The Informer

Energy demand is continuing to recover after the easing of lockdown measures; Ofgem said a fine of over £2m should serve as a warning to the industry over complying with rules on wholesale energy markets; and plans to slash returns for network operators could heighten the risk of blackouts and hinder net zero progress according to National Grid.

  • Energy demand recovers as lockdown eases

    Power demand at the beginning of August returned to levels similar to those before lockdown measures came into force, according to new data.

    Electricity demand fell sharply after the UK Government began implementing measures, but since they began to be relaxed in July demand began to recover and in August began reaching levels similar to this time last year, according to consultancy Cornwall Insight.

    As well as factors including the re-opening of businesses, warmer weather causing higher demand for air conditioning and cooling was also cited.

    Cornwall said energy demand for the remainder of the year is likely to remain similar to levels seen last year, but cautioned that making firm predictions is difficult given the potential for new lockdown measures.

    James Brabben, wholesale manager at Cornwall Insight: "The warm weather spell in early August can explain some of the recent rise as this will have likely caused a higher demand for air conditioning and cooling. However, there is a clear overall trend of demand recovery from the previous lows experienced in the GB market."

    Although many workers are still not returning to offices, that could actually see overall demand increase.

    "Even if many employees choose to work from home, our modelling suggests that demand may be boosted further by workers not returning to office environments. This is because lighting and heating used in households are typically far less efficient than in businesses,” said Brabben.

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  • Ofgem sends ‘strong message’ with £2.06m fine

    Ofgem has fined SSE £2.06 million for failing to publish inside information in a timely manner about the wholesale energy market in a move it said sends a strong message to the industry over complying with rules.

    The fine is the first of its kind to be levied under the EU’s Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) which says market participants must publish ‘inside information’ which is likely to significantly affect prices in an ‘effective and timely’ manner.

    Ofgem’s investigation centred around a ‘Black Start’ agreement with National Grid for SSE’s Fiddlers Ferry power station.

    The investigation found that whilst the company did consider whether it was in possession of inside information, “it failed to reach the correct conclusion and publish on that date”.

    However, Ofgem said it did not find evidence that SSE acted in bad faith and said it fully co-operated with its investigation. By settling the investigation early, the company qualified for a 30% discount on the proposed penalty.

    Martin Pibworth, SSE’s Energy Director, said: “SSE takes its market disclosures extremely seriously and acted in good faith, publishing details of the ‘Black Start’ contract for Fiddlers Ferry power station once signed, in line with our interpretation of the REMIT regulations at the time.

    “SSE did not benefit from disclosing only once the contract was signed and remains committed to clear and transparent rules for all market participants. We will be pressing regulatory authorities for additional guidance.”

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  • National Grid warns over network investment cuts

    National Grid has warned that Ofgem’s proposals to cut network spending could raise the risk of blackouts and delay progress towards net zero.

    In its response to Ofgem’s RIIO-2 price control draft determination, the company argues the overall package is “unacceptable” and not in the interests of consumers.

    Other network operators including Scottish and Southern Energy Networks (SSEN) and ScottishPower Energy Networks (SPEN) have also strongly criticised the proposals.

    In its formal response to the consultation on Ofgem’s plans, which would see the rate of return on network investments almost halve from April 2021, National Grid said they would jeopardise its ability to “maintain resilient and reliable networks and endanger the critical investment required to put the UK on the path to meet net zero targets”.

    It also said surveys of consumers, performed by an independent body, showed their preference is for investment in reliability and net zero above short-term bill reductions. Other network companies have also strongly criticised the proposals.

    However, the regulator maintained that the reforms will not threaten the UK’s net zero ambitions and said that the new rates of return would bring the energy sector in line with similar sectors such as water.

    “Investment in energy infrastructure comes from consumers’ bills, so we expect companies to run themselves efficiently and accept lower returns in line with current market conditions,” said Ofgem.

    A final decision on the spending controls will be made by Ofgem in December.

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  • Solar now world’s fourth largest energy source

    Solar PV dominated new power generation capacity last year with a record 118GW installed across the world, according to figures from BloombergNEF.

    The investment means solar is now the fourth largest power source on the planet, behind coal’s 2.1TW, 1.8TW of gas and hydro’s 1.2TW.

    The report found that solar and wind together accounted for 67% of new capacity added globally in 2019, while fossil fuels fell to 25%, according to BNEF’s new Power Transition Trends 2020 report.

    BNEF Analyst Luiza Demôro said PV is now “truly ubiquitous and a worldwide phenomenon”.

    “Sharp declines in solar equipment costs, namely the modules that go on rooftops and in fields, have made this technology widely available for homes, businesses and grids,” she said.

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  • New nuclear costs could be slashed by 30%

    The cost of building new nuclear plants could be cut by 30% by 2030, according to an industry report.

    The UK's Nuclear Industry Association (NIA) said rigorous pre-construction planning, simpler design and construction and using the same skilled and experienced workforce on different projects would help reduce costs.

    The report was produced by a cross-industry team, working as part of the government-backed Nuclear Sector Deal. The report also says a new financing model that controls construction risk will also bring down consumer costs by attracting a wider pool of investors and cutting the cost of capital.

    UK Minister for Business and Energy Nadhim Zahawi said: " New nuclear will play an important role as we reach our net zero target by providing reliable, low carbon power as part of our future energy mix."

    Chief Executive of the Nuclear Industry Association Tom Greatrex said: "This report demonstrates that the upfront costs can be tackled effectively by bearing down on construction complexity and risks, and by tackling unnecessarily high financing costs."

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