Informer Issue 546 - 18/01/2022

Rising electricity demand over the next three years could see continued high prices and market volatility, according to a new report. The International Energy Agency (IEA) said the 6% rise seen in global demand in 2021, driven by the rapid economic rebound and more extreme weather conditions, was the largest since 2010 when the world was recovering from the financial crisis. Without faster structural change in the sector, rising demand over the next three years could result in additional market volatility and continued high emissions it warned. IEA Executive Director Fatih Birol “Sharp spikes in electricity prices in recent times have been causing hardship for many households and businesses around the world and risk becoming a driver of social and political tensions. “Policy makers should be taking action now to soften the impacts on the most vulnerable and to address the underlying causes. Higher investment in low-carbon energy technologies including renewables, energy efficiency and nuclear power – alongside an expansion of robust and smart electricity grids – can help us get out of today’s difficulties.” Meanwhile, think-tank the Institute for Government has warned the current cost-of-living crisis, largely driven by energy price rises, is the "most immediate threat" to the UK's delivery of its long-term climate targets. Read more

An auction of seabed plots for offshore wind projects in Scotland will see 17 projects with a potential capacity of 25GW move forward. The capacity is two and a half times that of the UK’s current offshore wind projects, and an industry leader said it signalled the start of a new era for the sector. The ScotWind leasing round staged by Crown Estate Scotland was the first for a decade and saw £700m raised for the Scottish Government. The auction attracted more than 70 bids from across the world. RenewableUK’s Deputy Chief Executive Melanie Onn said “This announcement marks the start of a new era for the UK’s world-leading offshore wind industry. ScotWind represents one of the country’s biggest ever steps towards net zero.” Scotland has 1.9GW of operational offshore wind, and another 8.4GW in construction or advanced development. Claire Mack, Chief Executive of Scottish Renewables, said the potential for 17 new projects “creates huge ambition for our sector to deliver on”. “The scale of commitment to Scotland’s supply chain outlined alongside today’s announcement creates an incredible platform for industrial transformation and revitalisation.” Read more

Energy suppliers are to receive more than £39m from renewable generator under the Contracts for Difference (CfD) scheme as high prices continue. It is the first time since the mechanism was launched that the scheme will return money to electricity suppliers. Under the scheme, generators have, to date, received top-up payments to the strike price they are paid for the electricity they generate. However, the scheme is designed to work two ways, with CfD generators paying money back when market prices rise beyond their strike price. Given the high wholesale prices during the latter half of 2021, the Low Carbon Contracts Company (LCCC) reduced the CfD interim levy rate (ILR) to £0/MWh in September. The first full week of net negative generator payments followed during that month and the ILR has remained at £0/MWh since 14 September 2021 and throughout the latest quarterly obligation period (QOP) of 1 September – 31 December 2021. Given the ongoing high wholesale prices, the ILR has also been set at £0/MWh for the current quarter, and LCCC is currently forecasting another net payment to suppliers in the next quarterly reconciliation. Read more

Greater domestic flexibility can significantly cut peak electricity demand, according to the results of a trial project. The Crowdflex project, run by SSEN Distribution, National Grid ESO, Octopus Energy and Ohme, looked at how 25,000 households responded to price signals by reducing or increasing electricity demand. The project found that customers on time of use tariffs saw reductions of up to 23% in the proportion of their daily demand consumed during the evening peak. The project partners are now hoping to undertake future trials to investigate the reliability, consistency and the cost of domestic flexibility. Geoff Down, Innovation Manager, National Grid ESO, said: “System flexibility is vital for future system operation and we’re encouraged to see that engaged consumers can, by participating in time of use tariffs, help manage and reduce peak electricity demand.” "With the use of low carbon technologies in the home set to grow rapidly, this project helps us understand the exciting opportunities for us in the future.” Read more

Flexibility is one of the key priorities set out by Britain’s energy networks for the year ahead. Key tasks identified by the network companies in their work plan and priorities for the Open Networks programme this year include delivering a common framework for flexibility services. They are also looking to adopt a revised and “more collaborative governance approach” to work more closely with the industry in delivering the programme. The priorities also include further progressing whole energy system work across gas and electricity networks to address key strategic industry challenges in the move to Net Zero. Farina Farrier, Head of Open Networks at Energy Networks Association, said: “With around 3GW of flexibility available for tender in Great Britain in 2021, the programme’s work has helped the UK to establish world leading local flexibility markets, and in 2022 we aim to deliver key actions from Government’s Smart Systems and Flexibility Plan. “It will be another busy but productive year as we get a step closer to Government’s 2035 clean energy source target for UK's electricity and the ultimate goal of Net Zero, and we look forward to rising to the challenge.” Read more