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.


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.


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.”


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.”


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.


MPs launch inquiry into future of UK energy investment

LONDON (Reuters) – A committee of British MPs has launched an inquiry into the outlook for future investment in energy infrastructure in Britain after two nuclear projects were halted, it said on Thursday.

Last month, Japan’s Hitachi put a $28 billion (£21 billion) nuclear power project in Britain on hold, dealing a blow to the country’s plans for the replacement of ageing plants and coalplant closures.

Another Japanese firm, Toshiba Corp., scrapped its British NuGen project last year after its U.S. reactor unit Westinghouse went bankrupt and it failed to find a buyer.

The Business, Energy and Industrial Strategy Committee said it will look at whether the government needs a new approach to accelerate investment in a future low-carbon energy system.

The inquiry will also likely examine ways of financing future nuclear plant new-builds and concerns over foreign investors in the sector.

“In the wake of investment decisions over nuclear plants at sites such as Moorside and Wylfa, a giant hole has developed in UK energy policy,” said Rachel Reeves, chair of the committee.

“A bigger shift in our energy infrastructure to a low-cost, low-carbon energy system is necessary,” she added.

The committee has invited interested parties to make submissions on its website until April 3.



  • £2billion clean energy investment in UK in 2019 – record commitment in UK by ScottishPower
  • ScottishPower announces plans for large-scale battery storage at UK windfarms
  • New public electric vehicle charging business to start installations in 2019
  • Investment plan will support 300 new ScottishPower jobs in 2019

ScottishPower has announced it will spend up to £2billion in the UK in 2019, the company’s biggest ever investment in the country in a single year. The announcement came as ScottishPower updated its investment plans following the sale of its thermal generation business and transition to 100% renewable energy in 2018.

ScottishPower CEO, Keith Anderson, said: “Our first investment plan since leaving coal and gas behind is a historic milestone for ScottishPower and is a vote of confidence in the UK’s commitment to decarbonising the economy. In a time of uncertainty the UK needs to deliver its Industrial and Energy strategy and that’s what we’re providing with our biggest ever investment in a single year.

“Consumers want and need access to reliable, clean and affordable energy. That is what ScottishPower is focused on delivering and as long as Government climate change commitments stay firm, with sensible policies to support them, this investment will continue.

“Now that we have sold our gas power stations our growth plans are about cleaner and smarter power that will help the UK to decarbonise faster and we have set out the part we will play in the transition to electrify the economy where it matters most now – in transport and in heating.”

Between 2018-2022 ScottishPower will spend £6billion in the UK with 40% on new renewable energy generation, 42% on smarter enhanced networks and 15% on innovative services and products for customers.

ScottishPower will invest in smarter services for customers, including products to unlock the market for electric vehicle ownership.

As part of its strategy for growth ScottishPower announced plans for a new public electric charging service based within the company’s Retail division. The new business will install fast chargers across the UK at strategic commercial locations from winter 2019.

The company also announced plans for a 50MW battery storage project at Whitelee the UK’s largest onshore windfarm. The large-scale battery project will be the first of a series of storage schemes, mainly located at windfarms and at strategic points on the network. ScottishPower believes the combination of renewable energy and flexible storage are the most cost effective low carbon solution for consumers.

In renewables ScottishPower set out plans to develop a 1GW pipeline of onshore wind projects by 2025. Onshore wind remains the lowest cost technology for new electricity generation in the UK and ScottishPower sees substantial opportunities for the continued development of onshore wind projects across Scotland and other areas of the UK.

Construction continues at pace for the East Anglia ONE offshore windfarm located 43km off the Suffolk coast. The £2.5billion project will see 102 Siemens Gamesa turbines deployed, each with a capacity of 7 megawatts; which could in total provide enough clean energy to power the equivalent of more than 630,000 homes annually. Over 50 percent of the project’s total investment will be spent  in the UK, ensuring the benefits of East Anglia ONE are felt across the country.

ScottishPower has also gained planning consent for East Anglia THREE windfarm for up to 1,200MW and planning consultations on the company’s next two large offshore windfarms in the East Anglia zone have begun. If consents are granted, it is anticipated that East Anglia TWO will commence construction in 2024 and East Anglia ONE North will commence construction in 2025.

SP Energy Networks will continue to deliver smart and efficient grids capable of supporting the UK’s future energy needs. In 2019 the networks business will focus investments on continuing the company’s leading role in connecting renewables in Scotland, Wales and England.

Investments will also target the digitalisation of the grid including ground-breaking artificial intelligence systems that will control and balance the network in areas with high penetration of low carbon technologies enabling the transition to widespread use of electric vehicles.


