The Informer

This week’s headlines: network companies will have to operate on lower returns when the next price control period starts in 2023; the energy industry has called on Prime Minister Boris Johnson to act swiftly to live up to his promises following the election result; smaller players can now access the Balancing Mechanism; and the last coal-fired power station.

  • Ofgem confirms tougher price controls

    Ofgem has confirmed plans to lower returns for distribution network operators in a move it said will reduce bills but still attract the investment needed in decarbonisation.

    The regulator said the RIIO-ED2 price control starting from April 2023 would drive network companies to go further by delivering a “decarbonised, safe and resilient network” at a lower cost to consumers. Ofgem said it is continuing to develop its approach to some of the key challenges facing the networks including how the price control can enable companies to meet new sources of demand such as electric vehicles as well as making better use of flexible solutions such as storage or demand-side response options to shift consumption during periods of high demand.

    It will be consulting on its detailed sector specific methodology for the price control, which set the revenue network owners can earn from charges on bills, next summer.

    Cathryn Scott, acting Executive Director for Systems and Networks at Ofgem, said: “As we decarbonise our society and economy we will increasingly rely on renewables to generate the electricity to power the country, our vehicles and potentially heat our homes too. Electricity distribution networks will be crucial to making this transition to a smarter, net zero emissions economy."

    “Ofgem’s stable and predictable regulatory regime will allow companies to attract the investment they need to go further in decarbonising the system whilst saving consumers money by keeping returns as low as possible.”

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  • Energy sector urges action after election result

    Britain’s energy industry has welcomed re-elected Prime Minister Boris Johnson’s pledge “to make this country the cleanest, greenest on earth, with the most far-reaching environmental programme” and called on him to follow through on the Conservatives’ green manifesto promises.

    Audrey Gallacher, Energy UK's Interim Chief Executive, said: “While Brexit will continue to dominate the political agenda – and there will be important issues to now focus on as we look to the future relationship with Europe – we must also quickly break the hiatus in energy policy, therefore it is welcome to hear the continued commitment from the Prime Minister to delivering net-zero emissions by 2050.”

    The Renewable Energy Association added: “The new UK Government must be more ambitious and commit to wholesale systems change across energy, in particular for transport and waste, required to unleash the full potential of renewable energy and clean technology.”

    But Claire Mack, Chief Executive at Scottish Renewables, warned: “Our industry still lacks the clarity it needs to progress in key areas: onshore wind and large-solar PVs’ access to the energy market, the future of renewable heat and a plan for small-scale renewables, among others.”

    And RenewableUK Chief Executive Hugh McNeal added: “The voters have sent a clear signal that climate action must be a top priority, and the eyes of the world will be on the UK this year as we host the United Nations global climate summit, so this UK Government must take urgent action to get the UK on track for net zero.”

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  • Balancing Mechanism access widened

    National Grid Electricity System Operator (ESO) has removed barriers to let a wider range of technologies and providers take part in the Balancing Mechanism (BM).

    The minimum threshold for participation has been lowered to 1MW from 100MW.

    Providers can now register in the BM as a “virtual lead party” – a new type of market participant that can provide balancing services without needing a supply licence or to pay “use of system” costs – and create secondary BM units to offer flexibility to the grid.

    Richard Smith, Head of Commercial at National Grid ESO, said: “Our electricity system in Great Britain is changing; we’re making it smarter and more flexible as we shift away from traditional large thermal power generation to cleaner, decentralised power."

    “This transformation is central to the way we balance the system today, as we continue working towards being able to operate carbon free by 2025.”

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  • Yü Energy and SmartestEnergy Announce Supply Agreement

    UK business energy supplier Yü Energy have agreed a new supply agreement with SmartestEnergy.

    The deal will see Yü purchase power exclusively from SmartestEnergy at transparent and competitive prices over a five-year time-frame.

    The arrangement also has the benefit of freeing up cash flow for Yü, who will be provided with a credit line worth up to £13m, with the potential to grow in line with the business.

    Bobby Kalar, Chief Executive Officer of Yü Group, commented: “This agreement means we no longer have a need to tie up our cash and instead use our position to unlock new opportunities whilst scaling our customer base."

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  • Last coal powered plant in Wales closes

    RWE has closed its Aberthaw power station in the Vale of Glamorgan, the final coal-fired plant in Wales.

    The station will be decommissioned by the end of March 2020, with around 170 jobs expected to be lost.

    RWE announced in August that the closure date was being brought forward from 2021.

    At the time, the company said it would transfer Aberthaw’s Capacity Market agreements for the years 2019-2020 and 2020-2021 to third parties and a small proportion to other units within its own fleet.

    The UK is due to end the burning of coal to produce electricity by 2025.

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