Informer Issue 552 - 14/06/2022

A windfall tax on electricity generators could increase costs for homes and businesses and risk delivery of the Government’s energy security strategy, an industry body has warned. Responding to speculation of a levy being extended from the oil and gas sector, Energy UK also stressed that generators are ready to deliver billions of pounds of investment to help the UK reach its climate change targets and reduce dependence on the fossil fuel prices. Adam Berman, Deputy Director of Energy UK said: “We need to make investment in cheap, clean, domestic generation easier – not harder – and with electricity demand set to double by 2035, a windfall tax would jeopardise our pathway to energy security, Net Zero, and reliable low-cost electricity.” The organisation said investments made to date by generators have helped transform the UK energy system to a point where the majority of the UK’s electricity comes from low carbon sources. It pointed out that following the Government’s announcement that they were considering a windfall tax on generators, over £4bn has been wiped off the value of key electricity generators. “This has a direct impact on the private sector’s ability to invest in crucial new energy infrastructure,” it said. Read more

The UK’s largest natural gas storage site – Rough – could reopen to help bolster security of supply. Centrica has submitted a formal application to the North Sea energy regulator to reopen the huge site, five years after it was closed for economic reasons. Rough, which is located 18 miles off the east coast of Yorkshire, used to account for 70% of Britain’s natural gas storage capacity. Centrica said it was in exploratory discussions with the Government over the potential for the site to help improve gas security. Rough could store about 10 days’ worth of supply. Although the Government has stressed that a gas shortage in the UK is unlikely, it is exploring options to improve energy security ahead of this winter. Read more

The cost of turning off wind power in the UK has reached record levels, according to a new report. The report by LCP, commissioned by Drax, found that over the last two years curtailing wind power added £806m to energy bills in Britain. It said rising gas prices made the practice more expensive, as gas power stations were increasingly used to support the system when wind power was curtailed due to constraints in the transmission system and a lack of long-duration storage capacity. The report said the curtailment costs could be significantly reduced if more energy storage was available. Chris Matson, Partner at LCP, said: “Increasing the output from wind power is essential for the UK to achieve its climate targets and ensure energy security. “And yet because investment in the infrastructure needed to support this expansion has not kept pace, wind curtailment is costing the consumer and the environment. Every pound spent on curtailing wind power is a pound wasted.” Read more

Ever increasing power prices forecasted up to 2044 underline the need to build confidence for investment in renewable energy and deliver a stable and secure energy future, according to a new report. The report, by Cornwall Insight and law firm Womble Bond Dickinson, shows that although the UK government is in a good position to become a global leader in decarbonising its economy, it must tackle a number of key problem areas if it doesn’t want to miss targets. These include strengthening domestic supply chains to boost economic growth and engaging with local communities to roll-out renewable technologies such as onshore wind and solar. The UK also needs to exploit first mover advantage for low-carbon hydrogen and CCUS by providing clarity on business-friendly models for new technologies to allow industries and investors to make investment decisions. Naomi Potter, Lead Research Analyst at Cornwall Insight, said: “The UK is already a global offshore wind leader, has some clear competitive advantages in the development of floating technologies at scale, and is paving the way to utility-scale low carbon hydrogen and CCUS. “There are critical challenges facing the country as it pushes forward with its decarbonisation ambitions. These challenges are not insurmountable, however, and building on its strong foundations, the country can make significant strides towards environmental sustainability and energy independence, while unlocking investment opportunities.” Read more

Network companies need to do better to prevent power disruptions and get customers reconnected quicker after major incidents, regulator Ofgem has said. In a report into what went wrong during Storm Arwen, when nearly a million lost power in November, Ofgem said network staff “worked hard in challenging circumstances” to get customers reconnected. But it concluded that thousands of customers were provided with an unacceptable service. Some remained off power for extended periods, received poor communication from their network operator and compensation payments took too long. Jonathan Brearley, chief executive of Ofgem, said: “The frequency of extreme weather events is only set to increase so it is really important that industry, and those involved more widely, learn from Storm Arwen to better respond in future.”
Key recommendations from the review include network operators submitting winter preparedness plans to Ofgem so the regulator can be assured they have taken the necessary steps to ensure that all customers, especially vulnerable customers, can be supported effectively during power disruptions.
Network operators should also stress test their websites and call centres to ensure adequate capacity during severe weather events. Read more