Clarity needed on impact of decommissioning on public finances

  • Significant uncertainty over costs to taxpayers of decommissioning offshore oil and gas assets
  • Government has a poor understanding of potential liabilities to decommission assets used in fracking
  • It needs a clear plan to maximise economic benefits from UK decommissioning skills and resources

Report summary

Significant uncertainty remains about the future costs to taxpayers of decommissioning offshore oil and gas assets.

HM Revenue & Customs (HMRC) estimates that oil and gas companies will pass on £24 billion of decommissioning expenditure to taxpayers through tax reliefs, but there remains a wide range of possible future costs as most companies are still improving the certainty of their cost estimates.

If oil and gas companies can reduce their decommissioning costs then, in turn, UK taxpayers will benefit through a reduction in the value of tax reliefs that the government provides.

The Oil and Gas Authority (OGA) claims to have helped oil and gas companies to reduce the expected cost to decommission their offshore assets by 7%, and we recognise the value it has added by benchmarking performance, making data more widely available and encouraging the sharing of best practice.

But the direct impact of the OGA is hard to isolate from other factors influencing company decision-making, particularly the wider economic situation.

There is potential for the UK to become a global leader in decommissioning skills and technology but we are concerned that the Department for Business, Energy and Industrial Strategy (the Department) does not yet have a clear plan for maximising the potential economic benefits.

The Department must ensure taxpayers are protected from the risk of footing the bill for decommissioning fracking assets, where there are fewer protections than for offshore oil and gas.

The Department also needs to ensure its support for oil and gas remains compatible with its other activities aimed at achieving climate change goals, including ensuring alignment with the development of carbon capture, usage and storage, which could potentially reuse offshore oil and gas assets.

Chair’s comment

“Taxpayers will incur costs running to billions for oil and gas decommissioning, but it is far from clear what these costs will be in practice.

“The Oil and Gas Authority must bring greater certainty to its cost estimates. Together with the Department for Business, Energy and Industrial Strategy it should be transparent about how these estimates measure up to reality, and explain exactly what impact it is having on reducing costs.

“It is concerning that the Department has not yet properly set out the terms for how fracking assets will be decommissioned. It must do so before this industry grows further.

“It would be wholly unacceptable for taxpayers to pick up a hefty bill that could have been reduced had more timely action been taken by the Government.”

Conclusions and recommendations

There is significant uncertainty over the potential costs to taxpayers of decommissioning offshore oil and gas assets.Future decommissioning costs are uncertain because oil and gas companies are at the early stages of decommissioning and are still learning about how much different activities will cost. The OGA forecasts that the cost of decommissioning to companies will be between £45 billion and £77 billion. HM Revenue and Customs (HMRC) estimates that the cost to taxpayers from tax reliefs associated with decommissioning will be £24 billion based on the central estimate of the OGA’s range. But it has not estimated what the costs to taxpayers would be if decommissioning costs are at the top end of the OGA’s range. At the same time, oil and gas companies are commissioning new assets in line with the government’s objective to maximise recovery of remaining oil and gas reserves. New projects could generate tax revenues for the government but will also add to the total decommissioning bill and increase the future cost of decommissioning to taxpayers.

Recommendation: As part of its next estimate of decommissioning costs, expected in June 2019, the OGA should set out how it is making its estimate more certain and what the expected impact of new and as-yet uncosted projects could be.

It is unclear how actions taken by the Department and the OGA are reducing decommissioning costs for oil and gas companies.The Department established the OGA in 2015 to encourage companies to reduce their decommissioning costs. The OGA says it has helped oil and gas companies to achieve a 7% reduction in their expected costs of decommissioning through benchmarking performance, making data more widely available and encouraging the sharing of best practice. The OGA estimates that if companies achieve its target for reducing expected costs by 35% by 2022, UK taxpayers will benefit by £8.6 billion through a reduction in tax reliefs. But it is difficult to isolate the impact of the OGA’s activities from wider economic conditions that influence oil and gas companies’ decisions. Additionally, the OGA has only published estimates of future costs and has not compared costs already incurred with its previous estimates to demonstrate whether savings have actually been achieved.

Recommendation: The Department and the OGA should set out by July, and report to Parliament annually thereafter, on: the direct impact it has had on reducing decommissioning costs; and the actual decommissioning costs incurred during the previous year set against what the OGA had forecast.

