure consumers pay a fair price for energy whilst networks attract the investment they need to be safe and green.”

“The Price Control drives DNOs to be proactive in ensuring the local grids are ready to cut greenhouse gas emissions, as they are best placed to know where new investment is needed to accommodate increasing demands.”

Ofgem regulates the rate of return DNOs can make on investment, which ultimately is paid for through consumers’ bills.

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