Ofgem Opens a Statutory Consultation on Allowing Suppliers to Roll Domestic Customers Onto Further Fixed-Term Tariffs at ENERGY PERSPECTIVE 02 the End of Their Deal

Tom Crisp Editor 01603 604421 [email protected]

Monday 14/08 – Ofgem opens a statutory consultation on allowing suppliers to roll domestic customers onto further fixed-term tariffs at ENERGY PERSPECTIVE 02 the end of their deal. The Contract for Difference round two sealed bidding window opens. Greencoat UK Wind agrees a deal to acquire Between the acts – reinventing the gas market the 60MW North Hoyle and 30MW Slieve Divena windfarms from JP Morgan Asset Management. POLICY 05 Tuesday 15/08 – The Energy and Utilities Alliance seeks a GIB sale completed parliamentary inquiry into the impacts of the closure of the Rough gas Mayor targets carbon-free storage site. RSPB Scotland applies to the Supreme Court to appeal London by 2050 Government plans cyber against approval for four offshore windfarms in the long-running legal security fines saga. Moray Council approves Elgin Energy’s plans for a 20MW solar Stakeholders back smart and farm near Urquhart. flexible future plans IPPR North warns of Brexit Wednesday 16/08 – The UK government publishes a position paper dangers on its proposed relationship with the Irish energy market post-Brexit. REGULATION 12 IPPR North warns a hard Brexit would create substantial risks for the northern energy industry. uSwitch finds that nearly 1.3mn energy Ofgem proposes default fixed- customers have been overcharged in the last year due to supplier term tariffs mistakes. UK Power Networks issues a tender for demand-side RHI accreditations decline CEER advises on rules for self- response and storage operators to support the distribution network consumers during periods of high electricity demand.

INDUSTRY STRUCTURE 16 Thursday 17/08 – Ofgem Chief Executive Dermot Nolan argues that if a broader price cap is to be implemented beyond vulnerable Gas consumption to hit new global high: IEA customers it should be pursued through primary legislation. Scottish

Cornwall Insight electricity index Green MSPs challenge other parties in Holyrood to include a target of diverges from gas zero emissions by 2040 in the upcoming Climate Bill. Professor John NUTWOOD 19 Underhill, Chief Scientist at Heriot-Watt University, indicates that fracking may produce less oil and gas than expected due to the UK’s German company results show underlying geology. The CBI calls on the government to set out a mixed bag – Peter Atherton “future fit” energy policy framework. MARKETS 20 Friday 18/08 – BEIS confirms the completion of the £2.3bn sale of the Green Investment Bank to Macquarie. Labour’s Shadow Business and Energy Secretary Rebecca Long-Bailey criticises the sale as wrong and potentially damaging to the bank’s long-term prospects. The Aldersgate Group reacts to the sale calling for a clear green energy finance strategy from the government. Cuadrilla commences drilling on the first UK shale well for six years.

Energy in the UK Back in 2012 the government of the time published continues to make the Gas Generation Strategy. This paper, which records, with coal was below the radar for many at the time, sought generation reaching to address concerns that low clean spark spreads historic lows and and uncertainty about the outlook for gas plant renewables output could mean the UK did not see enough investment rising to new heights. in the sector to maintain capacity margins. Cory Varney Writer But, while the focus of As a result, the government implemented a series 01603 959882 policy narrative is on of measures – most significantly the introduction of c.varney@cornwall- power trends and the Capacity Market. It also confirmed its intention insight.com emergent technology, to explore the potential for shale gas development there are significant changes also underway in the in the UK. If shale gas production could be shown gas market. to be “economic and safe”, it could offer a significant economic opportunity. In this week’s Energy Perspective, we look at the state of the GB gas market. Gas has long been This was followed in 2014 by the publication of the referenced as a transition fuel, to be burned while Wood Review into the oil and gas sector, which set other more harmful fossil fuels are switched off. out a strategy of maximising economic recovery However, there are signs that the sector is capable from the UK Continental Shelf (UKCS). of reinventing itself just as profoundly as it did from But as with the rest of the energy landscape, the 1960s when the local, dirty town gas despite the stumble on carbon capture and infrastructure was converted to clean-burning sequestration (CCS) with the cancellation of the natural gas from the North Sea. demonstration competition, the picture for gas has To the lighthouse shifted significantly since the publication of these documents. Gas still does much of the heavy lifting in the energy system. It is particularly critical for home Simple gifts heating and hot water, and in 2016 met nearly two- On the supply side, the pattern of gas supply in GB thirds of total domestic energy demand. Final gas has changed dramatically in the last 15 years. consumption increased by 3.2% with domestic Despite recurrent oil and gas licensing rounds – consumption up around 5% (see Figure 1). Across the latest of which was launched in July, with a GB there are just 15% of households that do not focus on mature areas of the UKCS – the UK has have access to mains gas, and some 60,000 new gone from being self-sufficient in gas to relying on domestic connection points are being added imports for around half of its needs in 2016. annually. We also heard last week that UK shale gas It is now also widely acknowledged that gas is an reserves might have been "hyped". According to “essential partner” to renewables in balancing the Professor John Underhill from Heriot-Watt electricity system. The argument that gas is the cleanest fossil fuel and should at least displace coal in the power sector continues to hold a steady Figure 1: Changes in gas demand over time grip with policy-makers even as they struggle to successfully call forward new large-scale CCGTs. Paper darts The struggle for new investment in CCGTs is due to a number of factors. One is the low global coal price, combined with an ineffective carbon price. This context has undermined the economics of gas-fired power generation at just the same time as there has been a volume squeeze from renewables, but the longer-term prognosis continues to improve. Source: BEIS

University the UK's potential shale deposits were Figure 2: Peak supply margin under N-1 conditions with storage likely to have been disrupted by shifts in the earth. closures He said the government would be wise to formulate a Plan B to fracking for future gas supplies. We will soon know more as Cuadrilla is ramping up its test drilling at Preston New Road in Lancashire this month. But with the long-term decline of the UKCS inevitably set to continue, imported gas is becoming even more important. Structurally much of the shortfall has been made good by new Norwegian supplies, which accounts for two-thirds of imports. But LNG is now a key player too. From Source: National Grid 2012 to 2016, LNG provided an average of 16% of UK gas demand. Indeed in three out of four of agenda as it did periodically in the last decade. But National Grid’s recent Future Energy Scenarios a cold winter or disruption in the LNG market could (FES) gas’ role increases going forward. Indeed in well see a debate on it return. the Consumer Power case it could still supply Granite and rainbow more energy than electricity by 2050. One aspect of the gas strategy that has been The waves implemented is the capacity market (CM). Complicating the gas system’s resilience has been However, this has not led to a new dash for gas the announcement of the closure of Centrica’s that was hyped by many. The various auctions Rough gas storage facility. The closure of Rough have cleared at prices well below the hopes of has removed around 70% of the volume available those looking to build new large-scale CCGTs. for storage, and around 25% of the daily storage Only one such station has come forward, Trafford, supply capability. Although the asset has been but that project gave up its agreement after it partially closed over the past year, the industry has failed to meet a CM milestone in 2016. warned that the closure could mean greater With the next round of CM auctions coming up, the volatility for gas prices this winter, and this fear is rewards for small-scale peak generation through now being passed through in to wholesale prices. embedded benefits have attracted considerable Shortly after the announcement trade body the government and Ofgem attention, and are to be Energy and Utilities Alliance (EUA) called for a scaled-back. The sector will look on with interest to Parliamentary inquiry into the long-term see what clearing prices emerge and who wins consequences of the decision. The EUA points out contracts in the next T-4 auction early next year. that recent winters have been mild and the market The key question is whether BEIS might consider has not so far come under particular strain when more fundamental intervention in the event new Rough was unavailable. “The closure of Britain’s scale gas generation is not pulled through, given largest storage site for natural gas gets rid of a the increasing reliance of the system on the vital supply buffer, which allowed us to reduce flexibility provided by it. reliance on gas imports […] this almost certainly means greater volatility for gas prices this winter”, A room of one’s own the alliance said. Capturing the new mood of optimism surrounding The closure of Rough has highlighted the gas’ role going forward , National Grid Gas problems faced by ageing infrastructure in launched its Future of Gas project in November challenging economic conditions. SSE has also 2016, and has also developed a free-standing mothballed a third of the capacity at its Hornsea website to disseminate information and stimulate medium-range storage facility and sites elsewhere debate. In July it published a progress report. in Europe are struggling. There is presently little This developed three sensitivities that examine the premium in seasonal wholesale gas prices to impact of different levels of supply and demand: justify the costs of storing gas bought in summer for release in the winter. • High electrification describes an ambitious approach to the electrification of heat and sees Strategic storage, where investment is socialised a very high roll-out of renewable generation, across the consumer base, has yet to return to the

