Informer Issue 580 - 10/01/2023

Support for non-domestic energy customers amid high prices is to cut from April. A new scheme being introduced by the UK Government will provide help until March 2024. Under the Energy Bills Discount Scheme (EBDS), eligible businesses, public sector organisations and charities will benefit from a per-unit discount on bills. A discount of up to £19.61/MWh hour for electricity and £6.97/MWh for gas will be automatically applied. The discount will be applied if wholesale prices are above a price threshold of £302/MWh for electricity and £107/MWh for gas. The discount is calculated as the difference between the wholesale price associated with an energy contract and the price threshold. The Government said the scheme will cost up to £5.5bn, less than a third of forecast costs for the current support package. It said it had been clear that current levels of support were time-limited and intended as a bridge to allow businesses to adapt, and that the EBDS strikes a balance between supporting businesses and limiting taxpayer’s exposure to volatile energy markets. However, Shevaun Haviland, Director General of the British Chambers of Commerce, said: “Despite Government efforts, an 85% drop in the financial envelope of support will fall short for thousands of UK businesses who are seriously struggling. “While we welcome the 12-month duration of this package, its value is nowhere near far enough and means that for some firms, energy will now be a cost too far.” Read more

New multi-year contracts could be offered to demand side response and smaller-scale electricity storage are among proposed changes to the Capacity Market unveiled by BEIS. The Government said the moves would support the move towards “delivering secure, clean and affordable British energy in the long term” by incentivising more low carbon investment. Steps will also be taken to improve the mechanism’s ability to deliver security of supply by reforming the approach to performance testing to ensure confidence as early as possible in the winter that capacity is available. The non-delivery penalty regime will also be strengthened to send a clear signal that capacity must deliver in times of electricity system stress. Energy and Climate Minister, Graham Stuart, said the plans set out will deliver reliable energy and “ensure the scheme that sits at the heart of Britain’s energy security is fit for the future”. RenewableUK’s Chief Executive Dan McGrail said the consultation was an important step forward in moves to decarbonise the electricity system completely by 2035. “We need to incentivise more investment in new low carbon flexibility in our modern energy system based on renewable technologies including wind, solar, tidal stream and green hydrogen. “This will strengthen the UK’s energy security, enabling us to move closer towards energy independence in the years ahead.” Read more

Wind farms generated a record contribution to Great Britain’s energy mix in 2022, according to new figures from the system operator. Onshore and offshore projects accounted for just under 27% of generation, compared to around 22% in 2021. National Grid ESO said a number of other records had been broken during the year as the electricity grid continued to decarbonise. The year also saw the first time wind generation provided over 20GW of electricity and the lowest carbon intensity month since records began in February. Zero carbon electricity sources contributed over 50% of supply in February, May, October, November and December and 48.5% of the electricity used in total over the year compared to 40% from gas and coal power stations. The use of coal has continued to decline, responsible for only 1.5% of generation in 2022, compared to 2012 when coal represented 43% of electricity produced. Read more

A ‘war effort’ approach is now needed to accelerate the shift away from fossil fuels and tackle the energy affordability, security and sustainability crises, according to MPs. The Environmental Audit Committee said improving energy efficiency, installing solar panels on new developments, and setting a clear date to end oil and gas licensing were vital steps. The report stressed the UK remains dependent on fossil fuels for 78% of its energy needs and while the Government’s British Energy Security Strategy sets out ambitions for low-carbon electricity generation, “significant gaps” remain. Environmental Audit Committee Chairman, Philip Dunne said: “Britain will continue to need to access fossil fuel supplies during the Net Zero transition. But Government should consult on setting an end date for licencing oil and gas from the North Sea. “We can accelerate this transition by fully harnessing our abundant renewable energy resources, including tidal energy that can deliver a reliable year-round source of clean electricity, and by upgrading our energy inefficient buildings.” Read more

Businesses and households could have saved significant sums in energy costs last year if the UK had seen faster progress on climate and energy policies, according to a new report. Analysis by the Energy and Climate Intelligence Unit (ECIU) said that UK farms could have saved up to £1 billion over two years if they had been helped to install solar panels. It estimates some households could have saved as much as £1,750 on bills through earlier rollouts of insulation, rooftop solar panels, heat pumps and electric vehicles. “Deployment of these technologies would have involved significant initial investment, but these upfront costs would have already begun to pay off in the form of lower bills as well as stimulating growth in industries such as building, car manufacture and renewables,” the report said. “Britain was the first G7 countries to commit to reach net zero emissions and now 91% of global GDP is covered by net zero targets. But progress on climate and energy policies to shift to newer, cleaner technologies has in some ways slowed in recent years, for example, with the ban on onshore wind farms.” Read more

BEIS has launched a consultation on reforms to the Capacity Market to strengthen security of supply and align with net zero. More details here.

Ofgem has published details of Renewables Obligation late payments recovered from suppliers in administration. More details here.

National Grid ESO has published its annual Operability Strategy Report. It highlights the work being done to enable a zero-carbon electricity system by 2035. More details here.

The system operator has also published a review of the Electricity Market in 2022, including statistics on the energy generation mix. More details here.