The Informer

This week’s headlines: the regulator’s proposals to dramatically cut returns for network companies to deliver a ‘fairer’ energy system have been attacked; huge growth in offshore wind has helped investment in renewable energy capacity remain resilient so far this year; and the Chancellor unveils a series of measures aimed at stimulating a green recovery.

  • Ofgem’s network overhaul plans come under fire

    Ofgem’s proposals to slash returns for network companies in the next price control period have come under fire from the industry.

    The regulator said the plans to cut returns to an “unprecedented low level” would deliver a “greener, fairer energy system for consumers”, cut bills and support £25bn of investment.

    The proposals nearly halve network companies’ allowed rate of return, which Ofgem said would £3.3bn over the next five years for gas and transmission sectors alone. In addition it is proposing to cut over £8bn from companies’ spending plans by setting them stretching efficiency targets and disallowing costs it said companies have not justified as delivering value for money for consumers.

    Responding to the announcement on the draft RIIO-2 price controls, RenewableUK’s Head of Policy and Regulation Rebecca Williams described it as a “missed opportunity” to encourage investment in grid infrastructure.

    However, she said proposals to build more flexibility into price controls by using a net zero “re-opener” mechanism to accommodate new technologies such as renewable hydrogen, as well as boosting innovation funding more widely, could unlock benefits for consumers.

    National Grid said it was “extremely disappointed” with the draft determination.

    “This proposal leaves us concerned as to our ability to deliver resilient and reliable networks, and jeopardises the delivery of the energy transition and the green recovery,” it said.

    The final determination is expected in December ahead of the price controls coming into effect in 2021.

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  • Investment in renewables holds up despite Covid-19

    Investors continued to support new renewable energy projects in the first half of 2020 despite the unprecedented economic shock caused by the coronavirus, according to new figures.

    The overall tally was heavily influenced by the busiest half year ever for final investment decisions in the offshore wind sector, more than offsetting declines in investment in solar, onshore wind and biomass.

    Offshore wind financings totalled $35 billion, up 319% year-on-year and well above 2019’s record full-year figure of $31.9bn, according to the figures compiled by research company BloombergNEF.

    Major decisions during the period included the green light for the UK’s 1.1GW Seagreen project.

    Overall investment in new renewable energy capacity (excluding large hydro-electric dams of more than 50MW) was $132.4bn in the first half of 2020, up 5% from a revised $125.8bn in the same period of 2019. Onshore wind investment slipped 21% to $37.5bn, while that for solar fell 12% to $54.7 billion.

    Angus McCrone, chief editor at BNEF, said that a clearer picture of the impact of Covid-19 on green energy investment will come with the full-year 2020 figures. “Renewables have been helped by vastly improved competitiveness and by investor appetite for assets offering secure cash flows."

    “However, project developers face the challenge that key people, whether at the permitting, financing or construction stages, can’t meet face-to-face. And buyers of small-scale solar systems are sensitive to changes in consumer confidence.”

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  • Mixed reaction to green recovery measures

    Funding to improve energy efficiency in public sector buildings and to back early-stage flexibility technologies were among a series of measures announced by Chancellor Rishi Sunak in his summer economic update.

    Some £1 billion will be spent on a Public Energy Fund to decarbonise public sector buildings and social housing and £2bn has been earmarked for a new green homes grant which will cover two-thirds of the cost of energy-saving home improvements.

    Sunak said the measures will reduce the UK’s annual greenhouse gas emissions by half a megaton and create more than 140,000 full-time-equivalent roles.

    Environmental Audit Committee chair Philip Dunne MP said the measures showed that “calls to the Government on greening the economic recovery seem to have resonated.”

    “It is imperative this momentum is built upon in the Budget and Comprehensive Spending Review this Autumn, particularly as time is running out to make lasting policy decisions that will ensure the UK leads by example at COP26 and meets its own legal commitment of net-zero carbon emissions by 2050.”

    But Greenpeace UK’s Rosie Rogers said the funding packages fell well short of what was needed: “Of course this money is better than nothing, but it doesn’t measure up to the economic and environmental crises. It’s not enough to create the hundreds of thousands of new green jobs that are needed,” she said.

    Meanwhile, the long-awaited energy white paper from the Government will “hopefully” be published this Autumn, according to Energy Secretary Alok Sharma.

    The paper was originally due to be published last Summer but has suffered a series of delays.

    Sharma said he had received important feedback on committing to a green recovery and that “some very concrete ideas” had emerged which will help shape the Government’s work.

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  • UK renewables pipeline stands at more than 60GW

    The UK has a pipeline of shovel-ready renewable energy and battery storage projects that could provide hundreds of thousands of jobs and contribute over £125 billion to the green economic recovery, according to research.

    Energy advice organisation Regen said its figures showed the “huge scale of the opportunity” to drive reductions in carbon emissions across the energy sector, whilst kickstarting the economy and creating valuable jobs across the country.

    It said falling costs of renewables and storage means that the 61GW pipeline of green electricity projects can be developed quickly through private sector investment, allowing public investment to be focused on other green policies targeting hard-to-decarbonise sectors.

    Regen is calling to put in place policies to remove barriers and unlock these clean electricity projects including committing to annual Contracts for Difference auctions to give investors confidence and ending the “anti-onshore wind policies” in the English planning regime.

    In a separate report, industry body RenewableUK said lifting the capacity caps for the 2021 CfD auction could help facilitate 11GW of new onshore and offshore wind which would unlock £20bn of investment and 12,000 new jobs.

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  • Next generation nuclear technology wins £40m backing

    Projects focused on developing the next generation of nuclear energy technology have secured £40m backing.

    The funding will support three advanced modular reactor (AMR) projects. AMR sites are smaller than traditional nuclear plants and use intense heat generated in nuclear reactions to produce low-carbon electricity.

    The projects are located in Oxfordshire, Cheshire and Lancashire.

    Minister for Business and Industry, Nadhim Zahawi, said: "Advanced modular reactors are the next step in nuclear energy and have the potential to be a crucial part of tackling carbon emissions and climate change."

    "This investment will immediately create new jobs in Oxfordshire, Cheshire and Lancashire. But through this vital research, the technology could also create thousands more green collar jobs for decades to come."

    The remaining £10m will also be invested in the nuclear industry, including £5m for start-ups developing new ways of making advanced components for the sector.

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