requiring significant government support and • The gas network has the correct capacity for intervention. This is effectively a low case for such a conversion gas demand • It can be converted incrementally with minimal • Two degrees is one of the core Future Energy disruption to customers Scenarios and reflects a medium case for gas, where CCS-enabled generation is deployed • Minimal new energy infrastructure will be along with nuclear and renewable required compared to alternatives, and technologies, and • The existing heat demand for Leeds can be met via steam methane reforming and salt • Decarbonised Gas is grid’s high gas case and cavern storage using technology in use around sees the 2050 carbon reduction target met without a wholesale switch to electric heating. the world today. Heating in some cities is provided by burning A summing up hydrogen rather than natural gas. In the immediate term, the gas sector faces Going forward, these sensitivities will be used as a challenges in meeting winter demand, with the way of testing that the NTS is robust enough to North Sea in long-term decline and Rough Storage cope with a wide range of future supply and removed. Shale gas fracking is still uncertain in its demand scenarios. potential contribution in Great Britain, but elsewhere the technology means that gas is much The successful demonstration of CCS is a key more freely available on world markets than we variable. Norway has said it could achieve full CCS would have expected a decade ago. At home, the by 2022, with media attention falling recently on fuel retains a considerable advantage as the Gassnova’s TCM testing facility. Unlike the preferred fuel for heating with a considerable previous UK projects which failed to get off the delivery infrastructure and support network to ground, one of the Norwegian government's maintain consumers’ equipment. crucial decisions has been to divide responsibility for different parts of the CCS chain between the When gas was cast over a decade ago as a state and industry, with Gassnova footing the bill transition fuel, the expectation was that it would be for any proposals taken forward. squeezed out of the electricity market with a final role providing peak power. A more enduring The voyage out position in homes and businesses was envisaged The gas industry is, of course, much more than for electricity, not gas, as electrical capacity built wholesale production and generation, as National up to support heat pumps. Grid’s project highlights. But significant financial That view is obviously out of date. At the very least investments are also sunk in the local distribution we would expect the Clean Growth Plan due this pipes, and attention is turning to what extent they autumn to set a trajectory for long-term too can play a role in decarbonising heat. decarbonisation, but it also offers the opportunity Against this background, it is worth highlighting to define much more clearly what the enduring some other recent initiatives. Two gas networks role of gas in the generation and wider energy mix are testing whether a decarbonised heat source – should be. hydrogen – can be shipped through their existing So gas is reinventing itself, and as we explore (this infrastructures. issue, page 16), this is not exclusively a GB Cadent’s flagship initiative is the Liverpool- phenomenon. Manchester Hydrogen Cluster project. It is a study to “develop a practical and economic framework” for introducing hydrogen into the company’s gas network in that region. Natural gas would be converted in to “clean-burning hydrogen gas” through a process that removes the carbon dioxide for transfer in to storage. Northern Gas Networks’ H21 Leeds City Gate project is aimed at using similar technology to convert the distribution grid in Leeds. The company claims the project has already shown:

Cory Varney, Writer, [email protected]

On 18 August, the government confirmed that preferred bidder, the likes of Caroline Lucas, Vince the sale of the Green Investment Bank (GIB) to Cable, Clive Lewis and Gregory Barker were Macquarie had been completed, bringing an end among the MPs to voice concerns the GIB could to months of media reports and speculation. be stripped of its assets when sold to the Australian bank. Macquarie has committed to the GIB’s target of leading £3bn of investment in green energy Confirmation from the government came on 20 projects over the next three years, while the April 2017 through then Climate Change and £2.3bn deal ensures all taxpayer funding invested Industry Minister Nick Hurd, before the deal’s in the GIB since its creation, including set-up costs, eventual completion on 18 August. has been returned with a gain of approximately Following the sale, Edward Northam, Head of the £186mn. The new company will be known as the Green Investment Group, pledged the new Green Investment Group (GIG), allowing it to make company would continue to invest in what has overseas investments. been done to date, including offshore wind and Climate Change and Industry Minister Claire Perry energy from waste. Northam added: “But we also said: “Now that it’s in the private sector, it [GIB] will want to remain true to Macquarie’s pioneering be able to operate on an international level to spirit by supporting newer and emerging tackle the global challenge of climate change. It is technologies.” also perfectly placed to help us finance green The completion of the £2.3bn deal has been met incentives for our Clean Growth Plan and realise with mixed reaction, with Liberal Democrat leader the commitments set out in the Paris Agreement.” and the man responsible for launching the bank, The wheels were set in motion in June 2015 for the Sir Vince Cable labelling the sale “environmentally bank’s privatisation, with the government releasing irresponsible”. Cable claimed the GIB’s initial plans to part-privatise it. The government environmental mission was “in danger of claimed it had always been clear the GIB was disappearing” under Macquarie’s ownership designed with a view to a possible transfer to the whose “track record does not inspire confidence.” private sector, and the time was right. Cable said: “At a time when business confidence is falling and the Conservatives are giving mixed The privatisation process began on 3 March 2016, signals on their commitment to the environment, driven by the government’s belief it would allow this is the worst time to undermine investment in the organisation to deliver a greater green impact. the green economy.” At the time, Lord Smith of Kelvin, independent chair of the GIB, admitted: “Attracting new The Green Party co-leader, Jonathan Bartley said it investors is vital if the Green Investment Bank is to was a bad deal for the taxpayer and planet, adding fund its ambitious plans to double the size of its it was a time “to be investing in green energy, not business, expand into new parts of the UK green flogging off our future security to the highest economy and deliver a growing green impact.” bidder.” The sale process involved two separate rounds, In contrast, James Court of the Renewable Energy with bidders initially asked to submit non-binding Association (REA) felt the focus on early-stage initial bids based on an Information Memorandum projects could bring substantial benefits for containing detailed information about the business technologies where the investment community and its forward plans. In the second round, remains hesitant. He said the REA felt there are selected bidders were handed additional more technologies with a “huge future”, if backed. information allowing them to carry out due diligence on the GIB. This then concluded with the The proposed sale of the Green Investment submission of formal, final and binding offers. Bank has proven controversial and divided opinion throughout the process. Now Australian investment bank Macquarie was complete, it will be up to the newly christened reportedly chosen as the government’s preferred Green Investment Group to prove that the bidder in the autumn, beating the Sustainable concerns voiced have no basis. Development Capital consortium. When news broke of Macquarie being the government’s BEIS Macquarie REA Lib Dems Green Party

