Informer Issue 556 - 12/07/2022

Ofgem is to look at the potential benefits of local or regional wholesale electricity pricing as part of a range of options to reform the energy market. In a discussion paper, the regulator said significant changes are required to make the transition to a net zero energy supply at the lowest cost to customers and that reforming wholesale markets could save customers billions of pounds. Potential reforms to the market also include limiting the price-setting potential of natural gas, and using pricing signals to run the system more efficiently and save customers billions of pounds collectively on their energy bills. Jonathan Brearley, Chief Executive of Ofgem, said: “The economics of energy have fundamentally changed with green energy no longer a desirable but costly alternative, instead, it is now the secure, more reliable, and cheaper option. “This discussion paper sets out potential reforms to the energy system so customers can benefit from more affordable, homegrown and renewable energy. We’ll now continue our work with BEIS and other stakeholders to further develop proposals." Read more

The Government’s plans for the biggest reform to the energy system in a decade have taken an important step forward. The Energy Security Bill, which aims to accelerate the transition to a cleaner, affordable, home grown energy system, has been introduced into parliament. Business and Energy Secretary Kwasi Kwarteng said the bill will help drive an “unprecedented” £100 billion of private sector investment by 2030 into the energy system, including hydrogen and offshore wind projects. Kwarteng said: “To ensure we are no longer held hostage by rogue states and volatile markets, we must accelerate plans to build a truly clean, affordable, home-grown energy system in Britain. “We’re going to slash red tape, get investment into the UK, and grab as much global market share as possible in new technologies to make this plan a reality.” Measures being introduced include those to support the deployment of low carbon technologies at scale such as carbon capture, usage and storage (CCUS) and hydrogen. Other new powers will enable the extension of the energy price cap beyond 2023. Ofgem will also be appointed to oversee regulation of the heat networks market to ensure consumers are charged a fair price. Read more

Drax has agreed to keep its last two coal generation units operating this winter to help boost security of supply. The two plants at its site in Yorkshire were scheduled to close in September but will remain available if needed following a request from Energy Secretary Kwasi Kwarteng. Kwarteng said the decision was a "sensible precaution". "With Russia cutting off gas to parts of Europe, this is a sensible precaution back home. As Energy Secretary, I have a responsibility to ensure we have enough supply this winter." Drax said the units will not generate commercially for the duration of the agreement and only operate if and when instructed to do so by National Grid". The generator will be paid a fee and compensated for costs under the arrangement. In a stock market update the company said its profits were now likely to be “slightly above the top of the range of analyst expectations”. EDF has already agreed to keep a site in Nottinghamshire open this winter. Read more

A new approach to support growth in offshore wind could save consumers £5.5 billion in costs by 2030 compared to connecting projects individually. National Grid ESO has published a ‘Pathway to 2030’ report which looks at how electricity networks can meet growing consumer demand, while enabling the Government’s ambitions for 50GW of offshore wind by 2030. The ESO said the network design plans would be one of the largest investments in critical electricity transmission networks since the 1950s and 60s. The plans co-ordinate design for offshore and onshore transmission infrastructure to transport 23GW of offshore wind. The next step will be a detailed network design and consenting process to determine technology choices, transmission routes and where substations and converter stations will be located. Read more

The latest round of the CfD scheme has seen almost 11GW of renewable energy capacity secured, close to double the figure from the previous auction. The contracts under the fourth round of the CfD scheme include almost 7GW of capacity from offshore wind projects, but the Government said the round also delivered energy from a greater number of technologies than ever before. Onshore wind and solar energy were both included for the first time since 2015. The fourth round also saw tidal stream and floating offshore wind projects successful. Overall, 93 projects with existing planning permission across England, Scotland and Wales won contracts, which is more than in all 3 previous rounds combined. Business and Energy Secretary Kwasi Kwarteng said: “The more cheap, clean power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills. “Thanks to this record renewable energy auction, we have secured almost 11GW of clean, home-grown electricity – which would provide as much power as around 6 gas fired power stations.” RenewableUK’s Deputy Chief Executive Melanie Onn said: “Thanks to the rapid construction times of renewables, billpayers will start to feel the benefits of this auction next year. “The auction also showed that the UK is maintaining its position as a world leader in innovative renewable energy technologies like tidal stream and floating wind, which will both play an increasingly significant role in our transition to clean power to meet our net zero goal.” Read more