Tom Crisp Editor 01603 604421 [email protected]

Monday 27/11 – The government’s Industrial Strategy is launched, indicating support of clean growth and the intent to exempt more ENERGY PERSPECTIVE 02 industries from the costs of policy on energy bills. BEIS also commits up to £8.8mn to develop innovative approaches to energy Industrial Strategy offers little for energy sector to sing about – management for SMEs using smart meter data. Ofgem announces a Tom Crisp £145mn voluntary contribution by SGN, including £84mn being returned to customers under the price control sharing mechanism, POLICY 05 after identifying planned works as unnecessary. BEIS looks to boost small business smart meter Tuesday 28/11 – Climate Change and Industry Minister Claire Perry engagement states that BEIS is examining ways to allow new onshore wind to Perry defends low-carbon develop in parts of the UK where it has support. A Green Alliance support cut back report calls on the government to back emerging economies in its EU calls for renewed Energy Union effort “inclusive low-carbon transition”. The Policy Institute at King’s College Parliamentary update – Week 48 London calls for BEIS to be refocussed as the Department for 2017 Industrial Strategy. REGULATION 11 Wednesday 29/11 – Business and Energy Secretary Greg Clark Consumer trial confirms confirms £80mn of investment in a new automotive battery potential of cheapest market development facility to help the UK establish itself as one of the “world offers leaders in battery technology and innovation”. National Grid releases Views sought on stabilising balancing charges its Electricity Ten Year Statement. The Welsh government calls for continued support for onshore wind and solar technologies. Cory INDUSTRY STRUCTURE 15 Riverside Energy reveals plans to build an 96MW integrated, low- Centrica: nearly £1bn annual carbon energy park at its site in Belvedere in London. savings from distributed energy Thursday 30/11 – OPEC and non-OPEC producers led by Russia agree ENA seeks views on Electricity Network Innovation Strategy to extend oil output cuts until the end of 2018. BEIS figures show a Electricity costs to suppliers in total of 1,181,200 domestic smart meters were installed by large energy October hits highest level this suppliers in Q3 2017. Ofgem announces that five electricity projects year and two for gas have collectively been awarded £57.6mn under the NUTWOOD 20 Network Innovation Competition. Ecotricity and charge point manufacturer Rolec EV launch a bespoke EV tariff offering. Australian report finds no need to panic about energy storage – Friday 01/12 – Ofgem consults on the separation of National Grid’s Giles Parkinson electricity transmission licence into Transmission Owner and System MARKETS 22 Operator functions. The regulator also sets out its position on compliance with the DCC user mandate, tolerance for 2018 and 2019 smart meter roll-out milestones, future submissions of revised roll-out plans and consumer engagement.

To much fanfare the between government and industry to maximise government launched opportunities in the transition to electric, its long-awaited connected and autonomous vehicles. This is Industrial Strategy on backed up by the £400mn of public and private 27 November. investment in a charging infrastructure fund recently announced in the Budget. The publication rounds off a string of highly At a select committee appearance on 29 Tom Crisp anticipated November, Business and Energy Secretary Greg Editor 01603 604421 government reports Clark dismissed claims that the Industrial Strategy [email protected] and statements this and the sector deals were not about picking year, including the winners. Rather they are about maximising the Clean Growth Strategy (CGS), the Budget and the opportunity in certain areas for the UK to seek to Helm Review. benefit from its competitive advantages, such as in clean energy. In this week’s Energy Perspective we consider some of the common themes and discordant Falsetto clashes that these major documents have thrown But the strategy does suggest that the government up for energy policy, stretching well into the next is clearly differentiating its thinking on two key decade. clean growth industries – offshore wind and A capella nuclear. The main energy motif of the Industrial Strategy It seems strange that the Industrial Strategy did not will be familiar to our readers. In particular, the contain a sector deal for offshore wind. Despite recognition of maximising the advantages for UK warm words around being a world leader, there is industry from global clean growth as one of four nothing to build on recent successes in this sector. “Grand Challenges” gives reassurance that the Above all, the “ambitious sector deal”referenced in concept in broad terms will continue to be a the CGS has not materialised. priority. Accordingly there will be no new money beyond Innovation in clean growth is identified as the up to £557mn pledged for future Contracts for important for low-cost, low-carbon infrastructure Difference auctions until the overall cost of policy systems as well as for realising industrial levies on energy bills begins to fall. Currently this is opportunities. The government will increase estimated to be after 2025. BEIS assumptions support for clean growth innovation by making it a revealed in the Budget are that offshore wind is “strategic priority” for the £725mn Industrial the major beneficiary of that support, as evidenced Strategy Challenge Fund – part of which will go by its rise from 5.21GW in 2016-17 to 14.04GW in towards a programme to develop smart systems, 2024-25, while almost all other renewable entitled “Prospering from the energy revolution”. technology grinds to a halt in the next few years. One welcome shift is the absorption of feedback But whilst this money may accommodate the from stakeholders to take a whole systems current pipeline, the decision to provide no clarity approach to the decarbonisation of energy beyond 2025 is problematic in a sector where infrastructure systems. BEIS says it agrees with this development work begins many years ahead of principle, and will position the UK as a “leader in commission and development expenditure is high. clean and efficient power, transport and heat If new low-carbon spending is to only be through an integrated approach to decarbonising sanctioned as and when the burden of that these increasingly connected systems”. However, existing falls, then current forecasts show this aside from ideas showcased in the CGS there is occurring in the mid-2020s when the cost of the nothing really new in detailed terms in the Renewables Obligation begins to diminish. But, Industrial Strategy. even in this paradigm, the costs of legacy schemes Where the true indication of government backing will not fall fast. Recent analysis by Moody’s (see lies though seems to be the “sector deals”. For Figure 1) shows a peak of over £11bn of low-carbon example, a sector deal in electric vehicles is subsidy costs, and then a dip around 2025, but a identified as the “next step” in a partnership small one. Much of the “base load” renewables

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costs remain towards 2030, with the RO still according to the recent Public Accounts accounting for more than half of the total costs of Committee report. environmental obligations. On Budget day the FT’s Nathalie Thomas also Figure 1: Net subsidies under major renewable schemes gained a clarification from the Treasury that even Contracted schemes only, £mn within the strictures of the new cost controls it can still “discuss other projects and hold price negotiations, but generation can't start until after 2025”. In the Industrial Strategy it emerges that the nuclear sector, under the leadership of Lord Hutton, is in “advanced discussions with the government” on a range of ambitious proposals to increase competitiveness and achieve greater value at both national and regional levels. Industry- led proposals for a nuclear sector deal focus on how, working with the government, substantial cost reductions can be achieved across the UK’s Source: Moody’s new build and decommissioning programmes. This analysis does not, of course, take in to Further details of the discussions are expected “in account any fluctuations in wholesale power the coming weeks”. prices. A sustained fall in captured power prices Moreover, and outside the cost control framework would as more and more offshore wind CfDs that appllies to other energy technologies, there is become operational increase low-carbon spending the £250mn Small Modular Reactor (SMR) commensurate with the gap to the strike prices. commercialisation competition that has gained a Costs may, and probbaly will be higher than new head of steam in recent weeks. It was envisaged. reported – again in the FT – in early November The headline then is that any prospective support that talks about SMR support between government even beyond 2025 is likely to be limited for officials and industry had “intensified”. The offshore wind. With the long lead-in times, this potential for government backing can be creates a real risk of ripping the bottom out of the measured by the level of interest and lobbying that market for new offshore project development. In has been witnessed in recent weeks from that environment, what will the supply chain do? conglomerates including Rolls-Royce, NuScale and The UK-made content of offshore windfarms has Westinghouse. been steadily rising, but in the context of such a freeze the market could move to countries where Figure 2: Strike price comparison – offshore wind v Hinkley support is still available and away from the UK. The pent-up demand for support is likely to grow if The Crown Estate proceeds with the offshore wind licensing round it recently announced it is considering. The previous five leasing rounds have seen around 47GW of capacity leased to developers already – if support is truly limited to the extent indicated, interest in opening up sites with less beneficial locations will evaporate. Siren sound Having established the limited time and budget support offered for offshore wind, the parallel with nuclear is striking. Even before the recent raft of documents, Hinkley Point C’s costs have been subject to a commitment for several years, despite extending beyond 2050 Source: Cornwall Insight and they are now expected to total £30bn,