Ben Hardie, Analyst, [email protected]

Mayor of London Sadiq Khan launched his draft A new fuel poverty action plan will increase Environment Strategy on 11 August, a major support for Londoners struggling to heat and aspect of which is promoting more renewable power their homes affordably. This includes and local energy. support through £10mn energy efficiency delivery programmes, targeting the worst performing The report set out the scale of the current energy homes. challenge facing London. Nearly three quarters of the energy used in London’s homes is for heating On a broader scale, the plan recognised that it’s and hot water, and the overwhelming majority of unlikely London will ever be completely self- this demand is met using gas-fired boilers. Already sufficient in energy. At present, approximately 94% one in 10 electricity substations are approaching of the city’s energy is sourced from outside the full capacity, and the redevelopment of large parts city, and even a large-scale proliferation of local of the city will increase demand for energy and the distributed generation wouldn’t be enough to plug infrastructure required to distribute it. One in ten the gap. households in the city currently lives in fuel Gas, which currently makes up about half of the poverty, sometimes meaning they have to choose city’s total energy consumption, will likely continue between heating their home or eating. to play a key role London’s energy in the short to A flagship measure is London’s first solar action medium term, although uptake of biogas will be plan, which sets out the Mayor’s actions to more encouraged, and the report suggests the gas grid than double London’s solar energy generation should be updated to use hydrogen. capacity by 2030. Measures will include a new On transport the Ultra-Low Emissions Zone (ULEZ) community energy grant scheme and a “reverse” will be expanded to inner-London for heavy and solar auction to help cut costs for Londoners who light vehicles and Outer London wide for heavy want to install solar panels on their homes. By ones. Low emission freight vehicles and lorries will 2030, it is expected that the Mayor’s programmes also be encouraged. While the Mayor does not will lead to an extra 100MW of installed solar have the legal power to enforce a full petrol/diesel energy generation in London. ban, he can levy charges on polluting vehicles Public sector organisations and providers of social through ULEZ, thus encouraging greater uptake of housing will be encouraged to retrofit solar energy low-carbon transport. technologies on buildings, and projects that The plan also aims to green public transport in include energy storage will be promoted. London. All new double-deck buses will be hybrid, On buildings, it is envisaged that by 2018 minimum electric or hydrogen from 2018, and all new single- energy efficiency performance standards for all deck buses will be zero emission from 2020, and rented properties will be in place and by 2019 all the whole bus fleet will be fully zero emission by new buildings will be zero carbon. Better insulation 2037 at the latest. The Taxi trade, which is of homes and the mass deployment of smart tech currently mostly formed of diesel vehicles, must will also help to improve energy efficiency. also reform; from 2018 Transport for London will only licence zero emissions capable vehicles. Commercial buildings are estimated to be responsible for 32% of London’s carbon emissions. Views on the draft strategy are invited by 17 In light of this, the Mayor will deliver a three-year November. (2017-18 – 2019-20) commercial boiler scrappage scheme to incentivise the installation of more This is an ambitious set of proposals that efficient gas and renewable heating systems, such brings a welcome focus to renewable and as heat pumps. community energy and energy efficiency at scale. However, a theme running throughout London already has ambitious zero carbon targets the document is that the scope for action is for constructing new housing development in the still limited by central government strictures. capital. All such developments in London are currently expected to achieve at least a 35% onsite TFL reduction in greenhouse gas emissions above and beyond national government’s standard.

Emilia Jagiello, Writer, [email protected]

With technology taking on an increasingly that it is not possible to fully protect information important role and the risk of cyber threats systems from security incidents. Therefore, rising, the government is considering operators that suffered an attack despite having implementing measures that would see earlier assessed risks will be exempt from organisations fined if they fail to put in place penalties. effective cyber security measures. These include In the event of any enforcement action by the major energy suppliers and network operators. competent authority, operators will be notified of The Department for Digital, Culture, Media and the impending action. They will also be allowed to Sport (DCMS) is considering the plans as part of its make representations, and confirm the final consultation launched on 8 August. The decision and reasoning of the authority. consultation is seeking views on bringing into According to the DCMS, operators will be required force the Network and Information Systems (NIS) to develop a strategy and policies to understand Directive to ensure that UK operators are and therefore manage their risk. They must also sufficiently prepared and protected against cyber implement security measures to prevent attacks or threats. system failures, including measures to detect The European Commission agreed a Directive with attacks, develop security monitoring, and to raise the aim of increasing the security of NIS within the staff awareness and training. EU. The UK government has backed the directive, The Directive requires incidents to be reported as with the consultation setting out the proposed soon as they happen and operators to have implementation approach in the UK. systems in place to ensure that they can recover The NIS Directive, once implemented, will form an quickly after any event, with the capability to important part of the government’s five-year £1.9bn respond and restore systems. National Cyber Security Strategy. It will compel Furthermore, the consultation also proposes essential service operators to make sure that are similar penalties for flaws in network and taking the necessary action to protect their IT information systems as those applying to the systems. General Data Protection Regulation, due to be in It will ensure that UK operators in electricity, force by May 2018. energy, water and transport are prepared and Minister for Digital Matt Hancock, commented: “We protected against the increasing number of cyber want the UK to be the safest place in the world to threats. The security measures introduced will be live and be online, with our essential services and in line with existing cyber security standards and infrastructure prepared for the increasing risk of will additionally cover other threats affecting IT, cyber attack and more resilient against other such as power and hardware failures. threats such as power failures and environmental The consultation laid out the penalties in two hazards.” bands. Under band one, a maximum €10mn The consultation closes on 30 September. (£9.3mn) or 2% of global turnover was proposed for lesser offences, which include failure to These steps taken by the government are cooperate with the competent authority, failure to important against the background of the report a reportable incident, and failure to comply increased number of recent cyber attacks. The with instruction from the authority. energy sector is a key strategic sector and will Under band two, fines could be as high as €20mn be prone to targeted attacks. The costs of (£17mn) or the equivalent of 4% of global turnover. prevention and deterrence will, of course, fall This penalty is proposed to be applied to on customers. operators for failure to implement suitable and proportionate security measures. We will be taking a wider look at a report by PwC on this matter shortly. The department, however, specified that the fines would be used as a last resort after assessment DCMS that appropriate security measures were not in place without good reason as it was recognised

Emilia Jagiello, Writer, [email protected]

