Informer Issue 497 - 26/01/2021

Ofgem has recommended the full separation of the electricity system operator (ESO) role from the National Grid in a move aimed at help delivering net zero at the lowest cost to consumers.

The regulator said a new independent operator would also avoid any “perceived or real potential conflict of interest” given National Grid also owns the electricity transmission network.

A new body with additional responsibilities for running the system could save consumers up to £4.8 billion between 2022 and 2050, according to analysis by Ofgem.

Its new responsibilities would include taking a more active role in designing and planning new grid infrastructure, and providing independent advice to the Government on how best to hit its target of net zero.

Last month, the Government committed to consult on reviewing the management of the energy system and said any additional responsibilities may require greater independence from National Grid, which has managed the energy system since privatisation.

Given the scale of the net zero challenge, Ofgem said the Government should go further and consider full separation would it said would help ensure future decisions on how to manage the energy system are taken in the interests of consumers, helping to keep costs as low as possible.

Jonathan Brearley, Chief Executive of Ofgem, said: “The energy system needs to go undergo the biggest transformation in over a century to meet Britain’s ambitious climate goals."

“Ofgem is recommending the creation of an independent body to help deliver the fundamental changes in how we use energy. This would help bring forward green economic growth, accelerate our journey towards net zero and save consumers money on their energy bills.”

National Grid, which has already legally separated the electricity system operator business from the group, said it noted Ofgem’s report and said it “will continue to work closely with Government and with Ofgem over the coming months”.

“An industry structure that enables long-term thinking and allows the system operator to take on new roles as part of the energy transition is an important step in the market and regulatory reform necessary to deliver net zero."

"Significant further work is needed to determine the detail of that structure,” it said.

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A new high-voltage subsea interconnector linking the UK to France is now operating at full capacity.

The 1GW IFA2 link, which is the UK’s second with France, can import enough electricity to power a million British homes.

The cable stretches 149 miles along the seabed between Hampshire and Normandy in France and was built by a joint venture between National Grid and the French transmission system operator RTE.

Jon Butterworth, Managing Director of National Grid Ventures, said: “IFA2 is the latest feat of world-class engineering helping to transform and decarbonise the electricity systems of Britain and its European neighbours."

“We’re delighted to have been able to again work with our partners RTE to strengthen the connection between the French and British power grids. Together we are now able to help deliver cleaner, more secure, and more affordable energy to consumers at both ends of the cable.”

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Generators connected to the electricity network are being urged to apply for funding to help them carry out work to boost network resilience.

Support under the Accelerated Loss of Mains Change Programme helps generators make changes needed to avoid disconnecting too quickly in response to minor issues on the grid.

As of January 2021, around 6,000 sites, equating to 10.7GW of generation capacity - enough to power 20 million homes - have had their applications approved.

To accelerate the rate at which generators make the changes, a ‘fast track scheme’ pays generators that meet certain criteria and have a minimum capacity of 500kW an extra £5,000 if they are able to complete the work within four weeks of applying for funding.

Owner of such sites are encouraged to apply before April 2021.

Mark Dunk, Head of Engineering at Energy Networks Association which is one of the partners in the programme, said: “This vital cross-industry collaborative programme will help to make Britain’s electricity networks more resilient and help the move towards a smarter, net zero emissions grid.”

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A record £370 billion was invested by companies, governments and households on energy transition investment including renewable energy projects last year, according to new research.

The figures compiled by BloombergNEF, showed a 9% rise on the previous year despite the economic disruption caused by the Covid-19 pandemic.

New renewable energy capacity edged up by 2% during the year, helped by the biggest-ever build-out of solar projects and a surge in offshore wind.

Highlights included the largest deal ever of its kind which saw £6bn raised for the 2.5GW Dogger Bank offshore wind project in the North Sea.

Total spending on electric vehicles and associated charging infrastructure was up by 28%. Although Albert Cheung, head of analysis at BNEF, said clean power generation and electric transport were seeing heavy inflows, “they need to see further increases in spending as costs fall”.

“Technologies such as electric heat, CCS and hydrogen are only attracting a fraction of the investment they will need in the 2020s to help bring emissions under control. We need to be talking about trillions per year if we are to meet climate goals,” he said.

Europe accounted for the biggest slice of global investment, up 67%, driven by a record year for electric vehicle sales, and the best year in renewable energy investment since 2012. China saw total investment fall 12% and the US was down 11%.

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The UK Government must continue to support nuclear power if the country is to meet an expected doubling of electricity demand by 2050 while achieving its net zero ambitions, according to a think-tank.

The report from the Centre for Policy Studies (CPS) also recommends ministers explore innovative financing methods for the construction of new nuclear power plants.

It argues that the construction of at least one additional nuclear power plant would provide a significant boost to the UK's energy security while its older plants are decommissioned over the coming years. The new plant would complement Britain's booming renewables portfolio and help to manage periods of variability, it said.

The UK will have retired 14 of its 15 currently operating nuclear reactors by 2030, equivalent to to a loss of 7.7 GW of generating capacity. The construction of Hinkley Point C in Somerset will replace some of the shortfall but the report warns "there is a risk that without more capacity, the UK will have to prolong its dependence on fossil fuels - which would exacerbate climate change."

The construction of another nuclear power plant would also retain the existing pipeline of skills and expertise which will be required to develop future nuclear technologies, such as small modular reactors (SMRs) or fusion reactors, according to the CPS study.

The report also urges a change in how nuclear power plants are financed.

"The nuclear industry does not believe the current arrangements are suitable for attracting the sums of capital they need to get projects off the ground," it says.

To support the development of new nuclear plants, the report recommends exploring financing methods such as the Regulated Asset Base model which would allow developers to charge consumers a set amount before electricity generation commences.

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