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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


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.



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.


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.


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.


PN 06/21: COVID-19 and the business retail market – Ofwat consults on how to address increases in bad debt

Measures aimed at: combating the spread of Covid-19; and strengthening protections for Non-Household customers who are late paying their bills; could result in higher than expected levels of bad debt in the business retail market.

In April 2020 Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of Non-Household revenue, which it considered was the level of bad debt an efficient and prudent Retailer should have planned for.

Today Ofwat has signalled that, on the basis of available information, levels of bad debt across the market are likely to exceed this 2% threshold.

As a result Ofwat is consulting on amending the price caps, which apply to small and medium Non-Household customers who have not engaged in the market. Retailers will be expected to bear market-wide bad debt costs up to 2% in full. Ofwat proposes adjusting the price caps to enable market-wide bad debt costs in excess of 2% to be shared between Retailers and Non-Household customers.

Ofwat proposes to make an initial adjustment from April 2022, with a subsequent adjustment once more accurate information is available. Ofwat has made it clear that if bad debt costs turn out not to exceed the 2% threshold, it will unwind any additional protections implemented.

Ofwat’s consultation sets out the following preferred positions in relation to:

  • Timing – Ofwat proposes Retailers’ accounting estimates be used to estimate initial bad debt costs. A subsequent adjustment will be made once more accurate information is available.
  • Recovery mechanism – Ofwat proposes to make a market-wide, uniform uplift to price cap levels, giving Retailers additional freedom to adjust their prices in the light of increased bad debt costs.
  • Sharing factors – If market-wide bad debt costs exceed 2% Ofwat proposes the following sharing factors:
    • Outturn bad debt costs up to 3% – Retailers and Non-Household customers should each be expected to bear 50% of any market-wide bad debt costs in excess of 2%.
    • Outturn bad debt costs exceed 3% – Retailers should be expected to bear 25% of any market-wide bad debt costs in excess of 2% and Non-Household customers 75%.

Georgina Mills, Business Retail Market Director at Ofwat said:

‘These proposals are aimed at protecting the interests of Non-Household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19.

In doing so we want to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition. By setting out our proposals today we are also providing additional clarity to Retailers and their investors.’


Notes to editors

  1. Bad Debt – Consultation
  2. Ofwat is seeking views and evidence from all interested stakeholders by 5pm Tuesday 6th April 2021.
  3. Maximum price restraints (i.e. price caps) relating to certain types of Non-Household customers on schemes of terms and conditions are set out in the Retail Exit Code.

Bulb launches EV solution offering cheaper overnight charging

Bulb has launched a new electric vehicle (EV) plan that offers 100% renewable electricity and cheaper charging at night as key features.

The plan is currently being trialed by Bulb members, although it is set to expand in coming weeks. It allows EV drivers to charge their car at a cheaper rate of 4p/kWh between 2am and 6am, with this rising to around 20p/kWh outside of these hours.

Drivers will also be able to schedule and track the cost of charging, with visibility of the live status of their car, including battery level, range and charging status.

These features are available through Bulb’s app, as is the ability to order a charger to allow drivers to charge more conveniently at home.

The app is compatible with 75% of electric cars, Bulb said, claiming it as the highest level of compatibility in the market due to the app connecting with cars rather than chargers.

There is also the ability for drivers to order a EO Mini Pro 2 charger, arrange installation and access the EVHS grant from Bulb’s website.

Geraldine de Boisse, VP Innovation at Bulb, said the energy supplier is “making it simpler and easier” for EV drivers to own an electric car and “do their bit for the planet”.

Last week, the company was named the fastest growing firm in Europe as part of the FT 1000, with a compound annual growth rate of 1159.3%.

It joins a number of suppliers in offering EV solutions. In December 2020, EDF launched its cheapest EV tariff to date, with the zero carbon GoElectric 35 tariff offering an off-peak rate of 4.5p/KWh. For this, off peak is classified as 12am-5am daily.