We covered the Smart and Flexible Energy include removing the regulatory and technical System Plan in ES580. But BEIS and Ofgem also barriers to create a level playing field. published a document on 24 July alongside it, Other responses expressed concerns that which summarised the responses received from government intervention could stifle the growth of the energy industry to the smart and flexible smarter, flexible energy systems and noted that. future call for evidence (CFE). The document once enablers such as smart metering and half- summarises the 200 views received, as well as hourly settlement were in place, this market would the departmental response. drive itself. Several respondents mentioned that Regarding enabling storage, most respondents network users will need to have access to clear agreed that the CFE correctly identified the main information about the pros and cons of smart barriers to storage but additionally underlined the tariffs. Given the impartial position of BEIS and need for clear regulations for storage, and Ofgem, they are better placed than suppliers to addressing costs associated with final raise consumer awareness and secure buy in. consumption levies. BEIS and Ofgem were in agreement with Furthermore, respondents highlighted that low respondents over the importance of consumer revenue streams for storage can act as a barrier to engagement and provision of information to deployment and investment as it does not encourage smart tariff up take, and explained that, incentivise the full benefits of storage. Similarly, after establishing the key enablers, they will not suggestions from respondents included a “cap- intervene in the market unless necessary. and-floor” scheme as a solution to support large- Demand Side Response (DSR) will also be scale storage projects, which require considerable important in providing a flexible future energy initial investment. system. However, respondents suggested that According to the document, it was widely felt that more should be done to assess the scale of the the approach to storage in the CFE was too risk, including cyber security risks, at various levels focused on batteries, and behind-the-meter of DSR services on the grid. In response, they storage and appropriate regulation should have hope that the government and Ofgem will deliver received more attention. Respondents highlighted appropriate regulation to avoid potential system that a “whole system thinking” is needed to truly instability as a result of DSR implementation. facilitate flexibility on the system; this includes Respondents had different views over the potential considering the connections between heat and risk to system stability from aggregators. There gas, for example, and a general reform of the was also a lack of evidence as to the magnitude of energy system. the risk, but many felt the level of DSR was The government and regulator responded by currently low compared to the loss of a large outlining the actions they intend to take to address generating plant on the network. Therefore, the the six main barriers for storage. BEIS and Ofgem government and the regulator are hoping to work underlined the need for the roles of distribution with DSR providers to ensure that any new network operators to continue to evolve. standards introduced are proportionate to the risk Reassurance was also provided that the and protect the system suitably. government was looking to clarify how storage can be co-located on renewable generation sites that Weighing in at over 100 pages, this is a very are accredited for the Renewables Obligation, useful distillation of nearly 150 responses to Feed-in Tariff or Contracts for Difference schemes. the CFE, and is an essential read for those active in the debate. Most of the 48 questions Another large focus of the CFE was the drew over 100 responses. The government introduction and proliferation of smart tariffs. A and the regulator largely agreed with the large proportion of the respondents felt that the government and Ofgem had some sort of role to responses received. Importantly the document play in their promotion, but the level of intervention illustrates what is being done in response. varied between respondents. There was general BEIS agreement that the most appropriate role would

Tom Crisp, Editor, [email protected]

Brexit poses a significant risk to the energy Figure 1: Regional Carbon Intensity (kt CO2/GVA), sector in the North, but also opens some 2014 opportunities, according to the latest research from IPPR North. Released on 16 August, The Impact of Brexit on Energy in the North considered the consequences Brexit will have on specific policies and in turn what the impacts will be on the energy industry in the North. As the research highlights, there are reasons the Northern energy sector is particularly exposed to Brexit. Source: IPPR North According to IPPR analysis, the North as a whole has a much higher carbon intensity than the However, IPPR North also recognised that Brexit national average, with the North East having the creates opportunities for the Northern energy third highest carbon intensity of any region in the sector, primarily through a strong industrial UK. It is currently unclear whether or not the UK strategy. With the Brexit negotiations creating intends to continue its participation in the EU uncertainty over existing trade arrangements with Emissions Trading Scheme market and the new other countries, the UK has the opportunity to stabilising mechanisms planned for its future. This focus on inward investment within the energy uncertainty could have “serious consequences” for sector, building on regional strengths. the decarbonisation efforts of energy intensive If the end result of negotiations is that the UK industries across the country, and particularly in withdraws fully from all EU agreements, the the north (see Figure 1). government may have greater access to state aid. The north also has some of the highest domestic While any assistance provided would still be CO2 emissions per head in England. As such the subject to WTO rules against market distortion of continued ratcheting up of product efficiency is goods trading, two main benefits could be felt. particularly important for the North. The current First, the time-lag incurred waiting for Commission Ecodesign framework provides the basis to pursue approval of state aid projects would be removed. this, and as such replicating or remaining within Second, the UK would be less concerned about existing EU schemes after Brexit is a key part of the expansion of the EU Commission’s definition of meeting climate targets, which risks being lost what does and does not constitute state aid. during negotiations and could negatively affect The paper concluded that if the focus on energy homes in northern England more than other policy previously provided by the EU – and the regions. financial and technical support associated with this On Euratom, the research highlighted how the – is to diminish, then the only way in which the UK treaty would need to be replaced with international will be able to meet its international obligations cooperative agreements. This would have a and drive forward the energy sector in the North particular impact in the North as the Sellafield will be through the development of a long-term, nuclear facility employs 10,000 people and has coherent industrial strategy. several contracts in place with other EU nations to The sector has been almost universally trade and reprocess spent nuclear fuel and waste negative about Brexit, but IPPR offers a rare based on Euratom safety standards. Any solution to this is seen as complex and likely to take a long insight into the fact that there is some time to implement. potential for a genuinely new approach to be taken with the repeal of state aid rules. The North is also heavily dependent on the EU for However, the risks of Brexit are substantial research funding, including in the energy space. and only a paradigm shift would deliver The region is currently receiving £75mn in European Regional Development Funding, and benefits to outweigh these. also receives 45% of funding to universities. IPPR North

Centrica CEO Iain Conn has argued that, as the UK’s energy imports are growing and prices are set by the European markets, the UK should seek to retain influence on EU energy policy after Brexit. In comments reported by Bloomberg on 8 August Conn pointed out that UK imports are growing and prices are set by the European market. Therefore, Conn said, the UK must retain influence over the efficiency of the energy market to protect UK consumers. He went on to say that from an energy perspective “it’s not clear there is really any win-lose negotiation, if we are sensible”. Conn added: “Rather than the complexity of trying to renegotiate everything, I would advocate setting realistic red lines and then trying to achieve maximum continuity and be willing to pay something for it”. No link

The Scottish government has announced it will provide £4.4mn to fund energy efficiency projects in homes, businesses, public buildings and community projects across Scotland. In a statement published on 10 August the Scottish government said that 15 local authorities will use the funding to deliver innovative ways to reduce emissions and tackle fuel poverty. The funding is part of phase two of Scotland’s Energy Efficiency Programme (SEEP), which is due to commence in 2018. Minister for Business, Innovation and Energy, Paul Wheelhouse, said: “The SEEP Pilot programme is testing new approaches to improving energy efficiency and new ways of working in the public sector. A number of these projects will have a material impact on people’s lives, ensuring they have warm homes, businesses and community centres, while others will help develop essential strategies to support the effective deployment of investment to meet our ambitions to expand renewable heat and address fuel poverty.” Scottish government

