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Call for governments to work together to ‘kick start’ energy revolution

New funding needs to be established by the UK and Scottish governments to kick start a “community energy revolution” if climate change targets are to be met, a major new report has claimed.

The report by WPI Economics and SP Energy Networks calls for the UK and Scottish governments to collaborate to support community groups who want to generate their own energy.

But the report comes as the two administrations are at loggerheads over the COP26 climate conference due to be held in Glasgow later this year.

The Future of Community Energy document maps out the benefits the sector could deliver if given support, suggesting that over the next decade the number of community energy organisations could rise to around 4,000 across the UK – bringing a possible £1.8bn boost to local economies and creating over 8,000 jobs.

The schemes could also play a key role in meeting climate change targets by saving 2.5m tonnes of carbon emissions, while community solar panels or wind turbines could power up to 2.2m homes across the UK, and cut energy bills of households involved by up to £150m a year. A Citizens Advice Scotland report has found that one in eight Scots say their energy bills are unaffordable.

According to the report, the government should establish a national community energy strategy with a community energy fund; create new, regional funding streams; and give greater support and resource to groups who want to set up schemes.

Frank Mitchell, chief executive of SP Energy Networks said the report showed “just how much potential there is within our communities in our drive to a zero- carbon future, lowering emissions with the additional benefit of driving up skills and jobs across the UK.”

Last week MSPs on Holyrood’s economy and energy committee were told that more investment was needed if a broader range of people were to benefit from the decarbonisation of energy. A recent Climate Emergency Response Group report also said the Scottish Government needed to generate public and private investment of between £1.8bn and £3.6bn a year, to achieve its carbon emissions goals by 2045.

Community and local energy schemes are being encouraged as a way to increase renewable energy production, taking strain off the national grid, and creating new revenues for local areas. Today the Scottish Parliament also agreed to give rates relief to district heating schemes to encourage more be established.

Mr Mitchell said: “The report also shows what might be possible by highlighting the innovative efforts of communities – notably in Scotland and Wales– where sustained government support and a strong backing from third sector organisations has enabled local energy to lead the way, not only in a UK context but internationally as well.”

He added: “But we’ve only just scratched the surface. Communities across the UK increasingly want to generate their own, low carbon power. As the provider of the energy networks that make this possible, SP Energy Networks is committed to doing more. But we need government and regulators to allow us to do so.

“It is time for communities to be given a stronger voice in how their areas reach Net Zero. And as this report makes clear, we need new funding streams and reduced regulation in licensing planning to meet this vision”.

Scotland’s Energy Minister, Paul Wheelhouse, said: “Our support for community energy is beyond question – indeed it is internationally recognised. We had a target for 500MW by 2020 which we have exceeded by far, and indeed we voluntarily increased it to 1GW for 2020 and 2GW for 2030.

“Progress has been good against higher target. To date, there are more than 700MW of community and locally owned projects installed, with a similar quantity in the pipeline, but we have been undermined by removal of Feed In Tariffs by UK ministers and have urged them to reconsider reinstating them.

“We have put in place Non Domestic Rates reliefs for community hydro and wind projects and continue with CARES support, but UK ministers ultimately control the ‘route to market’ and have withdrawn any subsidy for onshore wind. We continue to explore and have been encouraging shared revenue models as a means of increasing community involvement in larger projects.”

He added: “We welcome this report and SPEN’s growing interests in community energy. Many of the recommendations included in this report are similar to what we have recently consulted on in our draft Local Energy Policy Statement, for which SPEN submitted a response.

“We are currently reviewing the responses to the consultation with the intention of publishing a final statement, including a delivery framework, in the spring.”

SP Energy Networks said it would launch an “educational toolkit” to provide communities with the information needed to get schemes off the ground and connect to the grid.

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Germany’s RWE to cut one in three jobs in $2.9 billion coal exit deal

FRANKFURT (Reuters) – RWE (RWEG.DE), Germany’s biggest power producer, will cut about 6,000 jobs, or nearly a third of its current workforce, by 2030 as the country moves to phase out brown coal as an energy source, the company said on Thursday.

Germany’s exit from the coal industry marks the second major upheaval for RWE in as many years following the breakup of the .company’s former subsidiary Innogy (IGY.DE) with peer E.ON (EONGn.DE).

It also accelerates RWE’s transformation into a pure renewables group, which – along with its low valuation – could turn it into a takeover target, Goldman Sachs said last week.