Other offerings from suppliers includes ScottishPower’s SmartGreen EV tariff and a charging bundle from Shell that includes a dedicated EV tariff allowing 2,000 miles worth of free charging per year and a discounted home smart charger installed for £299.


Ofgem awards licence for grid link to world’s largest wind farm

  • Ofgem’s regulatory framework secures £1.2 billion investment in grid link connecting the world’s largest offshore wind farm
  • Framework provides revenue certainty to investors while saving consumers hundreds of millions of pounds on their energy bills
  • Ofgem is helping to deliver government target of 40GW offshore wind by 2030 at the lowest cost to consumers

Ofgem has awarded a licence for the grid link to the world’s largest offshore wind farm after securing a record £1.2 billion investment.

Diamond Transmission Partners, a consortium led by Mitsubishi Corporation, the Japanese industrial group, was selected by Ofgem to own and operate the offshore transmission system linking Hornsea One to the British mainland.

The grid link for the 1.2GW wind farm off the coast of Yorkshire can deliver enough electricity to power more than one million homes.

The UK government has set a target of 40GW offshore wind capacity by 2030, almost quadruple the existing capacity, to help reach net zero emissions by 2050. New electricity grid links are needed to deliver this power to homes and businesses in Britain.

Under the regulatory framework, bidders compete to buy these links from the wind farm developer. In return the winning bidder receives a guaranteed level of income which is set by Ofgem for running the link for up to 25 years.

Providing certainty in this way allows bidders to price very keenly, reducing the costs of offshore wind and saving consumers money.

Ofgem has awarded 21 licences through this process, with a total of £5.7 billion being invested in grid links for 7.8GW of offshore wind capacity.

The first 15 licences alone have delivered at least £700 million in savings to consumers.

Ørsted, which built the Hornsea project, has built 12 offshore wind farms in Britain in total.

Rebecca Barnett, deputy director for commercial and assurance at Ofgem, said: “Today’s record investment demonstrates the appetite of global investors to support the UK’s transition to net zero emissions.

“Ofgem’s regulatory framework ensures that this investment can be attracted at the lowest possible cost, saving consumers hundreds of millions of pounds on their energy bills.”

Notes to Editors

  1. Hornsea One wind farm is located 120km off the Yorkshire coast and consists of 174 seven megawatt wind turbines.
  2. Ofgem has awarded the licence to own and operate the transmission assets for Hornsea One to Diamond Transmission Partners, a consortium comprising Mitsubishi Corporation and Chubu Electric Power Co., Inc., a Japanese utility.
  3. The developer of the windfarm and offshore transmission system is Ørsted and Global Infrastructure Partners. Ørsted’s and Global Infrastructure Partners’ initial estimated value (which is the forecast for the development and construction) of the transmission assets was £1.396 billion. Following Ofgem’s assessment of the final project costs, the final transfer value Diamond Transmission Partners will pay to Ørsted and Global Infrastructure Partners is £1.175 billion.
  4. The Offshore Transmission (OFTO) regime was developed by the Department for Business, Energy and Industrial Strategy and Ofgem, and was launched in 2009. For further information on the OFTO regime, see Offshore transmission tenders.
  5. Qualifying projects are grouped into competitive tender rounds and announced together. Potential bidders are also assessed at a pre-qualification stage, with qualifying bidders able to bid on all of the projects within a tender round. The Hornsea One wind farm’s offshore transmission system forms part of tender round six which started in 2018. The other two transmission systems in round six are to the East Anglia One wind farm (initial tender value £813.6m) and to Beatrice wind farm (£498.5m). Both are at Preferred Bidder stage. Ofgem will assess consumer savings for the most recent tender rounds later this year.
  6. To bolster the UK’s vibrant offshore wind sector, Ofgem is working with government and stakeholders to enable a more co-ordinated approach to offshore network development required for the rapid growth of offshore wind power. The Government’s offshore transmission network review will explore how the offshore transmission network could be designed and delivered, consistent with the ambition to deliver net zero emissions by 2050.