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In summary – despite being more expensive than This world of falling demand may only be here for offshore wind on a strike price basis (see Figure 2) the short term given that especially transport, and – there is a guarantee of support for coming to some extent heat decarbonisation, envisage decades, and a sector deal is being made electrification. National Grid’s most recent Future available for the nuclear sector as well as bespoke Energy Scenarios predict electric vehicles will funding for SMRs. Both are unproven on a reach around 1mn by the early 2020s, and there commercial basis and are clearly seen as strategic, could be as many 9mn by 2030. Without smart traditional economic arguments for subsidy. This charging, this could result in an additional 8GW of contrasts to the apparent halt for support of demand at peak times. Whether heat is offshore wind past a certain point, despite rapid decarbonised through heat pumps or – as hinted – commercialisation and reduction in costs. hydrogen, there will be significant new power demands created. The Energy Research Karaoke Partnership has estimated that converting the The other major headline from the Industrial domestic heat and hot water for homes currently Strategy was confirmation of the intent to explore using gas to hydrogen with an electrolysis pathway exempting an even greater number of non- would require about 445TWh of electricity/ year, domestic users from the costs of the low-carbon requiring 190GW of offshore wind to meet this. transition. A consultation will be opened shortly on Pitch imperfect widening eligibility for the exemption schemes for energy intensive industries to address “potential In conclusion, there remains a clear gap between intra-sectoral competitive distortion.” the rhetoric of the government on clean growth, achieving binding climate targets and the tools to The reality is that the total non-wholesale bill is live up to either of these. rising as a result of locked-in Third Party Charges and so reducing costs for one type of consumer There are no further major policy announcements merely raises it for another. But, as has been or strategies on the horizon so it seems for the brought home vividly in recent weeks, domestic short term at least, with the possible exception of energy costs are high on the political agenda, and finessing details on future energy efficiency we wonder where government is heading with this support arrangements, the framework has been rebalancing of the costs of subsidy measures. set. The challenge for the industry now is to deliver what is demanded of it, but without the prospect of The solution that seems to have been reached is further signficant financial support for many years to default to limiting costs in the first place: to come. deprioritising decarbonisation’s addition to costs even more so than before at least over the medium term. Deferring costs beyond 2025 has been adopted as the political solution, even if it means risking stalling the momentum in offshore wind and committing to higher cost sources of generation overall. This argument leads logically to the conclusion that to achieve carbon budgets policy makers are banking on smarter and more energy efficient homes and businesses reducing electricity demand and achieving the necessary carbon emission reductions. The CGS is heavy on hints of a long-term energy efficiency support mechanisms, even if commitments to the Energy Company Obligation (ECO) or ECO-like schemes are at this stage lacking in detail. There is a question though of how sensible this strategy is given Climate Change and Industry

Minister Claire Perry’s confirmation at the BEIS select committee last week of shortfalls against carbon budgets from 2030.

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Charlotte Farmer, Analyst, [email protected]

Following research into the impact of the smart should be able to differentiate whether a meter roll-out among non-domestic consumers, behavioural change, such as asking staff to turn off BEIS has launched a competition to foster the appliances when not in use, or an investment, such creation of new products and services that will as replacing old lighting with LED solutions, would encourage smaller enterprises to engage with, reduce the site’s energy consumption. and benefit from, their smart meter data. The research also found that the development of On 27 November, BEIS announced that it will be software products alone is unlikely to increase launching the Non-Domestic Smart Energy engagement with smart meter data, and needs to Management Innovation Competition (NDSEMIC), be accompanied with a support programme to to make it easier for small businesses to identify raise awareness and provide advice. Phase three demand reduction opportunities from their smart of the NDSEMIC will therefore require projects to meter data and act to initiate improvements. participate in engagement activities. This could take the form of collaboration with peer-to-peer or The government is planning to commit £8.8mn not-for-profit organisations, such as local councils, across up to nine projects to develop innovative who can act as a support network for businesses software and support networks. This will enable beginning the journey to smart energy small businesses to maximise the potential energy management. and cost savings achievable by analysing smart meter data. It will be staggered over three phases, BEIS has set five key objectives for the the final phase to take place in early 2019-2020. competition: Initially projects will be asked to undertake Develop innovative and easy-to-use data tools, feasibility studies and software development, with • initial testing to take place in phase two, followed tailored to the target sectors, which add value by a wider roll-out of initiatives alongside an advice to smart meter data service and engagement activities in phase three. • Develop packages of supporting The “early learning” research into smart meters in complementary interventions that drive uptake the non-domestic sector that triggered this and effective use of data tools competition found that larger corporations, • Secure earlier and greater levels of energy especially those with high energy use, are likely to management activity in target sectors, leading have adequate incentive and resources to to reduced energy costs and emissions understand and act upon smart meter data. • Reduce barriers to, and stimulate the market By contrast, smaller businesses often do not have for, companies developing energy dedicated energy management staff, meaning that management products and services, and they lack the time or skills to interpret and act upon their smart meter data. The competition • Support the implementation of energy projects will therefore focus on three sectors: retail management by enabling increased and more and hospitality (both chains and independents), as effective activity by partner organisations. well as schools. Interested parties can now submit applications. The research found that the benefit from smart Phase one contracts will then be awarded ahead metering in these sectors was maximised when of planned project commencement in March 2018. businesses were able to interpret data in the The case for action here is “market failure”, context of their own operations and then follow up which we would question as we have only just these insights with cost-effective solutions. had the much-delayed roll-out of smarter The research predicts, and the competition looks meters and settlement to larger sites in this to prove, that tailored and automated alert support sector. The market is already responding with from a free or low-cost solution will have the new services often linked to supply contracts. greatest impact. For example, if one restaurant in a Nevertheless the competition should help chain is seen to have atypical consumption at speed development further. certain times, the alert service should interpret the data and look to advise on options for action. It BEIS

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Cory Varney, Writer, [email protected]