National Grid and Affordable Warmth Solutions invited bids to the new £150mn Warm Homes Fund on 7 August. All eligible organisations – local authorities and registered social landlords and their partners in England, Wales and Scotland – are invited to apply including those who have not yet submitted expressions of interest by 8 September. The fund is being split into three rounds of bidding, each of £50mn. The second will be launched in Spring 2018, and the third in Spring 2019. The fund is designed to address issues affecting fuel poor households by incentivising the installation of affordable heating solutions in fuel poor homes who do not use mains gas as their primary heating fuel. It is intended to supplement traditional funding streams, such as local strategic plans. The funding is broadly split into three categories focusing on urban, rural and health-related solutions. Along with complying with qualifying measures, projects are required to demonstrate their “readiness to go” and be able to commence delivery of measures this fiscal year. Failure to deliver the given project within the given time may disqualify the organisation from benefitting in the future. Bidders must also be able to demonstrate that third party funding is in place. Affordable Warmth Solutions

The GMB union has called on the government to ensure that the Moorside nuclear power station continues to progress and ultimately produces electricity. The statement, published on 10 August, came after developer Toshiba published its accounts late, which showed the Japanese firm had made £6.7bn annual losses. The company is one of the major investors in the planned nuclear power station in Cumbria. The project has seen several additional setbacks in recent months, including the loss of French investors Engie and insolvency of Toshiba’s US arm Westinghouse, which is producing reactors for Moorside. The

company’s accounts were due to be published in May but were delayed because of the predictions of the losses they would reveal. Toshiba finally published the results to avoid being delisted from the Tokyo Stock Exchange. Justin Bowden, GMB National Secretary, said: “The chaos at Toshiba must shake the government out of its stupor of inertia and produce action to ensure the zero-carbon electricity we vitally need is produced at Moorside. […] Moorside is key to securing reliable electricity to meet future domestic and industry needs, alongside carbon reduction commitments. Government cannot be a spectator any longer, just watching the project descend into a farce.” GMB

Plaid Cymru MP Hywel Williams has urged the Welsh and UK governments to do more to support community energy schemes, speaking at an event on 9 August. Williams said that the growing network of community energy schemes was being punished by a regressive business rates system, which has seen many projects hit by a tax rise of up to 900%. Williams particularly called on the Welsh government to do more to relieve the tax burden on such enterprises and hailed Wales’ “huge potential” to generate energy. Williams added: “Co-operative community projects are becoming more commonplace […] These projects fulfil an important role both socially and economically, and deserve the government’s wholehearted support.” Plaid Cymru

Cabinet Secretary for Environment and Rural Affairs Lesley Griffiths has stated that a strong case for establishing an umbrella energy supply company for Wales has not been made. Responding to the Welsh Parliament’s Environment and Sustainability Committee’s recommendation to set up an umbrella not-for-profit energy service company for Wales, Griffiths said the Welsh government’s approach to improving home energy performance better supported its long-term fuel poverty and decarbonisation aims. Griffiths, speaking on 7 August, explained that for a majority of participants at Welsh government events exploring the proposition of an energy service company, the risks, challenges and tensions heavily outweighed the potential benefits. It was deemed that the government’s “neutral voice” could be lost if participating in the market, while those with experience in the industry felt such a supply company would struggle to be profitable and generate the funds needed to support the range of social outcomes that had been identified in the original recommendation. Griffiths added that, while there was a clear consensus it was not the proper business of the Welsh government to set up an energy supply company, there was potential for local authorities and housing associations to establish supply companies in circumstances where a competitive market does not exist. Welsh government

Our latest Chart of the Week explores switching statistics from the newly opened water market Last week’s blogs included Three reasons why renewables generators are earning more for their power, and the Secret of NILM.

The Cornwall Insight office will be closed for the August Bank Holiday. The next issue of Energy Spectrum (ES584) will be published on 4 September.

Rowan Hazell, Regulatory Analyst, [email protected]

A statutory consultation on proposals to allow not be required, as the regulator believes this suppliers to roll customers onto another fixed- would not be proportionate as competition would term tariff at the end of their deal was launched be greatly affected. by Ofgem on 14 August. The duration and type of potential rollover tariffs is Under current rules, unless the customer has also under consideration. If tariff durations are too arranged a switch, suppliers are required to move long, then the prompts to switch that are given as the customer onto their cheapest variable tariff. a tariff comes to end would be received This often means that customers end up paying infrequently, potentially leading to disengagement. significantly more than they could be by switching. However, if tariff durations are too short, then The regulator said it is now seeking to minimise costs to suppliers would increase and consumers this as much as possible, and hopes the new could be overloaded with information. proposals will lead to savings for many consumers. Stakeholders thought that customers may assume The idea of allowing flexibility for suppliers to they are automatically getting a good deal, and move customers onto another fixed-term tariff was would be less likely to switch than if they were considered in Ofgem’s consultation on Helping moved on to an SVT. Ofgem stated that Consumers make Informed Choices, held in consumers will still be prompted to switch in end of August 2016. The plans were generally met with fixed term notices, as well as in bills and other support from stakeholders, who agreed that it communications. would allow consumers to be moved on to Suggestions in the consultation that the proposals cheaper deals than is currently allowed. However, could be made mandatory for suppliers were met there were some concerns raised with the with a negative reaction from stakeholders, and proposals, including worries that customer Ofgem intends the measures to be optional for the engagement could be reduced. time being. The regulator expects suppliers will The regulator set out three conditions that any consider the characteristics and preferences of a rolling fixed tariff should meet: customer when rolling them onto a new tariff, and this reflects Ofgem's intentions to move towards a • The tariff should not have termination fees more principles based regulation system. • The tariff should be the same price or cheaper Ofgem also proposed that, if implemented, than the standard variable tariff (SVT) that the customers who remained on fixed-term contracts customer would have otherwise received, and without switching for more than three years could • The tariff is similar in nature to the previous be included in the disengaged customer database, tariff, taking into account customer which is set to be introduced in April 2018 characteristics and preferences. following a recommendation from the CMA. Ofgem responded to concerns that the prohibition Drafted licence changes have been published by of termination fees would lead to customers not Ofgem, and stakeholder views are requested until being offered the cheapest deals. It stated that 15 September. Pending a decision, licences will be although some cheaper tariffs would be excluded modified to reflect the introduce the changes from rollovers, allowing this would lead to barriers before the end of the year. for customers wishing to switch away from A remedy along these lines was trailed for the unsuitable tariffs, which could potentially lower microbusiness market but ultimately rejected. consumer engagement. Anything that limits choices and inhibits the The regulator intends that the tariff customers are disengaged segment from engaging with the rolled on to should be the same price or cheaper market should in our view be treated with than the cheapest SVT the supplier offers. It hopes caution. that this will prevent disengaged customers being put on poor value tariffs. Requiring suppliers to roll Ofgem customers onto the cheapest fixed term tariff will

Rowan Hazell, Regulatory Analyst, [email protected]