RWE said it would receive 2.6 billion euros ($2.9 billion) in compensation from the government over 15 years to soften the blow to its business.

However, this was less than the 3.5 billion euro hit it estimated it would take, even excluding the expected loss of profits, it added.

“RWE stretches to the limits of what is possible,” Chief Executive Rolf Martin Schmitz told journalists on a call. “And we will bear the majority of the burden the German government demands for the coal phase-out.”

After months of wrangling, the German government early on Thursday agreed a compensation plan with energy companies, affected regions and workers to pay for the accelerated shutdown of coal-fired power stations by 2038.

RWE said it expected special writedowns of half a billion euros on power plants and open-cast mines as a result of the agreement. About 350 million euros will be set aside for personnel measures.

Shares in the group were 2% higher at 1508 GMT, the second-biggest gainers among German blue-chips, having earlier touched their highest since Sept. 25, 2014 as traders welcomed the clarity after months of wrangling.

“RWE’s agreement with the German government lifts an important overhang,” Bernstein analysts wrote.

“Some investors were cautious on whether RWE would be able to receive adequate compensation for early mine closures, given the past track record of negotiations with the government.”

Schmitz denied speculation that RWE may now seek to sell its coal assets, adding the firm, which is also Europe’s third-largest renewable group after Iberdrola (IBE.MC) and Enel (ENEI.MI), would stand by its employees.

“There are no such considerations and no talks on the matter,” Schmitz said.

The company has in the past denied claims that its coal-fired plants are loss-making, saying it would not run them unless they generated cash.

Dave Jones, European electricity analyst at Sandbag, a non-profit think-tank, said that it had been clear that coal would have to be phased out even before the Paris Agreement to combat climate change was struck in 2015.

“It’s a pertinent lesson for all other countries: deal with coal now, and save yourself a big bill in the future,” he said.

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Targeted Charging Review: Decision and Impact Assessment

We are modernising electricity network charging through two closely-linked reviews: 

  • The Access and forward-looking charges review is looking at the ‘forward-looking charges’ which sends signals to users about the effect of their behaviour, encouraging them to use the networks in a particular way; and
  • The Targeted Charging Review (TCR) has examined the ‘residual charges’ which recover the fixed costs of providing existing pylons and cables, and the differences in charges faced by smaller distributed generators and larger generators (known as Embedded Benefits).

Today we are publishing our final decision on TCR. We have decided that:

  • Residual charges will be levied in the form of fixed charges for all households and businesses.
  • We will be removing liability for the Transmission Generation Residual from Generators and making changes to one of the ‘Embedded Benefits’ received by Smaller Distributed Generators in relation to balancing services charges.

The decision document and Impact Assessment were updated on 18 December to correct a further error in the data provided to us by our consultants. This primarily affects table 1 of the Impact Assessment and tables 6 and 7 in the decision document. This affects the indicative charges for LV HH, HV and EHV consumers.

The decision document and Impact Assessment were updated on 9 December to correct some data provided to us by our consultants. This primarily affects table 1 of the Impact Assessment and tables 6 and 7 in the decision document. This affects the indicative charges for the North East Region only and is for LV HH and HV consumers.

Further information

For media, contact:

Stephen Roberts, 07990 139516

Media out of hours mobile: 07766 511470

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 03454 040506.

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 the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.

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

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Consumer Perceptions of the Energy Market Q3 2019

Publication date2nd December 2019Information types

  • Charts and data
  • Reports and plans

Policy areas

  • Domestic consumers
  • Electricity – retail markets
  • Gas – retail markets

Related LinksRelated Links

Ofgem in conjunction with Citizens Advice uses a quarterly survey to monitor domestic consumers’ perceptions about the quality of service in the energy market. Ofgem uses this information to support its monitoring and compliance activities.

The survey commenced in Q4 2018. This is the fourth wave of the study, conducted in Q3 2019.

The survey covers a range of topics including satisfaction with energy suppliers, perceptions about energy tariffs, use of price comparison websites and awareness and understanding of the default tariff price cap.  

The survey is conducted by Accent Research on behalf of Ofgem and Citizens Advice. Each quarter we survey approximately 3200 household energy bill payers across Great Britain.

read more here: https://www.ofgem.gov.uk/publications-and-updates/consumer-perceptions-energy-market-q3-2019

Please contact consumer.first@ofgem.gov.uk for further details.