BEIS is examining ways to allow for new onshore targets, were not yet cost-effective and would wind development, according to Climate Change increase energy bills. and Industry Minister Claire Perry, speaking The government’s pledge to invest £2.5bn in before the Business, Energy and Industrial research and development will enable it to get to a Strategy Committee on 28 November. She was position where technologies such as carbon being questioned on the recently published capture usage and storage can be deployed cost- Clean Growth Strategy (CGS) and the outcomes effectively. of the UN climate change conference in Bonn. Perry assured the committee she was confident Asked about onshore wind, Perry drew on the so-called “flexibilities” would not have to be used Conservative election manifesto pledge of no new to meet the budgets. But she added that, while she large-scale onshore windfarms in England. would be personally disappointed if they were However, the minister noted there were parts of used, “if the cost of using them was to reduce the UK in which it has support. She explained that, energy bills for consumers, particularly vulnerable while the Contract for Difference rules made it consumers, I would judge that was the right call to impossible to bring forward “geographically make.” specific windfarms”, onshore wind was “absolutely” seen as part of the future energy mix The minister was pressed on reintroducing the and work was underway to see how it could be zero-carbon homes standard but explained it had brought forward in areas in which it is supported. made housebuilding “too expensive”. Perry said the real problem was not just building energy The Budget’s revelation that there will be no new efficient new homes, but also retrofitting “some of low-carbon levies, outside of existing the oldest housing stock in Europe” homes that commitments, until 2025 has drawn criticism, would not be captured by the standard. though both Perry and Tim Lord, BEIS Director for Clean Growth, defended the move. Perry noted On the UK’s future relationship with the European how she had recently opened the country’s first Union, Perry told the committee that the decision subsidy free solar farm and how offshore wind was to leave the bloc was not connected to leaving the being bought at levels “effectively subsidy free”. Emissions Trading System (EU ETS). She reiterated With these things considered, Perry felt committing a desire for there to be “no cliff edges” for £557mn up until 2025 was “pretty decent”, adding businesses, confirming the UK wished to remain a that “as costs fall, so should the level of subsidies”. part of the EU ETS. Lord told ministers that no decisions had been Despite this, she said that she would like to taken on how the money will be spent, assuring it explore other opportunities to trade emissions as did not rule out support for tidal, wave and she wants a “better carbon price” signal to drive geothermal technologies. When specifically asked emissions activity within the economy. The current about tidal lagoons, he said BEIS would set out its EU ETS carbon price of €7/tonne was not high position “in due course”. enough nor did it reflect the cost of carbon. On nuclear, Perry said other projects were still “in When questioned on the UN climate conference in the pipeline” and was unable to say if new money Bonn, Perry explained it had been a “process” would be available before 2025. conference, setting out how the conversations will be taken forward next year. There was a sense With regards to meeting carbon budgets, Perry that countries remained “very committed” despite said the policies set out within the CGS accounted the US withdrawing. for 93% of the reductions needed for the fifth budget. The minister expressed confidence that it Recognition that there are areas of England will be met, noting not all the emissions reductions that would welcome onshore wind is both for policies had yet been quantified – such as welcome and overdue. building standards. She added that it would have been “very irresponsible” for the government to Parliament put forward technologies that, while needed to hit

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Cory Varney, Writer, [email protected]

The European Commission has said the time has create synergies between energy, transport and come for everyone to “pull in the same direction” telecommunication infrastructure. to ensure the Energy Union succeeds. The report did touch on “considerable It made the call in its Third State of the Energy achievements” towards this goal, but warned that Union report, published on 24 November. It “important bottlenecks” still remain. One of the declared that by 2019 “the Energy Union must no most notable is that four Member States, including longer be a policy. It must be a reality.” the UK, are expected to remain below the 10% electricity interconnection target in 2020. In an The report began by providing an overview of EU attempt to address this, the EU Commission said it energy progress, finding the bloc is on track to has adopted a Communication on the 2030 reach its target of 20% renewables in the energy electricity interconnection target, and adopted the mix in 2020. As of 2015, renewables accounted for 3rd list of Projects of Common Interest. over three quarters (77%) of new EU generating capacity for the eighth consecutive year, while In conclusion, the report stressed that progress in they have led to an estimated €16bn saving in 2017 has resulted in the EU remaining on track to fossil fuel imports. implement the Energy Union project. In order to complete the project before the end of the current The document also highlighted the decoupling of Commission’s mandate in 2019, it warned that greenhouse gas (GHG) emissions and Gross further efforts are “urgently required”. It called on Domestic Product (GDP), as well as economic co-legislators to “redouble their efforts” to reach growth and energy consumption. It was found swift agreements on delivering the legislative despite an increase in industrial and economic framework. activities in 2016, as well as a 1.6% rise in GDP, GHG emissions fell 0.7% overall and 2.9% in the The report touched on the recent political sectors covered by the EU Emission Trading agreement on the review of the EU ETS that had System. been reached. It called on this progress to be maintained, ensuring ambition for remaining Meanwhile, a decline in demand energy demand legislative proposals remains high allowing the EU has been driven by energy efficiency measures in to consolidate its leadership role in the clean Member States. Despite this, the report warned the energy transition. The report urged Member States EU still has to reduce its primary energy to step up their work on their integrated national consumption by 3.1% between 2015 and 2020 if it energy and climate plans, creating predictability for is to reach its energy efficiency target. It found that investors. the EU’s combined GDP grew 53% between 1990 and 2016, with emissions reducing 23% in that The Commission pledged to intensify its support time. But transport sector emissions have for carbon-intensive regions in transition as part of continued to rise. this, while it will also encourage investment into clean energy. Its final recommendation was a call While there has been positive progress, the report for “society as a whole and all European, national, warned the energy transition will not be possible regional or local stakeholders concerned to without adapting the infrastructure to the needs of engage actively in the energy transition and the future energy system. contribute to its success.” The EU Commission explained that energy, transport and telecommunication infrastructure are While there is still work to be done to becoming increasingly interlinked. It tipped “trans- complete the Energy Union, the drive to sectorial” integration to continue, with local complete it from the EU is strong. It seems networks becoming increasingly important in the strange reporting on these issues with the UK daily lives of European citizens. It explained they on a secessionist pathway, but that doesn’t will increasingly switch to electro-mobility, diminish from the relevance of the report, decentralised energy production and demand which still provides an interesting snap-shot. response. The Commission called on project promoters applying for financial support to seek to EU Commission

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Tom Crisp, Editor, [email protected]

Climate Change and Industry Minister Claire Perry for renewables, costs for nuclear will come down appeared before the Business, Energy and for follow-on projects. For example, design Industrial Strategy on 28 November on the Clean engineering and regulatory approval do not need Growth Strategy (see p.6). to be repeated. Suppliers have already invested to relearn nuclear supply standards and develop The committee also held a session on 29 skills and financing costs can be reduced. November on the work of the BEIS department. Albert Owen (Labour, Ynys Mon) asked when the A Written Ministerial Statement was made on 29 government had been converted to “picking November on the COP23 Bonn climate talks. winners” before pressing for details on the Junior BEIS Minister Lord Henley stated that the announcement of a deal in the nuclear sector. UK, negotiating as part of the EU, secured its main Business secretary Greg Clark responded that it negotiation objectives: progress in the multiple was not about picking winners and the strategy's negotiating tracks on the work needed to five pillars addressed all parts of the economy. implement the Paris Agreement; and a clear vision However, he said there was an opportunity in for next year’s “Talanoa Dialogue” – a collective certain areas for the UK to seek to benefit from its process which will take stock of current efforts and competitive advantages, such as in clean energy. drive future global ambition. He added the discussions around the nuclear deal In a Written Ministerial Statement on 29 November, were proceeding very well but he did not have a BEIS confirmed that under Section 4A of the date in mind. Petroleum Act 1998, operators who wish to A number of sittings of the Smart Meters Bill Public conduct associated hydraulic fracturing must apply Bill Committee were held on 29-30 November. The for a Hydraulic Fracturing Consent from the debate focused on the Data and Communications Department for Business, Energy and Industrial Company and the Special Administration Regime. Strategy. Hydraulic Fracturing Consent was The bill now moves to report stage, with a date yet introduced in the Infrastructure Act 2015 as an to be announced. additional step to the existing regulatory and permitting regime. However, it does not apply to A debate was held in both chambers on 27 wells drilled before the 2015 Act came to force and November to accompany the launch of the these are not captured by the requirement to seek government’s Industrial Strategy (see p.2). Greg a Hydraulic Fracturing Consent. Clark stated the strategy’s priorities included making the UK the world’s most innovative The direction closes this loophole and ensures that economy, making energy intensive industries the same approach for consent is taken for all competitive in the clean economy and supporting relevant hydraulic fracturing operations, including the transition to zero-emission vehicles. where the associated well was drilled prior to the 2015 Act coming into force. Shadow Business and Energy Secretary Rebecca Long Bailey welcomed the acknowledgment of In a written answer, published on 29 November, many of the fundamental problems of the UK Climate Change and Industry Minister Claire Perry economy, but criticised the strategy as “little more confirmed details of the carbon capture usage & than a repackaging of existing policies and storage (CCUS) Task Force membership and terms commitments.” Later in the debate, asked about of reference will be published on the BEIS website support for tidal power, Clark responded that “we in January 2018. have to ensure that the cost to consumers is taken The House of Commons Library published two into account, and that is the judgment that we briefing papers of interest: need to make”. Carbon Price Floor (CPF) and the price support The Public Accounts Committee published • correspondence on 29 November from EDF in mechanism, and relation to its report on Hinkley Point C. Simone • Automated and Electric Vehicles Bill 2017-19. Rossi, EDF Chief Executive, argued that Hinkley Point C is a first-of-a-kind project and, just as it has Links underlined above

