The Informer

The cost of balancing the electricity system in recent months has been almost 40% higher than had been expected; industry bodies call for tax breaks to incentivise investment in renewables and storage; and corporate PPA growth continues.

  • Ofgem launches review after balancing costs hit record high

    A surge in balancing costs as Covid-19 measures hit electricity demand has prompted Ofgem to launch a review.

    The regulator said it wanted to identify “lessons that need to be explored further” in order to reduce future costs to consumers and is now looking for input from industry on the issue.

    Ofgem said the balancing costs on the GB electricity system from March to July were £718m, 39% higher than the system operator had expected during the period.

    “These costs increased at the same time as nationwide lockdowns changed consumer electricity consumption behaviour and reduced industrial activity,” said Ofgem in an open letter.

    It said the period also saw high levels of renewables output at times, which required the ESO to take a “large number of actions to balance the system and ensure system operability”.

    Those actions were charged to suppliers and generators via the Balancing Services Use of System (BSUoS) charges, which hit record levels.

    “Given the high balancing costs incurred this summer, it is important that we understand in more detail what happened in this period and identify whether there are lessons for the ESO to learn to manage these kinds of issues in future,” said Ofgem.

    It is planning to hold a series of virtual roundtables next month to get stakeholder views.

    Meanwhile Ofgem has approved a reduction in the cap on BSUoS charges introduced as part of its Covid support scheme to £10/MWh and has extended the measure until 25 October. Any under-recovery of revenue from the application of the cap will be recovered in 2021/22.

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  • Renewables industry calls for tax break to boost investment

    Industry organisations have joined forces to ask the Government to provide temporary tax relief to provide confidence to investors and enable shovel-ready green energy projects to start.

    Co-ordinated by Regen and the Electricity Storage Network, the trade bodies and membership organisations are calling for temporary rates relief alongside longer term reform, “to ensure clean technologies pay their fair share”.

    In a letter to the Government, the organisations argue that tax rates are regularly flagged as a barrier to deployment of clean technologies, particularly for assets that are installed behind the meter.

    “The business rates and VAT structure for clean technologies is complex and widely recognised to be in need of reform to facilitate the transition to net zero,” it said.

    The letter provides a number of examples of where the system penalises investment in renewables and storage. It said a 10 MW battery storage system installed behind the meter would face rates 400% higher than its grid-connected counterpart.

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  • Global growth in corporate PPAs continues

    The first seven months of 2020 have seen a rise in corporate PPA deals despite the impact of the pandemic.

    Figures from Bloomberg New Energy Finance showed that 8.9GW of supply agreements for renewable energy were signed in the first seven months of 2020, compared to 8.6GW in the same period last year.

    Its latest corporate energy report said although there was little change in deals in mainland Europe, there had been an increase seen in Latin America, Australia and Taiwan.

    However the report said that a fall in US activity could be a “harbinger for drops in activity elsewhere long-term” and that a “big second half” will be required in order for the market to hit record volumes by the year-end.

    Last year saw a record number of power purchase agreements for clean energy, 40% higher than 2018’s total. US corporates accounted for more than 10% of all the renewable energy capacity added globally.

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  • Clean energy target ‘should be raised after costs fall’

    The falling cost of renewable energy should see Great Britain set a target for it to meet two thirds of the nation’s electricity needs by 2030.

    Research by the National Infrastructure Commission showed that the ambitious target can be delivered at the same overall cost as meeting only half of total demand by that date.

    The Commission recommends a refreshed pipeline of ‘contracts for difference’ auctions should be set out to accelerate more offshore wind, onshore wind and solar power projects.

    It also said further work is also needed on new storage technologies, efficient interconnectors, and innovations to support renewables and ensure the security of the electricity system.

    RenewableUK’s Head of Policy and Regulation Rebecca Williams welcomed the report but said the target could be even higher.

    "The NIC is right to raise its ambition on renewables but we can go even further and even faster. Wind alone can generate more than 50% of the UK's electricity by 2030, so their new 65% target for renewables overall could go even higher.”

    Williams said the most important step that Government could take would be to lift the cap on the amount of new renewable energy capacity which can be procured in each auction.

    “This would allow us to maximise the benefits of cheap renewable power for consumers, cutting bills.”

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  • Gas from cow manure supplies UK network for first time

    Renewable gas produced from cattle manure and straw at a farm has been connected into the UK gas network for the first time.

    The biomethane, produced at Biocow’s Murrow Anaerobic Digestion Plant in Cambridgeshire, is being injected into the Gas National Transmission System and will provide enough gas to meet the annual needs of 10 average households every hour.

    Ian Radley, Head of Gas Systems Operations at National Grid said: “Alongside hydrogen, biomethane will play a critical role in the journey to Britain achieving net zero. We’ve collaborated closely with Biocow on this innovative project to ensure we met their needs and ultimately successfully connected their site to the National Transmission System; supporting the transition to a low carbon economy and paving the way for similar projects in the future.”

    Chris Waters, Managing Director of Biocow said: “This joint project with National Grid is a very important first step in Biocow’s keen commitment to continue pioneering new and innovative ways to inject green gas into the grid.”

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