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Weekly Industry Update – 03.04.18

Category : News


Week in Energy

Policy updates:

Industry updates:

Week in Energy

Monday 26/03 – Scottish First Minister Nicola Sturgeon calls on the UK government to provide clarity on what impacts Brexit could have on the renewables sector, warning against leaving the single market along with the EU as this would hinder the Scottish renewable industry’s supply chain and skills base. The UK Energy Research Council concludes that there is an important role for energy efficiency and demand reduction in energy security strategies.

Tuesday 27/03 – The government reveals the number of smart and advanced meters operating across homes and businesses in Great Britain as of the end of 2017 was over 10mn. The government also publishes its response to its consultation on non-domestic smart metering policy proposals, with specialist Industrial and Commercial energy suppliers to be made exempt from the DCC User Mandate. National Grid says it would support a decision to bring forward the government’s ban on the sale of new petrol and diesel cars to 2030. Appearing before the BEIS Select Committee, National Grid Director of Electric Vehicles, Graeme Cooper, says the power system could cope with the increased demands of an earlier surge in EV numbers.

Wednesday 28/03 – The government’s Green Finance Taskforce makes a total of 30 recommendations including relaunching UK green finance activities through a unified brand; issuing a sovereign green bond; and a National Capital Raising Plan that is designed to align UK infrastructure planning with the delivery of the Clean Growth Strategy and 25 Year Environment Plan.

Thursday 15/03/08 – BEIS statistics show over half of electricity generation was low carbon (nuclear and renewables) for the first time in 2017. EU ETS carbon prices fall back from highs of €14/t.

Friday 16/03 – The Grantham Research Institute on Climate Change and the Environment assesses how successful the Climate Change Act has been and asks whether it’s still fit for purpose in a post-Paris Agreement world.

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Policy 1 | Smart meters installations rise as key decisions shape non-domestic roll-out

At the end of 2017, the number of smart and advanced meters operating across homes and businesses in Great Britain was 71% higher than a year earlier.

The latest official smart meter statistics were published on Tuesday, 27 March, and revealed more than 10mn smart and advanced meters are now in operation. 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. The Smart Metering Programme targets a roll out of more than 50mn smart gas and electricity meters to domestic properties and smart or advanced meters to smaller non-domestic sites, with around 30mn premises set to be impacted.

Just under 4.8mn smart meters were installed in 2017, with 148,100 installed in non-domestic properties. In the final quarter of 2017, around 16,800 smart and advanced meters were installed at non-domestic sites – a 7% year on year rise. BEIS noted that this means there were 1.06mn smart and advanced meters in operation across smaller non-domestic sites across Great Britain at the end of 31 December 2017.

Along with the release of the smart meter statistics, the government published its response to its consultation on non-domestic smart metering proposals. The proposals had set out to ensure businesses could access the full benefits of smart meters, while also recognising the diverse nature of these energy users and the need for appropriate regulation.

The government set out that as a result of the consultation and responses received, it was making changes to the energy supply licence conditions, Data Communications Company (DCC) licence and Smart Energy Code to implement several measures.

One of the key amendments was that energy suppliers to non-domestic premises will be required to use the DCC for the operation of SMETS2 meters. This will mean most non-domestic energy suppliers will be required to become DCC Users by 31 August 2018. The government confirmed this will not apply to specialist Industrial and Commercial (I&C) energy suppliers that have only advanced meters and no SMETS2 meters within their portfolio. If they intend to operate a SMETS2 meter at a later date, however, they must become a DCC user.

Another measure was that energy suppliers will be allowed to offer SME and larger business consumers a choice between an advanced meter and a smart meter. The government said it would review this policy before the end of 2019 to ensure it is operating effectively and that consumers are able to get the maximum benefits available to them from the roll out.

The government said the consultation response had raised no substantive issues on the draft modifications to the legal framework required to implement the removal of the DCC opt-out. The draft legal text has now gone before Parliament.

It is expected that subject to the Parliamentary process, the modifications will come into force in early June 2018.

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Policy 2 | UKERC finds “important role” for demand reduction in energy security

Research by the UK Energy Research Council (UKERC) has assessed UK energy security and suggested how it may change in the future.

It is expected that energy security will be influenced by a number of factors, including actions to reduce emissions, technological change and geopolitics – including the UK’s relationship with the EU following Brexit.