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Rachel Reeves, Chair of the Business, Energy and Industrial Strategy Committee, has written to Business and Energy Secretary Greg Clark regarding the government’s efforts to help vulnerable energy customers. In her letter dated 15 November Reeves sought clarification on the government’s intentions to remove the legal barriers to the identification of vulnerable customers by energy suppliers. She drew on how Ofgem had advised the government to amend the required sections of the Digital Economy Act 2017 to permit data- sharing with suppliers, as long as it is in connection with fuel poverty protections. Ofgem had said current restrictions on data-sharing mean both it and suppliers struggle to correctly identify and support all vulnerable customers. Reeves asked Clark if the government is intending to take Ofgem’s advice on changes to the Act, and when these changes will happen if that is the case. The BEIS Committee Chair also asked if the government planned to reform the Warm Home Discount scheme so that more people identified by Ofgem and energy charities as vulnerable are guaranteed access on an “unconditional basis.” She said: “Ofgem and energy suppliers were very clear to us in evidence that a major obstacle to helping to protect vulnerable energy customers is the difficulty in identifying these customers due to insufficient data-sharing. When many low-income and vulnerable customers are missing out on current support such as the Warm Home Discount, the Government need to urgently spell out what it is doing to ensure vulnerable customers get the protection they deserve.” Parliament

On 30 November, the government released its Quarterly Smart Meter report, revealing a total of 8.61mn smart meters in operation across Great Britain, an increase of 12% from the previous quarter. The government is committed to ensuring that every home and small business in the country is offered a smart meter by the end of 2020, with the aim to roll-out over 50mn smart gas and electricity meters across all domestic properties and smart or advanced meters to smaller non-domestic sites in Great Britain To date a total of 1,181,200 domestic smart meters installations and an estimated 15,200 installations into smaller non-domestic sites have occurred over Q3 2017, by large energy suppliers. This represents a 12% increase in domestic installations and a 10% increase in non-domestic installations compared to the previous quarter from July to September. The BEIS figures totalled 9.44mn smart and advanced meters installations within both homes and businesses across GB by both large and small energy suppliers, a 15% increase from the previous quarter. In addition, BEIS indicated a total of 20.99mn gas meters and 25.24mn electricity meters operated by large energy suppliers in domestic properties across Great Britain, revealing a steady increase from quarter to quarter. Also, the report revealed a total of 7.59mn domestic smart meters operating in smart mode from 30 September 2017, representing 16% of all domestic meters operated by large energy suppliers. BEIS

Shadow Chancellor John McDonnell has said that Labour’s plan to renationalise key industries, including energy and railways, will not be a burden on taxpayers. Speaking on the Andrew Marr Show on 19 November, McDonnell outlined that Parliament would set the price on any of the nationalisations and the cost would always be covered. McDonnell assured the plan was not a “magic card trick”. The Shadow Chancellor explained that with the industries in question profitable, “that will cover the cost of any borrowing” and will not be to the detriment of taxpayers. McDonnell said that the UK would not be “keeping up” with competitors across Europe, the US and beyond if Labour’s plan was not put into action. The resulting funds from the renationalisation would be spent through a strategic investment board that brings together government and business, getting “the best deal” and ensuring the UK competes in a global market. No link

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The SNP have attacked the “glacial” pace at which the North Sea oil and gas tax reform is being implemented. Within the recent release of the Autumn Budget, Chancellor Philip Hammond announced that from November 2018 firms would be able to transfer tax credits, in order to attract investment and prolong production. In a statement on Saturday 25 November, the SNP welcomed the policy of transferable tax credits for mature fields, but argued the UK government should go much further to stimulate fresh investment and exploration in Scottish waters. In addition, the SNP criticised the speed at which changes will occur, with suggested measures already “long overdue”, and are now calling on the Treasury to introduce incentives for new exploration and support for oil companies. No link

Mayor of London Sadiq Khan’s draft London Plan has assured there is “absolutely no place” for fracking. Published on 24 November, the plan also called for any application to exploit shale gas resources to be refused. Khan drew on evidence that had shown the fracking process itself can cause damage to public health, worsen toxic air quality and contaminate water supplies. The move comes after reports of energy companies identifying potential fracking sites in London. Speaking on 24 November, Khan said: “We must instead focus our resources on developing technologies for the efficient extraction of clean, renewable forms of energy, rather than coming up with more ever innovative ways to keeping burning fossil fuels.” The move was welcomed by Friends of the Earth, with campaigner Rose Dickinson saying it was right for fracking to be opposed where it rears its head “because of the known risks from the process.” Mayor of London Our latest Chart of the Week explores new MOSL data that reveals a concentrated water market. Last week’s Cornwall Insight blogs included Yet more changes for supplier compliance and The electricity system of the future – at what cost?

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Emma Bill, Regulatory Analyst, [email protected]

The large-scale test Ofgem ran from June to from switching to supplier A (£293 versus £203 for August of its Cheapest Market Offers Letter supplier B). Also at play could be different (CMOL) has indicated that a supplier-branded customer attitudes to their supplier and to the letter has the biggest impact on switching rates. wider energy market, Ofgem said, as well as the timing of the trials between the two suppliers. The regulator published the results of the trial on 24 November, showing that the letters increased External - as opposed to internal - switching was average switching among customers on standard more pronounced overall, and particularly for variable tariffs (SVTs) from a baseline of 1% to an customers receiving supplier-branded letters. The average of 2.9%. This was a randomised control regulator noted that this may be down to the trial which involved 137,876 customers from two potential higher savings of switching supplier. domestic energy suppliers, who had been on SVTs From a 0.7% baseline, external switching increased for over a year. Ofgem has been using its powers to 1.7% and 2.5% for Ofgem – and supplier- to direct suppliers to test consumer engagement branded letters respectively. Although the measures since the conclusion of the Competition potential savings were the same across all groups, and Markets Authority’s investigation in 2016. Customers were randomly assigned to one of Figure 2: Switching by supplier and trial arm three trial arms, receiving either a letter branded from their supplier, a letter branded from Ofgem, or no letter (the control group). The primary outcome was the switching rate (switching tariffs or supplier), within 30 days after the letters were sent. The results show that switching was somewhat dependent on the messenger (see Figure 1). Supplier-branded material was the most effective, prompting a switching rate of 3.4%, while the figure for the Ofgem-arm was 2.4%. Interviews with trial participants suggest that customers are not as familiar with the Ofgem brand compared to that of their own supplier; hence fewer customers may Source: Ofgem have acted upon the regulator-led intervention. customers who switched saved an average of £50 Figure 1: Switching rates among trial arms more if they had received a letter. Again, interview data provided further context, with Ofgem noting that some participants welcomed the transparency. However, others viewed it as strange for their supplier to showcase their competitors’ offerings. In some cases, receiving a letter prompted customers to contact their supplier for verification. Further research is planned to assess the effectiveness of a CMOL on other SVT customers excluded from this trial, such as recipients of the Warm Home Discount, those in debt and from other suppliers.