The Department does not yet have a clear plan to ensure the UK maximises the benefit of developing exportable decommissioning skills and resources. The UK is one of the first countries in the world to start decommissioning its offshore oil and gas assets on a large scale. This presents an opportunity for the UK to become a global leader in decommissioning skills and technology that can be exported to other regions. The government announced in the 2018 Budget a call for evidence to identify ways the UK can become a global hub for decommissioning. Since then, the UK and Scottish governments (in partnership with Aberdeen University) have helped fund the creation of the National Decommissioning Centre as part of the drive to become a world-leading centre for decommissioning research & development (R&D). But industries that have been nurtured with UK tax incentives and R&D funding can take intellectual property and move abroad, reducing benefits from taxpayer-funded schemes. We are concerned that the Department does not yet have a clear vision for how the benefits for taxpayers of government support for decommissioning industries will be realised.

Recommendation: The Department should set out by July its strategy for maximising the economic benefit of the development and export of decommissioning skills and resources.

The Department has a worrying lack of understanding of the potential for government liabilities to decommission assets used in fracking. In offshore oil and gas, the government is ultimately liable to decommission assets that the operating companies cannot afford to decommission themselves. There is some protection given by the fact that partner operators and previous owners of assets are liable before it falls to the government. The Department focuses its monitoring on the 20% of assets which it considers to be highest risk because they have never been owned by one of the largest companies and has required nine companies to set aside £844 million for future decommissioning costs. In contrast, backers of fracking schemes may often be small companies with limited financial resources. The Department tells us that landowners are liable if project backers cannot decommission their assets, but we are concerned that determining liability may not always be as straightforward as the Department believes, and that the liability will ultimately fall to the government. The Department must ensure it sets the terms for how fracking assets are decommissioned before the industry grows further.

Recommendation: The Department should write to the Committee by the end of June 2019 explaining the decommissioning arrangements for fracking, including a full and clear explanation of the responsibility for subsequent costs once licences have been returned to the Government, and what it is doing to prevent liabilities falling to taxpayers.

Government support for oil and gas may become incompatible with its long-term climate change objectives. As well as providing tax reliefs for decommissioning, the government has reduced tax rates and made trading assets easier to encourage oil and gas companies to invest in maximising the extraction of the UK’s remaining reserves. The government is committed to supporting oil and gas companies due to the industry’s role in generating direct tax revenues, supplying energy and providing employment. The Department says that oil and gas will remain an important part of the energy supply: it estimates that oil and gas will provide nearly 70% of total energy required in 2035 and will remain particularly important fuels for transport and domestic heating. But the role of oil and gas in the economy is expected to decline as the government switches support to cleaner renewables to achieve its climate change targets.

Recommendation: The Department should set out as part of its energy White Paper, expected during 2019, how it will continue to ensure that government support for oil and gas remains compatible with its wider energy objectives.

There is uncertainty over whether carbon capture, usage and storage (CCUS) will become a viable option for reusing oil and gas assets. CCUS could be essential for decarbonising the economy at the lowest cost, but it is currently too expensive to be commercially viable. The Department has stated that the costs of the first CCUS projects could be reduced if oil and gas assets are reused, such as repurposing pipelines to transport carbon dioxide and using wells to store it. This could also defer part of the bill for decommissioning. But, as this Committee has previously reported, the government has tried and failed to support deployment of CCUS twice in the past and there is no imminent prospect of a large-scale CCUS facility being in operation in the UK. There is a risk that oil and gas assets are decommissioned before they can be used for CCUS schemes due to the Department’s slow progress at bringing forward CCUS.

Recommendation: The Department should, as part of its Treasury Minute response, set out its expected timetable for CCUS deployment and how this aligns with the latest indications of when oil and gas companies will decommission their assets.


No-deal Brexit wouldn’t disrupt gas, power flows from Europe: UK National Grid

LONDON (Reuters) – National Grid, which runs Britain’s energy systems, said on Tuesday that electricity and gas flows from continental Europe would continue as normal even under a no-deal Brexit as it has made preparations for all scenarios.

“We anticipate no additional operability challenges for this summer as a result of the UK’s planned exit from the EU,” National Grid said in its Summer Outlook, covering the period from April to October.

Britain imports around 5-6 percent of its electricity via interconnectors with continental Europe.

“Should the UK leave the EU with no deal, cross-border trading of energy would take place outside of the (EU) single market framework, i.e. under World Trade Organisation rules for the majority of countries,” National Grid said.

There are no tariffs on electricity or gas shipments between the EU and other WTO members.

Nearly three years after Britain voted to leave the EU, and three days before it was supposed to leave the bloc, it remains unclear how, when or even if Brexit will take place.

Britain also imports more than half of its gas via pipelines from continental Europe and Norway and through shipments of liquefied natural gas (LNG) from countries such as Russia, the United States and Qatar.