For media, contact 

Ben Tritton: 07388 851167

Media out of hours mobile: 0792 882 9894 (media calls only)

General enquiries (non-media) 

If you are an energy customer looking for help and advice, including complaints about energy firms, please see our Household gas and electricity guide. Citizens Advice also provide a free, impartial helpline service across a range of issues on 0808 223 1133.

We also regularly share news and post general advice to help consumers get the most out of their energy services via our @Ofgem twitter and Facebook pages. If you have an enquiry or complaint relating to Ofgem’s policies or functions, contact us at consumeraffairs@ofgem.gov.uk or on 020 7901 7295.

For all other non-media related enquiries, please visit our Contact us page.

About Ofgem 

Ofgem is Britain’s independent energy regulator. Our role is to protect consumers now and in the future by working to deliver a greener, fairer energy system. We do this by:

  • Working with Government, industry and consumer groups to deliver a net zero economy at the lowest cost to consumers.
  • Stamping out sharp and bad practice, ensuring fair treatment for all consumers, especially the vulnerable.
  • Enabling competition and innovation, which drives down prices and results in new products and services for consumers.

For facts, figures and information about Ofgem’s work, see Energy facts and figures or visit the Ofgem Data Portal.

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Coal falls to single unit in top-up Capacity Market auction that highlights growing pool of distributed generation

The ‘top up’ T-1 Capacity Market auction for next winter closed at £45.

Consumers will pay to underwrite one 435MW coal-fired station – Uniper’s Ratcliffe 4 –  and 6.12MW of diesel generation. But the largest contribution to the capacity contracted was embedded gas engines. Some 93 gas engine sites totalling 986MW won contracts. There was also a contract for EirGrid’s 295MW East-West interconnector.

Solar (12.7MW) and wind (13.5MW) won contracts suggesting that the CM is seen as a viable option to underwrite new plant. The solar owners are Warrington Power and the onshore  wind power contracts, for new-build, were with ScottishPower, Greencoat Wind and Muirhall’s Crossdykes project.

Contracts went to 239MW of demand side response and 114MW of battery storage. Among these Gridserv, Pivot Power, Power Act and Thrive renewables were among those who won contracts for new-build batteries. Tata Steel won two DSR contracts.

The auction results illustrated how far the UK pool of generators has moved on from the small pool of large generators who represented the market in past decades.

Around 53% of the 4240MW that entered the auction won a contract, representing 156 units belonging to 48 parent companies. The relatively small amount of capacity  available in the year-ahead auction brought forward distributed generation specialists and among those winning contracts were   Aggregated Micro Power (Urban Reserve), Amber Energy Storage, Anesco, Bagnall Energy, Conrad Energy Holdings, Eclipse, Kiwi Power, GridBeyond, Harmony, Flexitricity, Limejump (part of Shell) and Zenobe,


Energy firms overcharged one million switching customers

More than one million people were overcharged by energy firms during the process of switching suppliers, the regulator Ofgem has said.

When a customer decides to switch, the rules state they should be protected from price rises while moving – which could take up to three weeks.

Eighteen suppliers made errors leading to overcharging of £7.2m.

They are refunding the money and making extra payments in some cases, taking the compensation total to £10.4m.

The biggest names in the sector – including British Gas, E.On, EDF, Npower, Scottish Power, SSE and Octopus – made the mistakes, with Ovo Energy and Shell the worst offenders.

They failed to protect customers who switched tariffs or suppliers after price rises were set between 2013 and 2020.

Although the average amount overcharged was only £6.27, the sums would be higher for those with the biggest bills, and Ofgem said companies did not have the “adequate arrangements” in place to prevent overcharging.

Several companies had self-reported the issue to Ofgem, which then required all suppliers to check their records.

Anna Rossington, interim director of retail at Ofgem said: “Customers should have confidence in switching and not be overcharged when doing so.