The results of Ofgem’s largest CMOL trial to Source: Ofgem The results also showed that the letters from date challenge the narrative that some supplier A were more effective than those of customers cannot be engaged, including supplier B (see Figure 2). Ofgem considered that customers on SVTs for over three years. this was likely due to higher mean average savings Ofgem

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Rowan Hazell, Regulatory Analyst, [email protected]

The code administrator consultation on CMP250 • WACM 1: A six-month fixed charge with a 12- Stabilising BSUoS with at Least a 12 Month month notice period Notification Period was issued by National Grid on 24 November. The modification seeks to • WACM 2: A six-month fixed charge with a 15- reduce uncertainties arising from Balancing month notice period Service Use of System (BSUoS) charge volatility • WACM 3: A 12-month fixed charge with a 15- faced by generators and suppliers, by fixing the month notice period, and value of BSUoS over a season. • WACM 4: A 12-month fixed charge with a 9- The modification was raised by Drax Power in month notice period. August 2015 in an attempt to tackle issues relating to the increasing volatility of BSUoS charges, The workgroup voted on the proposals and, while which the proposer said were leading to financial the overall aim of the modification received wide risk for suppliers and generators. The BSUoS support, there were mixed views on the best charge is levied on generation and demand on a approach to take. Three members voted for the 50:50 basis, and varies in each half hour original solution, two voted for WACM 3, with settlement period to reflect the costs faced by WACM 1 receiving one vote. The National Grid National Grid when providing balancing services. representative concluded that the baseline was the best option, stating that, although fixing BSUoS The level of BSUoS is only known after National costs may give some relief to market participants, Grid publishes the values after the event, and so the solution would not appropriately recognise the generators and suppliers must estimate the charge price signal that BSUoS will provide for smarter when setting wholesale prices and customer and more flexible markets. It also said that the contracts. Previously, this has been a less proposed charging methodology would not reflect significant issue, but changes to the generation the costs incurred by National Grid, and that costs mix, in particular the growth of intermittent power would not be passed on to those causing them. sources, has meant that the costs of balancing the system are increasing and becoming more volatile, The proposals have now been issued for code leading to a greater risk for suppliers and administrator consultation, to seek views on the generators when forecasting the charge. most appropriate way forward. The industry has been encouraged to share information on how The proposer believed that the best way to reduce generators and suppliers account for BSUoS risk in the risk being faced by market participants was to their pricing strategies to help Ofgem in making its eliminate the volatility and unpredictability of determination. National Grid has confirmed that it BSUoS. To achieve this, the BSUoS charge would would require 12 months to implement system be fixed over a set period of 12 months. A changes at a cost of £1.5mn, and said that, pending notification period of at least 12 months ahead of a decision, the earliest point a fixed price could be each charging season would also be introduced. produced would be October 2018. This would Under the plans, the short-term risk of BSUoS mean the notification period could begin by 1 April would be borne by National Grid, with under- and 2019 at the earliest. over-recoveries to be redistributed through a higher or lower charge in the season commencing Responses are requested by 15 December. 12 months later. The plans would also see the Fixing BSUoS would reduce the short-term risk continuation of the publication of half-hourly for generators and suppliers, but would lower BSUoS data to allow the industry to forecast future the cost reflectivity of the charge. Over two BSUoS costs. years on since the discussion on this change The proposals were issued for workgroup proposal came forward, this is a dismal consultation in March 2016. Following this, four reflection of industry governance of what potential Workgroup Alternative CUSC seems to us to be obviously an improvement Modifications (WACMs) were put forward, as on the status quo. follows: National Grid

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Formal proposals to more fundamentally tackle the Unidentified Gas (UIG) volatility problem will soon be forthcoming from the industry, following an Xoserve workshop. Xoserve hosted a meeting on 22 November to evaluate the high-level impact assessment it conducted of three main reform proposals that the industry had brought forward at an earlier workshop on 13 November. The first approach was a proposal by E.ON to amend the parameters of the non-daily metered (NDM) demand algorithm, as inaccuracies in this were seen as a major driver of volatility. Updates could be made to the Annual Load Profile, Daily Adjustment Factor, and Weather Correction Factor, amongst others. Estimates suggest this could reduce volatility by two percentage points on average. How long this would take to implement would depend on the time needed to determine what the new parameters should be. The second option, tabled by I&C shippers, was based on a proposal by the Allocation of Unidentified Gas Expert (AUGE). This would set UIG for each day at the level calculated annually by the AUGE, currently 1.1%, and have NDM demand revert to being a balancing factor. Allocation error would be spread across the industry using scaling factors. A third option, also raised by I&C shippers, of having a third party who would buy UIG from shippers and act as a balancer, invoicing shippers for its costs. This would smooth the cash flows of shippers who used it, but some attendees said this would do nothing to address the issue, and supporters felt it would need to be mandatory for the party to balance efficiently. During voting at the close of the meeting, most attendees preferred option 1, which could possibly be progressed without a UNC modification. However, others argued it would not go far enough and so instead plan to raise a modification proposing to take forward some form of option 2. There was agreement from attendees that discussions had progressed as far as they could and the next step would be to propose formal industry change Xoserve

SGN announced on 27 November that it would not be claiming £145mn from its customers under its price control allowances, in a move that has been welcomed by Ofgem. The gas distribution company said that the sum was intended for a range of projects and programmes across Scottish and Southern gas networks, but it had been identified as no longer required. Under Ofgem’s price control sharing mechanism, the contribution will see £84mn returned to customers. As part of SGN’s contribution, additional work will be carried out to enhance the resilience of the network and assist fuel poor households. The work will total around £30mn, with the majority to be funded by the company. It was stated by Ofgem that the forecasted returns for gas distribution and energy transmission companies as set under the first phase of RIIO price controls were at the higher end of expectations, in part due to significant improvements in efficiency. As part of the price control, under or over-spends are split between consumers and the network companies, acting as an incentive to reduce costs. Since 2013, network costs have reduced by 6% under the RIIO price controls. The decision comes after Ofgem has signalled that network companies should prepare themselves for a tougher round of price controls from 2021. National Grid previously announced that it would voluntarily defer around £589mn in allowances under its electricity transmission price control with around £332mn to be returned to customers. Scottish and Southern Electricity Networks has also agreed to make a voluntary contribution of £65.1mn. Ofgem

Energy supplier E will pay out £260,000 in voluntary redress for failing to make sure its sales agents dealt with customers in a transparent way, or had sufficient background checks, Ofgem ruled on 23 November.

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Following an investigation opened in September 2016, the regulator found that E had failed to comply with standard licence condition (SLC) 25.2, which required suppliers to ensure the information it provides was not misleading, and that marketing and telesales activities are conducted in a fair, transparent, appropriate and professional manner. Also, the regulator found that E had failed to comply with SLC 13.1, which requires suppliers to ensure that their representatives can be readily identified as a representative of the licensee. The investigation identified that sales representatives contracted for E by third party agency Energy Watch UK had been misleading in their approach to face-to-face sales, by presenting themselves as an independent price comparison service. Additionally, it was found that between 2014 and 2017, the supplier had failed to ensure that its face-to-face sales agents had sufficient background checks. Ofgem recognised that E had acted to improve the situation, and that it had worked with Energy Watch UK to make the face-to-face sales process more transparent. It is now also carrying out sufficient checks, including criminal records checks, on all prospective and existing sales agents. There was no evidence found that suggested any customers suffered directly from the breaches. The £260,000 payment will go towards Ofgem’s new voluntary redress fund to make amends for the failures, which will help charities to work with vulnerable energy consumers. Ofgem

Transmission Capital Partners was appointed by Ofgem on 24 November as the preferred bidder for the ownership and operation of the high-voltage transmission link to the Dudgeon Offshore Wind Farm over the next 20 years. The Dudgeon windfarm is the first project to reach this stage in the fifth tender round (TR5) of the offshore transmission owner (OFTO) regulatory regime, which sees bidders compete to own and operate connections. The competitive process is intended to ensure lower costs and higher standards of transmission services for generators, and ultimately consumers. The 402MW project consists of 67 turbines and is located off the coast of Cromer in Norfolk, having been officially opened on 22 November. The transmission assets are valued at £377.2mn, and the link is currently owned by a consortium of Masdar, Statoil ASA, and Statkraft. Transmission Capital Partners - a consortium of Transmission Capital Partners Limited Partnership and International Public Partnerships Limited - has previously been appointed as OFTO for six projects, and has also tendered under TR5 for the operation of the transmission links for the Rampion and Race Bank windfarms.