Both the domestic and the non-domestic popular technology, but biomass overtook solar Renewable Heat Incentive (RHI) saw a decline in thermal for the third most popular technology by accreditations during 2016-17, according to installation number. annual reports released by Ofgem in July. For the non-domestic RHI, solid biomass boilers Reforms of the RHI are still awaited, following continued to dominate, accounting for over 88% of delays to the parliamentary process due to the installations. Biogas and air source heat pumps general election. saw the largest increase in proportion for the non- For the domestic scheme, 8,141 installations were domestic RHI, although the proportion of accredited during the third year of the scheme. installation was still comparatively small, at 2.1% This continues the decline seen in the previous and 1.7% respectively. year, when the number of installations fell from The scheme saw several regulatory changes 30,695 to 17,612. In July 2016, the 50,000th during the financial year. The biomass tariffs for domestic installation was accredited under it. the domestic RHI saw a number of degression A similar picture was seen for the non-domestic driven tariff reductions during the year. On 1 July RHI, with only 2,407 installations made during the 2016, a 10% degression on the biomass tariff was fifth year of the scheme. This is compared with seen, with a further 10% degression on 1 January. 5,394 installations in 2015-16 and 5,184 in 2014-15. For the non-domestic RHI, solid biomass combined Figure 1 shows the number of installations made heat and power plants with a tariff starting after the under since 2014-15. start of 2017 saw the minimum power efficiency Figure 1: RHI installations accredited since 2014-15 threshold reduced from 20% to 10%. 30000 The annual report for the domestic RHI also 25000 revealed that registered social landlords (RSL) had accounted for 1,704 of accreditations, 21% of the 20000 total. Air source heat pumps are by far the 15000 preferred technology for RSLs, making up 97% of 10000 accreditations. In total, 12,890 RSL accreditations have been made, 52% of which are for legacy 5000 installations that were commissioned before the 0 scheme launched. 2014-15 2015-16 2016-17 Domestic Non-domestic BEIS has announced that it will reform and refocus the RHI in its response to the consultation on the In total, over £458.8mn was paid out over both scheme held in 2016. These changes were schemes during 2016-17, with over £90mn under intended to be implemented in spring 2017, and an the domestic scheme and over £368.7mn under increase in the number of domestic accreditations the non-domestic scheme. Total scheme payments seen during March is likely to have been related to as of June 2017 had reached over £204mn for anticipated changes to the regulation of the domestic and over £890mn for non-domestic. scheme. However, the parliamentary process was Biomass received the most domestic payments delayed due to the general election, and the during 2016-17, receiving over £47.6mn. Ground government is expected to provide an update on source heat pumps were the second highest paid how the reforms will progress in due course. technology, receiving over £23.7mn. Air source Declining RHI take-up suggests that the heat pumps and solar thermal technologies received £16.5mn and £2.1mn respectively. government’s decision to reform the schemes is justified. Although it has a relatively small Despite not receiving the largest pay-out, air impact on the energy system, a reformed RHI source heat pumps remained the most popular has the potential to make significant technology type for new domestic installations, contributions to the decarbonisation process. making up over 5,000 of accreditations. Ground source heat pumps remained the second most Ofgem – Domestic Ofgem - Non-Domestic

Josephine Lord, Regulatory Consultant, [email protected]

The European regulators organisation has issued terms of rights and quality of service. Therefore, a further white paper on the European the regulation and the authority of regulators to Commission’s Clean Energy for all Europeans oversee such entities should be as strong and legislative proposals. Issued on 27 July, it appropriate as it is for conventional DSOs. CEER considers the proposals as they relate to self- believes this principle should be introduced in the consumers, active customers and energy recitals of the Electricity Directive. communities. It said local energy communities should be allowed The white paper believes that greater clarity and to operate networks only where there is no sound regulatory principles are needed in certain negative impact on consumers as a whole and if areas to effectively manage growth in the sector they cover a coherent area where they can while maintaining reliability, fairness and manage network developments in an efficient way. consumers’ rights. It has therefore recommended a National regulators should define and publish number of changes to the legislation. criteria for situations where a local energy community owns or operates the network. This The first relates to consistency between the also implies that regulatory oversight has to be definitions in the Renewables Directive and the properly arranged, especially concerning data Electricity Directive, as CEER believes that they are management, energy balancing, unbundling and not always consistent with each other either in quality of the network services. their definitions or approaches. It has proposed revised wording for the four key definitions of: CEER stated that precluding cross-subsidisation renewable self-consumer; renewable energy between active and non-active customers, whether community; active customer; and local energy as individuals or in groups (as a member of a local community. A local energy community is defined energy community) is a core principle in this policy as one that is controlled by final customers. CEER area. In most Member States self-consumers are maintained it should not be possible for local exempted, fully or partly, from network charges for energy communities to be a vehicle for existing the share of self-consumed electricity, but they rely energy companies to reorganise their businesses on the energy network when their consumption into/ through local energy communities and there exceeds self-generation. Therefore, they should by extract some sort of regulatory advantage vis-à- face network tariffs which are cost-reflective in the vis their conventionally-organised competitors. same manner as consumers that exclusively relay on the network for their energy supply. CEER said one of the core principles for the treatment of local/renewable energy communities In particular, CEER said network tariffs should be is the preservation of consumers rights as these designed to reflect the value of the network to all new customer roles and structures become more those connected, in terms of costs and benefits, common. One such fundamental right is the right irrespective of the type of consumer involved. not to be compelled to be a member of a local Network tariff structures should be non- energy community, regardless of where the distortionary: recovery of the costs of building, consumer resides. It said these new structures are operating and maintaining networks should be about giving consumers new choices and it would designed to avoid unintended distortions in be against the nature of their development to limit decisions involving investment in self-generation. consumer choice to be a member or not — this should be made explicit in the Electricity Directive. The paper is seeking to ensure that a robust Customers must also retain the right to leave a framework is created for the diversity of local energy community in an easy and quick way. innovative arrangements that are being developed and established, and to ensure that Where local energy communities seek to own, some customers do not unfairly benefit to the establish, lease and/or manage network assets, disadvantage of others. But the paper is all a CEER said they would in effect be distribution system operators (DSOs). As such, CEER said that bit high-level at this stage. one of its core principles is that the DSO does not CEER in any way negatively affect consumers, both in

The third phase of the Energy Company Obligation (ECO) is being discussed by BEIS and ministers, according to details from July’s ECO stakeholder delivery group meeting. A consultation on the scheme will launch early in 2018, and will be used to inform the direction of ECO3, which is set to begin in October 2018. The obligations placed on suppliers under the scheme are designed to tackle fuel poverty and energy efficiency within domestic homes through the delivery of measures such as loft insulation and energy efficient boilers. ECO3 will help the government meet its fuel poverty targets, which in the 2017 Conservative election manifesto were set out as a commitment to upgrading all fuel poor homes to Energy Performance Certificate Band C by 2030. In consulting on the future of the scheme, BEIS hopes that the lessons learnt from the transitional phase of ECO2 (ECO2t) will help to improve the effectiveness of the scheme. Of particular interest is the combination of measures that should be used, and the consultation will seek views on whether the minimum level for solid wall insulation delivery should be maintained and if the deemed scores methodology that was introduced for ECO2t is disadvantaging the delivery of key measures. Following the consultation, a final impact assessment is expected to issue in May 2018.