LNG is more widely available on the world market as Russia and the United States have been ramping up deliveries. National Grid said it expects higher deliveries of LNG than last summer and that it expects there will be sufficient gas supply to meet demand. It also said it would be able to meet electricity demand.

It forecast gas demand during the summer period will total 36.1 billion cubic meters, almost 6 percent higher than summer gas demand in 2018, once weather related adjustments were made.

Electricity demand in Britain is expected to peak at 33.7 gigawatts (GW) this summer while the minimum summer electricity demand is forecast at 17.9 GW.


Brexit Delays Leave U.K. Facing Risk of Higher Power Prices

Some projects to develop new power cables between the U.K. and France are on hold because of uncertainties related to Brexit, throwing into question the delivery of infrastructure intended to reduce electricity costs in the U.K.

Work continues on two new interconnectors that were already under construction between the countries. However, talks on three other subsea power lines have been suspended due to the prolonged wrangling between the U.K. and the European Union over their divorce.

The pause, caused by the French energy regulator’s decision not to rule on the benefits of new interconnectors with the U.K. until the final conditions of Brexit have been clarified, could mean higher power prices on the British market for several years.

“As the U.K. often benefits from low power prices from France, less interconnection with that country can inadvertently translate to higher power prices,” said Andreas Gandolfo, a London-based analyst at BloombergNEF.

Increased connectivity with neighboring countries is becoming more important as the European power market undergoes rapid change. Utilities are becoming reluctant to invest billions to replace coal-fired and nuclear plants that are edging closer to retirement age, while wind and solar power can experience significant fluctuations.

On Pause

Ofgem, the U.K. energy regulator, has so far approved nine interconnectors, which would more than triple capacity from the current 5 gigawatts, a spokeswoman said. Developers will need to work with governments and regulators in connecting countries to ensure that final approval is granted in those countries, she said.

French regulator CRE’s concern over Brexit uncertainty is delaying progress of the Fab Link, Aquind and GridLink.

Prime Minister Theresa May is still struggling to gather enough support to get her EU withdrawal agreement through a vote in the House of Commons by Friday. If her deal fails for a third time, the U.K. will be forced to choose between a potentially long delay to its departure and falling out of the EU without a deal on April 12. Either of those outcomes would deepen the uncertainty that’s affecting the development of this vital infrastructure.

“There is a pause on talks for new interconnectors in development to France until Brexit is sorted,” National Grid Plc said in response to questions from Bloomberg. The U.K. power-grid operator said it’s continuing with projects that are already underway, amounting to a 2.1 billion-pound ($2.8 billion) investment in cables to France, Norway and Denmark.

“There are significant benefits for consumers from greater interconnection, no matter what the Brexit outcome,” National Grid said.

Slipping Timetables

The construction of Fab Link, a 1.4-gigawatt subsea link between the South of England and the Normandy region in France, is due to start in 2020 and to be completed in 2023, according to its website. The project is being developed by French power-grid operator Reseau de Transport d’Electricite, Transmission Investment and Alderney Renewable Energy.

Achieving that timetable will ultimately depend on the review by the French energy regulator, an RTE spokeswoman said by email. A spokesman for Transmission Investment declined to comment on any delays to Fab Link.

GridLink, a 1.4-gigawatt power transmission cable between Kent and Dunkirk developed by Icon Infrastructure is due to be built between the end of 2020 and the end of 2023, according to its website. GridLink didn’t respond to a request for comment through its website.

The 2-gigawatt Aquind project is “progressing on all planned activities,” said a spokesman for the company, while declining to comment on the details of talks with the French and U.K. regulators. Based on environmental and permitting time lines, the company aims to make its final investment decision by the end of 2020 and commission the cable at the end of 2023. In a statement last October, Aquind said its target was to complete construction in 2022.

Insufficient Capacity

The only power link between France and the U.K. is the 2-gigawatt IFA 2000 interconnector. That cable has been in service since 1986 and isn’t sufficient to meet the highest demand for power trading between the countries.

In the short term, Franco-British interconnection capacity will double to 4 gigawatts — the equivalent of more than two nuclear reactors — as Channel Tunnel operator Getlink expects to commission its ElecLink project early next year.

National Grid and its French counterpart RTE plan to complete the IFA2 cable between Southampton and Caen in the fourth quarter of 2020. National Grid also expects to complete its North Sea link with Norway at the end of 2021.

RTE and its Irish counterpart are continuing studies for the 700-megawatt Celtic Interconnector, which could bypass the U.K. and link France directly to Ireland from 2026. A final investment decision would happen around 2021, according to Eirgrid’s website.