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Npower loses over 260,000 customers in the third quarter of 2019

Big Six energy supplier Npower lost 261,000 customers in the third quarter of 2019, as large providers continue to haemorrhage clients to smaller challenger brands.

The figures take total customer losses for the year for the company, which is owned by German power giant Innogy, to 447,000.

Npower also posted a nine-month operating loss of €167m (£142.1), with expected losses for the whole year expected to hit €250m.

Innogy said that the decline was mainly driven by the introduction of the energy tariff price cap in the UK.

Chairman and chief executive Johannes Teyssen recently described Innogy’s loss-making UK retail operation as “an open wound that is bleeding profusely.”

Npower, which is Innogy’s retail arm, was recently bought by fellow German firm E.on, which warned that it would not tolerate a loss-making business for long.

According to energy market regulator Ofgem, profits at the UK’s six-largest energy suppliers shrunk by over a third last year.

Ofgem’s State of the Market report also found that 40 per cent of all electricity switching between July 2018 and June 2019 came from customers leaving Big Six suppliers in favour of smaller ones.

However, a report earlier this week found that last month 100,000 customers moved from small or medium sized firms to Big Six companies, suggesting the major players may have begun to turn the tide.

Peter Earl, head of energy at comparethemarket.com, said: “The Big Six have snatched the momentum from their smaller and nimbler energy rivals – but whether this is a longer-term trend or merely a blip remains to be seen.”

Innogy slashed its overall outlook on the back of Npower’s performance, saying it now expects retail profit to run between €200m and €300m, a €100m reduction on its previous range.

The news caps off a tough twelve months for the company, which last December was forced to call off a planned merger with SSE’s retail arm, which was subsequently bought by challenger brand Ovo.

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Climate change: UK ‘has technology’ for zero carbon

Eliminating greenhouse gas emissions in the UK is achievable with current technology, according to a new report.

The Centre for Alternative Technology (CAT) said a net zero-carbon Britain is already possible, without relying on future developments.

The Powys-based charity said changes to buildings, transport and industry could help slash UK energy demand by 60%.

“We have the technology to combat climate change and we can start today,” said project coordinator Paul Allen.

The CAT report – Zero Carbon Britain: Rising to the Climate Emergency – also claims making further changes to energy, diets and land use could help provide 100% renewable energy and cut emissions from agriculture and industry.

That would mean the UK would not be reliant on “as yet unproven” technologies, such as carbon or air capture, said Machynlleth-based CAT.

Mr Allen said using alternatives to technology that is ready to be rolled out at scale was “not worth the risk”.

However, the UK government described carbon capture as a “game-changing technology” in addressing climate change and said the country’s first project should be operational next year.

Britain was the first major nation to propose cutting greenhouse gas emissions to zero, promising to do so by 2050.

Reducing energy use

CAT said more new houses should be built to high Passivhaus standards that can reduce energy costs to just £15 a year by using insulated masonry and concrete, triple-glazing, LED lighting and air-source heat pumps.

Some of these changes could also be fitted to existing buildings to improve temperature control and potentially reduce heating use by around 50%.

Transport energy demand could also be cut by 78% by increased use of public transport, walking, cycling and using electric vehicles while cutting flights by two-thirds.

Increasing energy supplies

Based on the past decade’s weather and energy use, it is possible to fully match the UK’s entire energy demand with renewable and carbon-neutral energy, the report claims, if CAT’s recommendations are carried out.

Half of that would be provided by wind while other sources suited to the UK climate – including geothermal, hydro, tidal and solar – would produce most of the rest.

Carbon-neutral synthetic fuels are also an important alternative to electricity, especially in some areas of industry and transport.

Transforming land and diets

Switching from meat and dairy to plant-based proteins, reducing food waste and improving agriculture could go a long way to cutting carbon emissions, the report said.

CAT says the UK can:

  • Reduce on-farm greenhouse gas emissions by 57% (compared to 2017)
  • Cut food imports from 42% to 17%
  • Use 75% of current livestock grazing land for restoring forests and peat-lands

“We can still have coffee, chocolate and tea in a zero-carbon Britain, but the UK currently imports many foods that we can easily grow here,” said Mr Allen.

“By changing what we eat and how it’s grown, and by wasting less food, we can reduce greenhouse gas emissions, increase resilience and improve health and wellbeing.”