Ofgem

Ofgem has approved a Supply Point Administration Agreement (SPAA) modification to align the recording and sharing of vulnerable customer data between gas suppliers and network operators with those in electricity. In its decision on 23 November, the regulator stated that implementing CP16/370A Refining the Needs Code Information, raised by SSE in January, will maximise data consistency and uniformity across the gas and electricity sectors and minimise overall system change. It will, therefore, leave both sectors better positioned for any future cross-sector data sharing, such as, with water companies. Ofgem stated that CP16/370A would support robust data sharing by creating a framework to govern this, and allow for more efficient interrogation of data through the introduction of new data fields. Explaining its decision, it confirmed that the governance framework was an important advantage for the modification over the original CP16/370, and the second alternative, CP16/370B. It said that the introduction of an ‘expiry date’ field in CP370A is regarded as vital in ensuring that the provisions for customers with transient vulnerabilities are effectively captured and updated as necessary. This is not proposed in either of the alternatives. The modification is expected to be implemented in June 2018. Ofgem

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Neil Mearns, Analyst, [email protected]

A report by Centrica has identified that Industry was found to receive the most substantial distributed energy solutions could result in potential benefits from distribution solutions. almost £1bn annual energy savings, and deliver a Centrica worked with a large cement £18.5bn boost to the UK economy. manufacturer, and installed Panoramic Power wireless sensor technology to monitor energy use The Powering Britain’s Economic Future report, and isolate consumption across different published on 23 November, assessed the potential equipment, buildings and plants. By identifying economic benefits of three sectors – industry, unnecessary energy consumption, and by healthcare and hospitality & leisure – embrace exposing faulty equipment, the manufacturer distributed energy solutions. Above all, the saved £200,000 in just one location, and an distributed energy sector presents a unique estimated additional saving of £8,000 a year. opportunity for the UK, with the global market for connected devices expected to double from Although benefits to healthcare are not as 15.4bn in 2015 to 30.7bn in 2020, and rise to potentially substantial, the NHS needs to achieve 75.4bn in 2025. almost £22bn of savings by 2020, as set by the government’s 2015 financial settlement to 2020- Centrica lists a range of technologies, services and 21, and can therefore greatly benefit energy-cost products that could benefit a large energy user. reductions. Centrica replaced an old heating These include energy efficiency, demand side system at the University Hospitals of North response (DSR), battery storage, small-scale on- Midlands NHS Trust with a new CHP plant, which is site power generation, combined heat & power now delivering annual savings of around £500,000 (CHP) and energy insight. Energy insight is defined a year. Hospitality and leisure industries face as new technology that accurately monitors energy similar cost reduction challenges, with potential use across all equipment and devices. wage rises post-Brexit. In this sector, Centrica From quantitative analysis undertaken by FTI operates and maintains a fleet of 14 CHP units for Consulting a breakdown of savings across the People for Places Leisure, which they claim are three sectors was derived as shown in Table 1. This delivering an estimated £250,000 annual savings. analysis assumes that 50% of the businesses/ Recommendations are presented to realise further services in each sector utilised the aforementioned potential of given solutions. Centrica calls on BEIS solutions. to assess the role of distributed energy solutions Table 1: Benefit analysis in three key sectors to deliver long-term energy cost reductions, and on the Committee on Climate Change to consider Energy cost UK GVA Jobs reduction the lower cost route to decarbonisation for larger benefit supported per annum energy users. Industry £540mn £13.9bn 195,000 Finally, Centrica asks the government to address Public barriers preventing the uptake of distributed sector £130mn £0.9bn 15,000 energy solutions, while curbing debilitating healthcare regulation. Industry would be incentivised if a working group were to be established that Hospitality £310mn £3.7bn 50,000 assesses how the proposed industrial energy & leisure efficiency scheme can be best implemented and Total £980 £18.5bn 260,000 reflects available technologies. This report neatly ties together the way technology is improving the ability to control The report considered three case studies in each of the three sectors identified, highlighting the local power consumption and production with experience of a typical Centrica Business Solutions the wider economic and social benefits of customer. switching away from a large-scale centralised power system. Centrica

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Lee Drummee, Analyst, [email protected]

On 20 November, the Energy Networks focus one notes there is significant potential for Association (ENA) launched a consultation on its further innovation, but the benefits are not easily Electricity Network Innovation Strategy. The achievable, with 14 of the 31 categories association said that the strategy sets out how demonstrating a high future innovation potential “energy innovators” can work with network and a high or relatively high level of innovation companies to provide up to £1.7bn of benefits to effort. In these categories, ENA says the benefits the UK energy sector over the coming decade. of working together should be most evident. ENA said independent research showed that Strategic focus two highlights the categories innovation projects by local electricity Distribution where innovation opportunity is high with a short Network Operators could deliver the assessed to medium-term priority timeline, resulting in a benefits by 2031. The projects and services could clear call to action. This includes: improving deliver major savings to billpayers by ensuring network visibility and controllability, enabling networks evolve to new demands in the most cost- flexibility in the low-carbon transition, efficiently efficient way possible. facilitating the adoption of low-carbon technologies supporting the electrification of heat The strategy sets out short, medium and long-term and transport, and maximising benefits provided innovation plans, and outlined: a roadmap to by new technologies. address challenges and uncertainties currently facing the sector, how third-party innovators could Strategic focus three places emphasis on more easily identify opportunities for new projects, delivering the benefits from innovation to how network companies can get the best value effectively operationalise innovation for each from innovation projects and ways in which network company. For example, improving the network operators can collaborate further on transfer of innovation into business as usual and tackling industry issues. committing to realising the full value of previous innovation as new initiatives continue to build. The strategy identified five key trends that will require new innovative approaches from market Strategic focus four highlights the importance of participants. These were: shifting power strategic collaboration, including project generating sources and the resulting revolution in partnership, coordination of information sharing, the utilities industry, the power of customer choice and more effective use of industry forums. ENA and changing energy demands, policy drivers, the noted that this is not just across electricity network smart, flexible energy system and the DSO companies but also cross-sector with gas networks transition, and uncertainty and choices for the and other third-parties. electricity network companies. ENA CEO David Smith said the association wants ENA stated that these trends will increase the energy innovators to be aware of the opportunities need for further innovation and pose challenges, available to them, adding “the consultation gives which it condensed into five innovation themes: stakeholders the chance to help shape that networks improvements and system operability, process”. He welcomed their views. transition to a low-carbon future, new technologies The deadline for responses to the consultation is and commercial evolution, customer and 15 December 2017. stakeholder focus, and safety, health and environment. This is a very interesting document, and the Within the five innovation themes, ENA identified draft strategy correlates well with individual 31 challenge categories with 178 specific challenge moves made by the networks to become topics. ENA then summarised the level of DSOs. It comes at a time of significantly innovation activity to date, the future opportunity increased scrutiny of their function and the for innovation, the required innovation effort and pathway for change to a more active local the priority timeline for each category. system management role. Following the analysis of the challenge categories, ENA ENA identified four strategic focuses. Strategic

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Elliot Dransfield, Analyst, [email protected]