UKERC said it was particularly concerned with the synergies and trade-offs that could arise between emission reductions and energy security. It noted that it is often argued that there will be security benefits of the transition to a low-carbon energy system and agreed that benefits were likely to emerge. However, it added that low-carbon electricity systems will require new approaches to balancing and will need to be increasingly resilient to cyber-attacks.

The assessment of energy security was conducted using a “dashboard” of indicators to model different scenarios and it came to three main conclusions. The first was that there is an important role for energy efficiency and demand reduction in energy security strategies. It was found that the two scenarios with the lowest number of “red indicators” were also found to have the lowest primary energy demand, suggesting a correlation between the two factors.

The second conclusion was that the relationship between decarbonisation and energy security is “not straightforward”. UKERC noted that energy imports are often seen as being insecure, but that this can be a controversial point of view. The report argued that imports could in fact boost energy security by providing additional sources of energy, lowering costs, or by increasing diversity. Overall it suggested that it is more important to consider where the imports are from and whether they are dominated by risky sources or supply routes, rather than just the fact that they are imports.

Finally, UKERC found that the significant risks to energy security can be mitigated. It said that electricity and gas system reliability can be “improved significantly” by investing more in system flexibility. The report focused on a sub-set of sources of flexibility and found that demand side response (DSR) has a particularly positive impact on the reliability of energy systems.

Taken collectively, UKERC said that these conclusions highlighted a number of priorities for the government and other stakeholders who are responsible for ensuring the UK’s energy security. It added that as the energy system evolves, it will be vital to prioritise actions that help to improve the resilience of energy systems. This, it argued, should include a greater emphasis on energy efficiency and measures to improve diversity and flexibility, such as storage, DSR and interconnection.

The report recommended further research be done, particularly into the impacts of cyber security risks and climate change on energy security.

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Policy 3 | Sturgeon calls for clarity on Brexit impact for the renewables sector

Scottish First Minister Nicola Sturgeon has called on the UK government to “provide clarity” on what impacts Brexit could have on the renewables sector.

In a speech at the Scottish Renewables Annual Conference, held on Monday, 26 March, Sturgeon warned that if the UK government decided to leave the single market as well as the EU – which is currently the government’s stated position – it would most likely hinder the supply chain and reduce the skills base of the Scottish renewables industry. She also explained that outside of the Internal Energy Market, the UK’s influence on issues such as energy regulation and cross-border energy flows could be diminished. Sturgeon further warned that this could see the UK and Scotland lose access to EU funding.

Due to these potential issues, the First Minister said that the Scottish government believes that if the UK is to leave the EU, then it should remain in the Customs Union, the Single Market and the Internal Energy Market. This, she said, “would be the least damaging outcome of Brexit”.

Sturgeon went on to say that Brexit “increases the importance of getting on with all of our efforts to develop the low-carbon sector.” She argued that current UK policies “effectively stop new [onshore wind projects] from having a route to market”, which is “incredibly counter-productive.” Sturgeon therefore called for onshore wind to be able to compete in future Contract for Difference auction, saying it “would be good for consumers and obviously good for the onshore wind sector.”

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Policy 4 | Government sets out strategy for leaving Euratom

The Commons Public Accounts Committee (PAC) has found that the Green Investment Bank (GIB) was never able to live up to its original ambitions and suggested that there was no guarantee that it will in the future. The report, published on Wednesday, 14 March, said that this was because its green intentions were not “sufficiently protected”.

The PAC explained that since its creation in 2012, the GIB has been able to successfully attract private investment in some areas of the green economy, such as offshore wind. However, it added that BEIS has no way of assessing whether or not the GIB has achieved its intended objectives of both encouraging green investment and creating a lasting institution.

In August 2017 the GIB was sold to Macquarie for £1.6bn, and subsequently renamed to the Green Investment Group (GIG). The report was also critical of the government’s approach to selling the GIB, noting that BEIS prioritised reducing public debt and maximising the amount of money it received for the bank, rather than the continued delivery of its green objectives. The PAC added that the sale took “far longer than planned” and that the department’s approach to the process was “reactive” and meant it had to make a number of compromises.

The committee also found that the measures put in place by BEIS to protect the GIB’s green aims were insufficient and that it is unclear whether the newly branded GIG will continue to support the government’s energy policy or climate change goals.