Ofgem

An investigation into a company providing services to the energy industry regarding potential infringements of competition law was opened by Ofgem on 11 August. Ofgem did not say which company it is investigating. The regulator is considering whether the company breached Chapter II of the Competition Act 1998 and Article 102 of the Treaty on the Functioning of the European Union, which concern the abuse of a dominant position within the market. The Competition and Markets Authority (CMA) classifies a business as having a dominant position if it has more than a 40% market share and if it is not affected by normal competitive restraints. Ofgem has concurrent powers with the CMA to conduct competition law investigations, and the CMA’s annual concurrency report published in April highlighted how more work is being done to support regulators when looking at breaches. The investigation is currently in the information gathering and assessment of evidence phase. This is the first investigation into the abuse of a dominant position by Ofgem since an investigation into SSE was opened in December 2014 regarding electricity connections covered by SSE’s distribution network. Ofgem

National Grid issued a consultation on 11 August on its proposal to reintroduce a financial incentive on the costs of operating margin (OM) gas. OM is gas procured by National Grid to maintain system pressure in certain specific circumstances, such as the time immediately after a major supply loss. Prior to the RIIO-T1 transmission price control, OM gas was financially incentivised, but this was changed to a reputational incentive only in 2013-14 as the market for OM gas was small, meaning that National Grid had a limited ability to influence the costs. The system operator now believes that a financial incentive is appropriate and has proposed that this runs for three years from April 2018 until the end of RIIO-T1 in March 2021. It argued that following its intensive consumer engagement, it has successfully increased the competitiveness of the OM gas market, and that a financial incentive would enable it to retain this high-level of focus and so maintain the reduced costs and continue to grow a more diverse market. The incentive proposed would have a breakeven target cost of £12mn for each of three years, an upside sharing factor of 45% with a cap of £1mn and a downside sharing factor of 22.5% with a collar of £1.5mn. National Grid considers this would give a fair balance of risk and reward for both consumers and itself. Responses are requested by 8 September. National Grid

James Cunningham, Writer, [email protected]

A report by the International Energy Agency (IEA) would see the US account for almost 40% of the – Gas 2017 – has predicted that global gas growth in global output. While overall US demand will grow at 1.6%/ year, a slight increase production fell in 2016, output from the Marcellus on the previous year’s forecast of 1.5%. This shale basin continued to grow, underscoring the trend will see global annual gas consumption ability of US gas drillers to counter the impacts of reach almost 4,000bn cubic metres (bcm) by lower prices by improving efficiency and producing 2022, up from around 3,630bcm in 2016. more gas with a fewer number of rigs. Gas demand is expected to grow faster than both The continuing development of both the Marcellus oil and coal over the next five years, helped by low and Utica shales is being supported by the prices, ample supplies, and its role in reducing extension of pipeline infrastructure from the emissions. Almost 90% of the expected growth Appalachian region. Over the forecast period US comes from developing countries, most notably gas output is expected to grow by 2.9% per year, China. Industry is set to emerge as the main driving adding around 140bcm to global production. By force behind demand growth, accounting for half 2022 the United States is predicted to produce of the forecasted growth in global demand. A approximately 890bcm, 22% of the total global gas growing use of gas in the chemical sector, strong production. Although US domestic demand for gas demand for fertilisers, and the replacement of coal is increasing due to an increased industrial by gas in smaller industrial applications in China demand, over half of this growth in production will means industrial gas demand is expected to grow be turned into liquified natural gas (LNG) for by almost 3%/ year. export. This would mean that by 2022 the US will be well on track to challenging Australia and Qatar Power generation remains the main gas- for global leadership among LNG exporters. consuming sector with demand continuing to grow, although at a slower rate of 1%/ year. In many The IEA also predicted that the volume of LNG mature markets, the increase in power generation trade flows are increasing rapidly, but warned that from renewables, combined with modest growth in the ample availability of LNG is putting pressure on electricity demand, limits opportunities for thermal traditional ways of pricing and marketing natural generation. The IEA also pointed out that in many gas. Over-supply and the decline in the price of oil emerging markets that rely on imported gas, in have brought down natural gas prices in all particular those without a price on carbon or strict regions, while the large price divergences rules on air pollution, gas faces very strong between regions seen in 2013 have narrowed competition from coal. considerably. This has limited profitable export opportunities for many players, at least In the EU, after four years of decline from 2010, temporarily. An intensely competitive international gas demand increased for the second year in a supply environment is also loosening some of the row in 2016. This was due to lower gas prices, pricing and contractual rigidities that have higher coal prices, coal plant closures and nuclear characterised long-distance trading in the past. outages in France pushing up gas demand for The IEA expects this trend to be further power generation. Specifically in the UK, the accelerated by the growth of US exports, which Carbon Price Floor has supported an 8bcm are not tied to any particular destination, and so increase in gas demand for the power sector will play a major role in increasing the liquidity and between 2015 and 2016. The report expects flexibility of LNG trade. demand to remain flat between 2016 and 2022, as further growth will be constrained in the power The resurgence of the natural gas market is sector by a limited growth in electricity demand not simply a local or temporary phenomenon and the continued growth of renewables, and by (see this week’s Energy Perspective), as this slow growth in European industrial output. report makes clear. The industry is presently The United States, already the world’s largest gas undergoing a fundamental transformation. producer, is predicted to increase production more IEA than any other country over the next five years, largely due to a boom in shale production. This

Elliot Dransfield, Analyst, [email protected]

The latest monthly Cornwall Insight Index of leading to the small decrease in the gas cost Domestic Energy Supply Costs was published at index. Gas network and policy costs remained the start of August. Updated every month, the stable over July. index tracks wholesale, network and policy costs Forecasts for supply margins in August could lead that electricity and gas suppliers face. It is to further increases in next month’s electricity baselined to a value of 1,000 points in January index. Parts of September are also forecast to see 2012. Over July the electricity index rose, tighter power supply margins due to expected whereas gas marginally fell. power plant maintenance and a 1GW reduction in In total, the cost of electricity rose by 46 points interconnector availability and rising demand over the course of July, which increased the total levels. index to 1,289 points. The change was due to an This prediction comes from National Grid’s increase of each cost component over July. Summer Outlook report, published in April 2017, Government obligation and policy costs saw an and would mean an increase in the volatility of increase due to a higher Feed-in-Tariffs (FiTs) cost, month-ahead prices pushing up the costs of which increased by 75%, contributing an extra 29 supplying electricity. This increase in month ahead points to the index. Wholesale and network costs contracts throughout August will likely mean an increased by 4 and 14 points respectively. Network overall increase in the cost of electricity as third cost increased due a rise in the charge associated party charges look to remain stable. For gas, with balancing the system (BSUoS). Wholesale wholesale prices are expected to rise as the price rises can be attributed to outages at a weather worsens and demand due to heating number of nuclear plants and higher spot gas increases. prices throughout July. As winter approaches prices look to be rising as Unlike electricity, the cost of gas fell by 1 point expected, but it is unlikely we will see the index hit wholly due to a small fall in the wholesale cost. Gas the highs that occurred at the end of 2016. contracts experienced mixed movements in July with the day-ahead contract on average rising as We update the index of domestic supply costs maintenance at a gas processing plant in Norway during the first week of each month. For more and on the Continental Shelf limited supply during details, please contact e.dransfield@cornwall- July. Despite this, month-ahead contracts fell insight.com or 01603 604409.