CAT is urging politicians to come up with action plans with policy frameworks and large-scale investment as a matter of urgency.

Solar farms can keep UK’s lights on even at night

Solar farms could soon play a vital role in the energy system 24 hours a day, after a breakthrough trial proved they can even help balance the grid at night. National Grid used a solar farm in East Sussex to help smooth overnight voltage fluctuations for the first time earlier this month, proving solar farms don’t need sunshine to help keep the lights on.

Lightsource BP, the owner of the solar farm, said an inexpensive tweak to the project’s electrical equipment meant it could help balance the grid with only two seconds’ notice. Kareen Boutonnat, the company’s chief operating officer, said: “We have proven that solar plants can play a larger role across the electricity network. But this is only the beginning.”

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The breakthrough could mean that UK solar farms will soon help stabilise the energy grid at night, which could save £400m on grid upgrades or building new power plants. “Inverters” at the solar farm are usually used in the process of converting solar energy to electric current. But at night, when the grid is often less stable, the same equipment can adapt grid electricity to a healthier voltage.

Chris Buckland, technical director of Lightsource BP, said the inverter acts like a distortion mirror by reflecting the energy network’s voltage back to the grid at a slightly different level.

On blustery nights with plenty of wind power but little demand, the solar farm could help prevent the energy grid’s voltage from rising too high. It could also prevent the voltage from falling too low during still nights in winter when demand is often high.

Lightsource BP will carry out a second trial next month, and it hopes to strike its first commercial deal to help balance the electricity grid with National Grid next year.

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Decision to suspend the Secure and Promote Market Making Obligation with effect on 18 November 2019

On 8 October 2019, we published an open letter seeking views on our ‘minded to’ position to suspend the Secure and Promote Market Making Obligation (MMO) in the event we released RWE from the Licence Condition. Following our decision to release RWE from the MMO from 30 October 2019, and having now considered responses to the open letter, we have decided to suspend the MMO with this taking effect on 18 November 2019.

This letter explains the reasons for our decision and provides an overview of responses to the open letter. To give effect to this decision, pursuant to the Special Condition, we have published a Direction to the relevant Electricity Generation Licensees alongside this letter.

Main document

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World’s energy watchdog is undermining climate change battle, critics say

PARIS (Reuters) – A short walk from the Eiffel Tower, Fatih Birol oversees the world’s energy watchdog, whose analyses of fuel demand have long been viewed as the gold standard by government officials, energy executives and investors.

But now, the Turkish economist and the International Energy Agency (IEA) he heads are facing mounting pressure from groups concerned about climate change – including investors, scientists and former United Nations diplomats – over the organization’s widely watched annual outlook.

The World Energy Outlook, due to be published Wednesday, shapes expectations among governments, companies and investors over the future use of coal, oil and gas.

The critics say it underplays the speed at which the world could switch to renewable sources of energy. The result, they say, is to bolster the case for continued investment in fossil fuel companies, undermining the fight against climate change.

“The IEA is effectively creating its own reality. They project ever-increasing demand for fossil fuels, which in turn justifies greater investments in supply, making it harder for the energy system to change,” said Andrew Logan, senior director of oil and gas at Ceres, a U.S. non-profit group that promotes environmentally-friendly business.

Senior IEA officials say they share concerns over climate change but defend their organization’s work, saying the criticism is based on a misunderstanding of what the World Energy Outlook intends to show. They say the goal of the publication is to help governments assess the likely consequences of existing energy policies, not forecast what the world’s energy system will look like decades into the future.

The IEA — which is mainly funded by industrialized nations including the United States, Germany and Japan — advises governments on energy policy.

“If they criticize us, the only option that comes to my mind is that they don’t know exactly what we are doing,” said 61-year old Birol during an interview at the IEA’s headquarters in Paris last week. “They must be misunderstanding, or they must have been misled.”

IEA officials also say there is also some wishful thinking about how quickly the transition to cleaner energy could happen.

“A lot of times people want to believe there’s some simple lever that you push: ‘change the IEA and the world will be better,’” said David Turk, who had been a senior climate official in former U.S. President Barack Obama’s administration and now heads the IEA’s strategic initiatives office.