The latest monthly Cornwall Index of Domestic contributed to increasing the electricity index. Energy Supply Costs for October was published Network cost however fell by 9 points dampening at the end of November. Both electricity and gas the higher costs of policy; this was a consequence indexes have continued to rise. The electricity of lower BSUoS (Balancing Services Use of index rose by 71 to 1,487 points whereas the gas System) charges in October. index increased by 41 to 979 points. The gas index followed the same trend, rising for Updated every month, the index tracks wholesale, the third consecutive month. The index now sits at network and policy costs that electricity and gas 979 points after increasing by 41 points over suppliers face. It is baselined to a value of 1,000 October. As usual wholesale costs were the points in January 2012. indexes main driver, rising by 45 points as month ahead contracts rose by 8%. This was in part due The cost of electricity has now risen for the fifth to colder temperatures creating a higher demand. consecutive month, reaching the same level as it In addition to this, increased exports to Europe was in January 2017. The index rose by 71 points also helped push prices higher. over October to reach a total 1,487 points at the end of the month. The main contributor to this At the start of October Ofgem introduced new increase was wholesale costs, unlike last month, in typical consumption values for a “medium” user, which policy cost were the main driver. reducing the gas consumption from 12,500kWh to 12,000. This change led to a small increase in gas Wholesale costs increased the electricity index by policy costs of 1 point. Gas network costs were the 69 points following a 13% rise in month ahead only cost to fall, decreasing by 5 points as October contracts. This was a result of tighter power supply marked the start of a new charging period. margins expected in November, as planned nuclear outages in the UK begin. This was also We update the index of domestic supply costs coupled with French nuclear availability during the last week of each month, covering sensitivities and an increase in UK power exports the prior month. to Europe, which both pushed wholesale costs higher. For more details, please contact [email protected] or 01603 An increase of 11 points in policy costs from 604409. For accompanying charts and figures, updated FiT (Feed-in-Tariff) charges also visit our website. Figure 1: Trends the Cornwall index of domestic supply costs: standard user

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On 26 November, the launch of Ventient Energy was announced. Ventient Energy was created from the merger of Zephyr’s portfolio of 15 windfarms with 19 windfarms that were formerly owned by Infinis Wind, with the entire portfolio of windfarms now owned by institutional investors advised by JP Morgan Asset Management. The merger makes the new business the third largest wind generator in the UK and the largest non-utility owner of onshore wind. The company operates 34 onshore wind farms accounting for 690MW of installed capacity, making it the third largest onshore wind generator in the UK, cumulatively owning 6% of market capacity. Two-thirds of Ventient Energy’s onshore wind portfolio is based in Scotland. In the past six months, 22 new jobs have been created to prepare for the launch of Ventient Energy and the company now employs a total of 44 staff. The company is based in Edinburgh and plans to grow its installed capacity in the UK through consolidation and expand its renewable energy projects across Europe. The company will spend £1.5mn this year in community fund payments on qualifying community projects and initiatives around its wind farm sites. Scott Mackenzie, CEO of Ventient Energy, said: “We are excited to introduce Ventient Energy […] We are ambitious - committed to creating prosperity through safe and sustainable generation of renewable sourced electricity, through quality job creation and supporting the communities in which we operate.” Ventient Energy

On 27 November E.ON announced that first power was generated at Rampion. E.ON’s 400MW offshore wind project is located on the Sussex coast. Work began in autumn 2015 to prepare the seabed for turbine foundations, with the first installation in early 2016 and the total 116 completed by November 2016. Turbine installation commenced in March 2017 and was completed ahead of schedule in September. In addition, the project revealed a £4mn community fund with the majority of £3.1mn allocated to the Rampion fund, earmarked for community projects with particular links to environment, climate change and improved community facilities. Matthew Swanwick, Project Director for Rampion, said: “Over the coming weeks and months the turbines will one-by-one begin to be turned on and generate power as they are brought online. This process will take us into 2018 to complete.” E.ON

In early 2018, artificial intelligence start-up Verv will test the UK’s first peer-to-peer energy trading platform in the Banister House estate in the London Borough of Hackney. The pilot project, in collaboration with renewables developer Repowering London, was announced on 22 November. The “Verv 2.0 platform” will allow 40 local residents on the Banister estate to trade solar energy generated through the estate’s solar panels through a smart home hub. In total 102 kWp of solar array has been installed on the estate. A battery storage system will also be installed on the site by Powervault to enable energy produced by the panels to be stored, shared and traded between flats and reduce wastage. The project is being financed through a £100,000 grant from the government to support Ofgem’s research into the potential for blockchain and peer-to-peer trading platforms within its regulatory sandbox. Once it launches in early 2018, the project is due to last for 12 months. A peer-to-peer trading platform of this nature does not currently exist in the UK. Community Engagement Officer Jack Dangerfield from Repowering London suggested that this is due to the structure of the UK energy market, leading to the majority of the UK’s distributed generation being exported to the grid.

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Chief Executive of Verv Peter David stressed the potential of the platform for relieving energy poverty, particularly in social housing estates. He suggested that “as a company, our goal is to eradicate fuel poverty, and by partnering with Repowering London to put Verv 2.0 into Banister House to enable the sharing of clean energy at affordable prices, we are moving one step closer to making that happen. The fact that we will be physically trading energy for the first time is a very exciting prospect.” Repowering London

On 21 November Utility Warehouse revealed its half-year results ending on 30 September, confirming a revenue rise of 2.6% to £299mn, up from £291mn in 2016, and its profit before tax increased 6% to £25.7mn. Utility Warehouse’s report highlighted a period of growth within customer numbers, services, revenues and profits. The results showed adjusted earnings per share increased by 6.1% to 26.0p, and the statutory profit before tax increased by 7.0% to £19.1m from £17.8m in 2016, after intangible amortisation of £5.6m (2016: £5.6m) and share incentive scheme charges of £1.0m (2016: £0.7m). Growth in total revenue for this period is in line with an increase in service numbers. Gross margin increased to 22.5% over the period, reflecting changes to the company’s sale mix, with energy accounting for a smaller proportion of total revenue. Considering its operating highlights, the report illustrated continued organic growth shown through increased customer numbers up by 5,265 to 613,067 and a rise in services supplied up by 36,348 to 2,325,266 over the recent period. CEO Andrew Lindsay commented on the results welcoming the proposed legislation to introduce a price cap on SVTs, suggesting the cap will ensure competition still thrives due to the “attractively priced introductory deals” offered by smaller, independent suppliers. Lindsay added: “We are optimistic that the proposed SVT price cap will materially improve our competitive position, and will act as the catalyst that takes our growth rates back towards the double-digit levels we have historically achieved.” Utility Warehouse

On 21 November, investment firm Battery Energy Storage Solutions (BESS) revealed that it had raised over £50mn in equity investment from New York based firm Tiger Infrastructure. In a statement following the announcement of the deal, BESS suggested the investment would be used to grow its portfolio of grid-scale battery storage projects in the UK. The company also announced it is still looking for behind the meter projects, looking to acquire these directly from developers. It has set a target to acquire 60MW of battery storage by the end of the year. BESS co-founder James Basden said that the equity investment demonstrated that storage is becoming economically viable. He added that going forward, BESS will be looking to support behind-the-meter battery applications with large-scale industrial and commercial consumers. No link

Swindon Borough Council-owned Public Power Solutions (PPS) has applied for planning permission to develop a battery based electricity storage facility. If approved, the project would be one of the largest in GB with a maximum capacity of up to 50MW. Steve Cains, Head of Power Solutions at PPS, said: “Rapid technological advances have now made energy storage a viable proposition. This has the potential to be a real game changer, helping to integrate the variable generation from renewables, reduce costs for consumers, and build a clean energy system fit for the future.” If granted approval, the project is set to be operational by 2019. Swindon Borough Council