“This case sends a strong message to all suppliers that Ofgem will intervene where customers are overcharged and ensure that no supplier benefits from non-compliance.”

In changes made last year by Ofgem, customers receive automatic compensation of £30 if their switch to a new provider goes wrong.

Payments are made if the switch is not completed within 15 working days. A mistaken switch or a failure by the old supplier to provide a final bill within six weeks also qualify for compensation.


Vattenfall gets green light for 1.8GW Norfolk Vanguard offshore wind farm

BEIS gives nod to huge 1.8GW wind farm proposed by Swedish energy company, as it delays approval for Ørsted’s Hornsea Three project for the fourth time

Vattenfall has been given the all clear to build the mammoth 1.8GW Norfolk Vanguard offshore windfarm off the east coast of England.

Planning consent was granted earlier this week by Business Secretary Alok Sharma, following a decision in June to postpone the decision by a month.

The Swedish energy giant intends to install between 90 and 180 turbines across an area of just under 600 square kilometres located 47 kilometres from the Norfolk coast. The project is expected to generate enough power for roughly 1.95 million homes.

Gunnar Groebler, senior vice-president for Vattenfall’s wind business, said the firm was delighted to clinch planning consent for the development, which is scheduled to come online in the mid-2020s.

“This decision justifies the confidence that we have in the offshore wind sector in Britain, and we’re looking forward to developing the project and benefiting the local community,” he said.

“Decarbonising our economies starts with one of the most essential resources – electricity,” he added. “Today’s news sends a strong signal that the UK is serious about its climate ambitions and is open for business to power a green economic recovery.” 

Vattenfall had previously questioned the government’s plans for the offshore wind sector after suffering a second round of delays to the Norfolk Vanguard project last month.

Norfolk Vanguard’s sister project, the proposed 1.8GW Norfolk Boreas farm, has also been stung by significant delays to the government consenting procedure. In May, the Department for Business, Energy, and Idustrial Strategy (BEIS) extended the examination period by five months to October, citing the cancellation of hearings due to the coronavirus.

Danielle Lane, country manager and head of offshore wind for Vattenfall in the UK, urged the government to speed up its approvals process. “It’s now vital that other shovel-ready renewable and low-carbon projects are also given the go-ahead as soon as possible,” she said. “Delays of even just a month or so can set back big infrastructure developments by years in some cases. The UK has to go much further, much faster, if it’s going to reach its net zero targets.”

Lane stressed that the offshore wind projects promised to deliver a significant boost to the local economy. “Today is also great news for people living locally, who we’ve been working with over the last four years to develop this project,” she said. “They can look forward to a multi-billion pound economic boost, bringing with it hundreds of new long-term jobs, driving forward a green revolution and helping to level up UK opportunities.”

The developer expects Norfolk Vanguard to generate more than 400 jobs in the onshore construction phase and a further 150 jobs once operational, once combined with Norfolk Boreas’ workforce.

Hugh McNeal, chief executive at trade body RenewableUK, commended government’s decision to approve Norfolk Vanguard and urged it to reach a similar conclusion for Ørsted’s 2.4GW Hornsea Three project, which was subjected to further planning delays this week.

“Investments in major clean energy projects like these are great examples of how we can get the economy moving again, and the Secretary of State’s announcement will boost our ability to meet the government’s 2030 target of 40GW of offshore wind,” McNeal said. “The landmark decision on Norfolk Vanguard means the UK is taking a significant step closer towards our net zero emissions target, and confirmation of a positive decision on Hornsea Three will get us there even faster.”

In a blow for the Danish energy developer, BEIS extended the deadline for its decision on the 300-turbine Hornsea Three project to 31 December 2020 for the fourth time on Tuesday.

Sharma confirmed, however, that he was “minded to approve” the project, subject to further information being submitted by the Danish energy company by the end of September. The new decision date, BEIS said, would allow time for further consultations with interested parties after the new information was provided.

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