Informer Issue 487 - 10/11/2020

Ofgem has reported a £105m shortfall in the Renewables Obligation buy-out fund for 2019-20 after 33 suppliers failed to pay the full amount due by the latest deadline.

The deadline for suppliers to make late payments was 31 October and Ofgem will redistribute payments received before 1 January 2021, including interest levied.

The RO requires suppliers to source a proportion of the electricity they supply from renewable sources.

Obligation levels for 2019/20 are 0.484 ROCs per MWh of electricity supplied to customers in England, Wales and Scotland.

Suppliers were able to meet their obligations by presenting ROCs or making a buy-out payment of £48.78 per ROC. Suppliers received approximately £5.02 for each ROC they presented.

Last month Ofgem issued three suppliers with final orders compelling them to pay £15m in outstanding payments to comply with the RO and Feed-in Tariff (FIT) schemes.

Shortfalls in the late payment fund for the RO scheme will trigger mutualisation if the relevant threshold is met.

Suppliers who have complied with their obligations will be required to make up the shortfall.

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National Grid ESO last week issued an Electricity Margin Notice to encourage generators to increase output to boost its buffer of spare capacity.

It stressed that while it had enough generation to meet demand, it would like a “larger cushion”.

The system operator later withdrew the notice after it said its buffer had been "restored to an adequate level".

“Our forecasted margins for the next few days are sufficient. We'll continue to monitor the situation and share any relevant updates,” the system operator said on its Twitter account.

The ESO stressed the notice was a “routine signal that we send to the market to indicate that we’d like a larger cushion of spare capacity and we're continuing to explore measures to further increase our buffer”.

Ahead of one weekend in October, the ESO had also warned of tighter margins than usual due to a combination of low wind and generator outages.

Meanwhile, National Grid ESO has announced contracts worth a total of £84m with six providers to provide Black Start services – to help the system recover from a total blackout - in the South West and Midlands.

The contracts are the first time the system operator has used a competitive tender for the services.

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The launch of the UK’s first green bond to invest in projects including low-carbon renewables infrastructure will help accelerate the push to net zero, according to the Government.

Chancellor Rishi Sunak said the new bonds will help back finance much-needed infrastructure investment and create green jobs across the country.

Sunak said the bonds, the first of which will be launched next year, would help ensure the UK “continues to lead the world in pioneering new technologies and shifting finance towards a net zero future”.

The bonds will enable the Government to borrow money at low interest rates while providing stable, long-term income streams to investors such as pension funds. A report from the International Renewable Energy Agency earlier this year said green bonds form a key link between capital providers and renewable energy projects to speed up decarbonisation.

The Government has also announced that major companies will have to disclose the risks they face from climate change by 2025, including areas such as emissions from energy use, from 2025.

Carsten Jung of the IPPR think tank, urged the Government to go further, arguing firms should also be forced to set binding targets for emissions reductions. Climate risk disclosure rules should also include Scope 3 emissions disclosures for company supply chains and products sold he said.

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Ofgem has said the system operator’s engagement with stakeholders over Project Terre, which aims to boost security of supply through the creation of a Europe-wide balancing market, has been “below our expectations”.

It its open letter, Ofgem noted that industry stakeholders have expressed “frustration at the delays, lack of certainty regarding the implementation timelines and the level of engagement they’ve received from the ESO”.

“Stakeholders have stated that they have not had sufficient clarity to plan the necessary updates to their own systems and that this is leading to increased costs and uncertainty.”

It has set out a series of steps for the ESO improve its approach to the implementation including bringing together all interested stakeholders to consider, plan and address outstanding details through the creation of a dedicated group.

Project TERRE – the Trans-European Replacement Reserve Exchange – has been launched by transmission system operators (TSOs) from eight European Countries to create a replacement reserve balancing product.

The Czech Republic was the first TSO to be connected to the platform on 6th January this year, with other TSOs to connect at future dates.

In September, the ESO published an update stating that go-live for TERRE will not be achieved before early December at the earliest.

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Construction work has got underway on a cutting-edge facility which aims to store excess electricity on a far larger scale and for longer than existing batteries.

The 250MWh CryoBattery energy storage facility near Manchester, being developed by Highview Power and Carlton Power, is scheduled to enter commercial operation in 2023.

The project features cryogenic energy storage technology which utilises air liquefaction, in which ambient air is cooled and turned to liquid at -196 degrees Celsius. The liquid air is stored at low pressure and later heated and expanded to drive a turbine and generate power.

The facility will generate income from arbitrage, grid balancing, the Capacity Market, and ancillary services such as frequency response and voltage support.

Highview Power chief executive Javier Cavada said: “Our facility will deliver much needed clean, reliable and cost-efficient long duration energy storage to the National Grid."

“The CryoBattery will help the UK to integrate renewable energy and stabilise the regional electrical grid to ensure future energy security during blackouts and other disruptions.”

In June, Highview Power was awarded a £10m grant from the UK Department for Business, Energy & Industrial Strategy to build the facility.

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