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Industry 1 | Repowering onshore windfarms cost-effective: ECIU

Research by the Energy and Climate Intelligence Unit (ECIU) has found that repowering UK onshore windfarms would be a “highly cost-effective” way of increasing the generation of cheap low-carbon electricity.

The report, Repower to the People, published on Tuesday, 27 March, found that an estimated 750 wind turbines located across 60 UK sites will reach the end of their scheduled operation within the next five years. The ECIU report suggested upgrading these potential windfarms with the latest turbine technology would boost the UK’s generating capacity by over 1.3GW. This is expected to yield an electricity output of more than 3TWh/ year, compared to a scenario in which the turbines are decommissioned at the end of their lives.

Moreover, currently, onshore wind is the cheapest source of new electricity generation capacity. Repowering projects is expected to save consumers more than £77mn/ year on energy bills, compared to generating the same amount of electricity from gas-fired power stations. In turn this should help reduce carbon emission, dependency on fossil fuels and support effort to meet climate change targets. The electricity generated is expected to be significantly cheaper than that from current onshore windfarms, which received more generous support at a time when less-developed technology needed higher subsidies.

The report highlighted the logic behind repowering windfarms, finding that most of the earliest windfarm locations have the best wind resource. Upgrading these turbines to increase their size and efficiency allows models to operate in a wider range of wind speeds and provide greater resilience to high winds in which older units were unable to operate safely, as well as improved performance at lower speeds. The report found improvements to a 4MW wind turbine can generate up to 50% more electricity over the course of a year than a typical 3MW unit.

Jonathan Marshall, Energy Analyst at the ECIU, said: “It makes sense to repower sites of the earliest windfarms, which tend to be in locations that have the best wind resource. Existing infrastructure including network connections can also be reused or upgraded at costs lower than for new sites.”

Furthermore, repowering onshore windfarms can benefit communities through boosting UK supply chains due to higher demand for high quality steel or payments from the developer. The creation of community funds is the most common way for windfarm owners to give back to the local area with a potential pay out of more than £100mn.

Commenting, Simon Clarke, Conservative MP for Middlesbrough South and East Cleveland, said: “Upgrading our oldest wind farms with the latest technology would […] provide a market for the newly re-invigorated British steel industry, cut greenhouse gas emissions faster and, given that repowering is the cheapest way for us to expand electricity generation, reduce bills for businesses and consumers.”

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Industry 2 | Property and construction industry calls for higher environmental standards

A group of over 50 businesses from across the property and construction industry have signed an open letter to ministers calling for the introduction of a policy that would require all new buildings to be built to net-zero carbon standards by 2030.

In a statement, on Sunday, 25 March, the group, led by UK Green Building Council (UKGBC), called on the government to “swiftly confirm” that from 2020 energy performance standards will be significantly improved. The letter also asks ministers to give the industry medium and long-term policy certainty, to drive significant investment and catalyse innovation.

Julie Hirigoyen, CEO of the UKGBC, said: “We’ve heard a lot from government recently on the environmental agenda, with some impressive commitments in the Clean Growth Strategy and the 25 Year Environment Plan. Now it’s time for the government to act on those commitments, with the industry’s backing, and put policy in place to turn their low-carbon aspirations into reality.”

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Industry 3 | PSRC and ESRC announce new centre to research energy demand

The Engineering and Physical Sciences Research Council (EPSRC) has announced the creation of the UK Centre for Research on Energy Demand, which it is developing in partnership with the Economic and Social Research Council (ESRC).

The new centre, announced on Monday, 26 March, will focus on energy demand from a systemic, socio-technical perspective and aims to examine the energy demand related aspects of the transition to a secure, affordable, and low-carbon energy system.

The facility will be funded with £19.5mn from the council partnership and expected to bring together a world-leading and multi-disciplinary group of researchers led by Professor Nick Eyre, at the University of Oxford. The Centre involves over 40 academics at 13 institutions across the UK. The proposed programme of research is expected to have several themes which align with elements of the governments clean growth strategy, especially in areas such as ‘Improving Business and Industry Efficiency’, ‘Improving our Homes’ and ‘Accelerating the Shift to Low Carbon Transport’.

Professor Nick Eyre, said: “The goals of a secure, affordable, low carbon energy system are only achievable if energy demand is reduced, decarbonised and made more flexible. Understanding how these changes can happen is a major inter-disciplinary research challenge.”

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