INCREASED SCRUTINY

The IEA has long faced criticism from other energy analysts who say the outlook has failed to capture dramatic falls in the cost of solar power. Tim Buckley, a Sydney-based analyst at the Institute for Energy Economics and Financial Analysis think tank, said the cost in the United States had fallen to below $40 per megawatt hour this year but the last World Energy Outlook implied a current figure closer to $90.

The IEA says much of the dramatic expansion of the solar industry has been driven by policy changes in China, which the outlook was not designed to predict, and that projections in other areas had proved accurate.

The increased scrutiny of the World Energy Outlook shows how the once esoteric subject of energy modeling is becoming a focus of the mainstream investment community as worries over climate change intensify.

Concerns among fund managers about the implications for their investments escalated after the world’s climate scientists issued a landmark U.N.-backed report late last year offering a stark assessment of the likely consequences of rising global temperatures.

The report said the worst effects could be averted by limiting the temperature increase to 1.5 degree Celsius above the levels of pre-industrial times. That target is the most ambitious goal of the 2015 Paris Agreement, the global pact to curb global warming.

Birol was instrumental in developing the models used to compile the World Energy Outlook during his previous role as the agency’s chief economist. The outlook is published each year with a different cover featuring the yellow and red colors of Birol’s favorite soccer club, Istanbul-based Galatasaray.

The publication’s main report, or scenario, maps how demand for different forms of energy would evolve over the next couple of decades based on existing government policy commitments. Some critics say that because it doesn’t take account of the likelihood that governments will take more drastic action to curb emissions, it means projections will inevitably be conservative.

IEA officials emphasized that the outlook is not a forecast, rather it explores the implications of existing policies, which is made clear in the introduction.

“MORE STRINGENT”

Another scenario, called the Sustainable Development Scenario, aims to show how the global balance of renewable energy and fossil fuel would need to change to meet the temperature goals of the Paris accord, cut air pollution and expand access to electricity for the world’s poor.

Investors and climate activists are lobbying Birol to include a scenario that uses the most ambitious Paris Agreement target of a 1.5 Celsius increase. In the last outlook, the Sustainable Development Scenario implied warming of about 1.7 to 1.8 degree Celsius.

Investors say using the more ambitious target could spur a faster switch to renewables by showing the financial markets a path for meeting the goal.

Among those pressing Birol for that change is a group of institutional investors representing $30 trillion of assets under management, called the Institutional Investors Group on Climate Change.

In a previously unreported letter sent to Birol earlier this year, the group said that appropriate scenarios are important to institutional investors for understanding their exposure to climate risks and deciding how to allocate capital. The IEA’s scenarios “materially impact expectations for future investment returns,” the investors wrote.

Birol, who downplays the extent to which the outlook guides investment decisions, said the next World Energy Outlook takes the latest findings of climate science into account. The IEA in comments on its website last month said that it will explore a path with a 50% chance of stabilizing warming at 1.5 degree Celsius without relying heavily on still early-stage techniques for sucking carbon from the atmosphere.

The Sustainable Development Scenario will be “more stringent” than in the previous outlook, Laura Cozzi, the IEA’s chief energy modeler, told Reuters. IEA officials said it was very challenging to model a scenario of a 1.5 degree Celsius rise given the amount of existing fossil fuel infrastructure.

PRESSURE MOUNTS

In April, Birol received a separate letter expressing similar demands from more than 60 signatories, including leading climate scientists and former UN climate chief Christiana Figueres as well as several large asset managers, including UK-based asset manager Legal & General Investment Management Ltd. and Sarasin & Partners LLP.

The letter also urged Birol to make clear that the outlook’s main scenario, which had been called the New Policies Scenario and reflects governments’ existing climate pledges, is a “business as usual scenario” that would lead to a rise of between 2.7 and 3 degree Celsius.

In the comments on its website, the IEA said it would rename its main report the Stated Policies Scenario to clarify it reflected existing commitments.

The groups pushing for change welcomed the name change but said they would study the new outlook when it is published to reach firmer conclusions.

Parliament sends 30,000 invitations for citizens’ assembly on climate change


 “Net zero is an opportunity, therefore, for people to not just explore ways in which the UK can end its contribution to climate change, but also create a cleaner, healthier environment as well as benefit from the opportunities around creating a low-carbon economy.”

Key themes to be discussed at Climate Assembly UK will include how people travel, what people buy and household energy use. The outcomes of discussions will be presented to the six select committees, who will use it as a basis for detailed work on implementing its recommendations. It will also be debated in the House of Commons.