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A new report into energy storage commissioned At the same time, the report also warned that by chief scientist Alan Finkel has highlighted the Australia needs to develop a recycling strategy for enormous opportunities for storage in Australia, battery storage, and also needs to take into but underlines how little is actually needed over account other social aspects, such as the origins of the short to medium term, even at relatively high lithium and cobalt. levels of wind and solar. But the most striking part of the report is the The report, The Role of Energy Storage in apparent contrast to the “doomsday” scenarios Australia’s Future Energy Supply Mix, funded by about renewable energy peddled by the Coalition Finkel’s office and the Australian Council of and the fossil fuel industry, and reflected in some Learned Academies (ACOLA), says the required of the assumption in the proposed National Energy investment in energy security and reliability over Guarantee. This Guarantee would see the the next five-10 years will be minimal, even if wind government impose a reliability obligation and and solar deployment moves far beyond levels emission reductions target on energy retailers. contemplated by the Energy Security Board (ESB). Yes, the report says, sensible policies are needed The contrast with the ESB modelling – and the to provide a market signal, and the opportunities attempts by Coalition parties at both state and are boundless. But it does not suggest that wind federal levels to dismiss high levels of renewable and solar farms should be penalised for not having energy as “reckless” – could not be more storage, or should be made to appear or act like pronounced. coal-fired power stations. While the ESB, in arguing for a National Energy Indeed, it says the total storage requirement for Guarantee, noted the system threats and the need Australia to meet even a 50% share of variable for urgent action with a level of “variable” renewable energy – wind and solar – would be a renewables accounting for between 18% and 24% fraction of the annual spend required of the grid. of total generation, this new report found that The report found that a $10.7 investment in surprisingly little storage may be needed with 35% batteries alone could meet the security and to 50% wind and solar. reliability needs for 50% wind and solar. And most Even in the 50% variable renewable energy of these could be installed behind the meter. scenario – more than double that contemplated at “These numbers are not so huge that we have to the high end by the ESB – the new report go gasp, at least compared to what we are suggested enough battery storage may be spending anyway on networks,” lead author available “behind the meter,” to households and Professor Bruce Godfrey said. businesses, to meet the storage needs. In fact, spending on storage could actually defray “The modelling provides reassurance that both the required spending on poles and wires – reliability and security requirements may be met possibilities that are beginning to emerge with the with readily available technologies,” it said. creation of micro-grids, and support for new solar “Nationally and regionally the electricity system investments to help ageing grids cope with rising can reach penetrations of renewable energy close peak demand. Pointedly, the study models levels to 50% without significant requirements for energy of “variable” renewable energy – wind and solar” reliability storage. […] Reliability problems, such as that are far higher than that contemplated by the those that recently occurred in South Australia and ESB under its “urgent” reliability option. New South Wales, can be responded to quickly The new study’s “low renewable” share of 35% is and effectively with appropriate storage,” the twice the amount of wind and solar modelled by report added. the ESB for 2030, at just 18-24%, and yet it sees In one of the most detailed reports into energy little need for a lot of added storage. The study’s storage, the authors point to the huge potential of medium renewables scenario aims for a 50% share battery and energy storage in Australia – both in of variable renewables by 2030, while its “high” core mineral resources, manufacturing of battery share models 75% wind and solar penetration. storage, R&D, deployment, and even renewable It even contemplates what is needed for 100% hydrogen. renewable energy in South Australia – a scenario

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that looks increasingly possible given the huge pumped hydro provides the cheapest option for range of projects in the pipeline, many with bulk storage for reliability (despite its long lead storage of some sort, including pumped hydro, time), it is not clear that will be the case by 2030, solar thermal, and batteries. when the cost of other technology falls. “Pumped hydro energy storage (PHES) is presently the cheapest way to meet a reliability requirement,” it says. “Projections indicate that the most cost-effective energy storage options available in 2030 will be PHES, lithium-ion batteries and zinc bromine batteries.” “These all have a similar levelised cost of storage, depending on the PHES sites selected and uncertainty in the rate of reduction of battery costs.” The release of the report is timely, coming as it does in the same week that the ESB is taking its proposals for the NEG to the COAG energy The underlying principle is that for up to 50% ministers in Hobart. While the Finkel commissioned renewable share, not that much storage is needed report assumes that its “low” renewable – although this increases rapidly as the share of penetration will reflect business as usual, the ESB variable renewables goes beyond that level. “At an is assuming that wind and solar will be stopped in aggregated national level, Australia can reach its tracks – the inference being that the NEG will penetrations of 50% renewable energy without a be the mechanism to do that. Added to that the significant requirement for storage to support ESB’s modelling of deliberately high technology energy reliability,” the report said. costs for wind and solar, and its assumption that In this sense it fits in with the scenarios painted by emission reduction efforts will stop in 2030, then the CSIRO and Energy Networks Australia in their there is no surprise that the idea is being treated energy transformation roadmap last year, but the with great suspicion by many in the industry. contrast with the assumptions made by the ESB is Professor Godfrey says there is a legitimate role stark. “Energy storage is both a technically feasible for governments to ensure that the right policy and an economically viable approach to settings are enacted to drive growth in energy responding to Australia’s energy security and storage. “Hopefully, it will be a well thought reliability needs to 2030, even with a high through plan,” Godfrey told RenewEconomy, and renewables generation scenario”. not using storage to penalise renewables, “but to It models storage on two services: system security, recognise we are going to have more and more which is the fast-acting response to network faults; renewables – so let’s get on to thinking more and reliability, which is providing enough energy about the future.” That means framing policies with when it is needed. “In the LOW RE and MID RE a view to encouraging innovation, investment and scenarios – 35% wind and solar and 50% wind and the establishment of new high technology solar – consumer storage would theoretically be industries, the growth of existing high technology sufficient to provide the entire energy reliability industries and increased or new energy exports. requirement,” it says, although the challenge here “A proactive approach will provide the opportunity might be in “aggregating” these resources. for Australia to lead and facilitate re-skilling of work “The reliability requirement in these two scenarios forces and the creation of jobs across all levels of is small, respectively requiring 1.5 and 5.0GWh in the value chain from mining and manufacturing total, and could be managed by demand through to consumer spending,” the report says. responses, such as load shedding.” “The reliability Giles Parkinson is a former Business Editor and requirement in the HIGH RE scenario is significant Deputy Editor of the Financial Review, a with 105GWh and it is hard to imagine how this columnist for The Bulletin magazine and The could be met other than by utility-scale bulk Australian, and the former editor of Climate energy storage.” Spectator. It suggests that battery storage provides a cost- competitive option for “security” needs and, while

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The day-ahead gas contract grew 1.4% to 57.0p/th. Similar to the previous week, prices were supported by colder temperatures and higher demand. Towards the end of the week the system became undersupplied, this tightening of supplies forced end of week prices upwards. The month-ahead (January) contract lifted 0.5% to 57.9p/th, up from 57.6p/th the previous week. The summer 18 gas contract lost 2.1% to 44.6p/th.

After the previous week’s gains, most baseload power contracts lowered last week. The day-ahead contract was an exception as it experienced marginal growth, rising 0.4% to £53.6/MWh. Prices were strengthened by continued nuclear outages across the UK due to annual maintenance, most notably at Sizewell B. Burgeoning demand across the week lifted prices. Power prices would have been capped by strong wind generation throughout the week The month-ahead (January) contract lost 1.6% to £55.3/MWh. The contract is now 14.9% above its level last year (£48.1/MWh). Summer 18 baseload power fell 1.6% to £44.4/MWh.

For a second successive week, Brent crude oil prices grew 1.5% to average $63.5/bl. The primary source of gains in prices stemmed from expectations and the agreement of extensions to current production cuts by OPEC and non-OPEC members on 30 November. Cuts to output were prolonged by a further nine-months to the end of 2018. API 2 coal prices upturned the previous week’s losses, growing 1.2% to average $84.6/t. Gains in API 2 coal prices have occurred amid increased demand for coal across Europe as the continent enters the winter season. Growth in the commodity was capped by continued weakening demand from China. EU ETS carbon prices strengthened 1.9% to average €7.7/t. Prices were supported by strong auction results during the week and by rising coal demand.

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