Mongoose Energy has announced it has successfully completed financing of three solar farms, covering a combined 75-acres at Drayton Manor, near Stratford-Upon-Avon. The 14.7MW project will be the largest in the UK by generating capacity, enough to power around 4,500 homes. The deal will ensure £4.8mn in local community benefits over the project’s 20-year lifetime. The project was built and designed by Anesco, and will contain co-located batteries. Funding for the Drayton Manor project was secured by bridge financing provided by Social & Sustainable Capital (SASC) and senior debt provided by Close Brothers. Repayment of the SASC financing will begin via a series of community share and bond offers in autumn via the newly-launched Mongoose Crowd community energy crowdfunding platform. Since its launch in June 2017, the platform has raised over £1mn for green energy projects in the UK, with investors typically receiving 4.5-7% return on their investments depending on project performance. Mongoose Energy now has 80MW of solar assets under management and over £90mn now raised to put renewable assets into community ownership. Mongoose Energy

AIM-listed Plutus Powergen (PPG) has received planning permission for the development of two 20MW renewable green diesel powered “flexgen” sites at the Marchwood Industrial Estate in Marchwood, Hampshire. The projects will increase Plutus’ total number of planned 20MW sites to nine, with a combined 180MW capacity. The current focus is to roll-out nine flexgen sites with Rockpool Investments LLP, along with the development of approximately 200MW of gas-fired flexgen projects. One gas-fired site is already operational, with a further four expected to be commissioned by the end of 2017. PPG is involved in developing a pipeline of projects with combined capacity over 700MW, and is targeting 120MW to be operational by the end of 2017, with an additional 120MW anticipated to be at the post-planning stage by the end of the year. PPG chairman, Charles Tatnall, has also drawn attention to the company’s recent expansion into the emerging battery energy storage arena, stating: “we are extremely excited about the Company’s future and its role in the UK energy matrix.” Plutus Powergen

OVO Energy has launched a new deal, combining renewable domestic energy with free membership to the POLAR electric vehicle (EV) charging network. The supplier announced the move on 1 August, revealing that it had entered a new partnership with Chargemaster, which will see it supply 100% renewable electricity to the POLAR network. Its new EV Everywhere tariff is claimed to be the only tariff to bundle 100% renewable household energy with free membership of POLAR. Furthermore, moving towards building a complete “grid smart” charging solution for EVs, OVO confirmed it will begin to introduce its proprietary VNet technology across the network. It said this will unlock smart charging capabilities on a national scale. Stephen Fitzpatrick, CEO of OVO, said: “Mass adoption of electric vehicles will completely revolutionise the energy sector as the number of cars on UK roads reach one million in the next five years.” OVO Energy

Three of the four large German utilities companies ruling that has led to the German government have reported their H1 financial results recently. refunding them for the nuclear tax and the stabilisation of German power prices. The first to report was Uniper, which was spun off last year from E.ON. Uniper is largely centred upon Indeed, Uniper has been one of the best 'legacy' fossil and nuclear assets. performing stocks on the German market in the past 12 months, up nearly 90%. E.ON's shares have The highlight of Uniper's results was the also have a very good run, up nearly 60% since announcement that the full year dividend would be October 2016, RWE has also performed very well increased by 25%. Whilst investors had been since its lows before Christmas, and is up 70% year expecting a sizeable uplift in the dividend the to date. The one exception has been Innogy announcement was nevertheless well ahead of whose shares are only just ahead of their listing expectations and led to a healthy rally in Uniper's price, although they are up 15% since their share on the day. February lows. Although Uniper reported a year-on-year fall in The reasons for Innogy's more modest share price profits, the underlying performance of the business performance is probably twofold. First, Innogy's was fairly strong, particularly in cash flow shares were well-priced at the listing as investors generation and retention. This was helped by were attracted to its mix of renewables, customer strong nuclear output in Sweden and the and regulated network businesses. Also due to its stabilisation of power prices in Germany. business mix, it has not benefited from the Next to report was E.ON, which retains a sizeable favourable moves in the political, tax, and market stake in Uniper. Once again, the highlight of the conditions in Germany as much as the other results for investors was an encouraging statement companies. on future dividends. E.ON announced that from One area where E.ON has been clearly 2018 it would establish a dividend pay-out ratio in outperforming Innogy is in UK retail. Ofgem the range of 65% to 80% and that it was targeting recently released the 2016 segmental accounts for absolute dividend growth from the base set in the Big Six energy suppliers. 2017. The accounts show that E.ON has performed well E.ON also saw strong cash flow which helped net earning a 3% margin on domestic electricity debt fall by €4.8bn in the period. E.ON's shares accounts and a whopping 12% on gas supply. By had been very strong in the week leading up to the contrast Innogy lost money in both electricity results – up 8% but fell a little post the results as (£125mn) and gas (£25mn) in 2016. Innogy's H1 investors took some profit. results showed that the pressures in UK retail were The last of the trio to report was Innogy which had continuing as they implement a £200mn cost been spun off from RWE in 2016 taking most of the saving program. renewable, retail and network operations. Innogy's Cornwall Insight associate Peter Atherton is a H1 results were slightly below market expectations well-known equity analyst having headed utility and the shares fell nearly 1.5% on the day. research at several eminent City institutions, A better than expected performance in its most recently Jefferies, and is a respected Networks business was rather off-set by tough energy commentator. conditions in the Retail operations (especially in the UK) and weaker than expected performance in Renewables, although there was a number of one- off items at play. Last year was a momentous one for the German utility sector with both E.ON and RWE implementing radical (and similar) restructurings. The birth of Uniper and Innogy proved to be a greater challenge than first envisaged, but has since been greatly helped by the favourable legal

All near-term gas contracts increased last week. Week-on-week, the day-ahead contract rose 2.9% to a fresh five-month high of 44.0p/th, amid restricted flows caused by ongoing maintenance in Norway and the UKCS. On Friday, the month- ahead contract rose to 44.0p/th, the highest price on our records for the contract. Near-term prices were generally supported by concerns about the reliability of supply with extensions to Norwegian outages, sparse LNG arrivals and storage site issues. Most seasonal gas contracts experienced losses last week, following the oil market downwards. Summer 18 gas slipped 0.5% to 41.2p/th. In contrast, winter 17 gas moved 0.8% higher to 48.2p/th.

All baseload power contracts moved higher last week, with many reaching new highs. Day-ahead baseload power increased 10.5% week-on-week, reaching £47.5/MWh, a fresh five-week high. September 17 power reached £49.6/MWh on Friday, the highest price on our records for the contract. The October 17 and Q417 contracts also reached the highest levels on our records, at £46.1/MWh and £48.8/MWh respectively. Prices were supported by concerns of nuclear power outages in France. All seasonal baseload power contracts moved higher last week. Winter 17 power ended the week at a seven-month high of £49.3/MWh. Summer 18 power rose 0.8% to £42.0/MWh.

Brent crude oil prices slipped 2.4% to average $51.0/bl, with continued concerns over rising crude output from OPEC members and the US. On Tuesday afternoon, prices dropped to a three- week low of $50.2/bl, amid a rebound in the strength of the dollar, as tensions between the US and North Korea seemed to ease. API 2 coal rose 1.0% to average $76.4/t. On Friday, coal prices reached $78.5/t, the highest price since September 2014, with strong Asian demand and following the oil market upwards. EU ETS carbon prices increased 5.5% last week to average €5.7/t. On Thursday, prices reached a seven-month high of €5.8/t.