Informer Issue 605 - 04/07/2023

Ofgem is pressing ahead with proposals to prevent electricity generators from making excessive profits through the Balancing Mechanism.
Following a ‘deep dive’ into the issue amid concerns that some generators might be taking advantage of the existing rules, the regulator has now launched a consultation on introducing a new licence condition aimed at protecting consumers. Ofgem found that some thermal generators were scheduling themselves to cease output early in the afternoon which then makes them unavailable for the evening peak period. They have then been using the Balancing Mechanism to offer a price to the ESO to keep operating throughout the afternoon and therefore be available for the evening peak. “This has led to high balancing costs that are ultimately paid for by consumers,” said Ofgem. Read more

Reform of the wholesale electricity market should take an evolutionary rather than revolutionary approach, according to an industry body. The Association for Renewable Energy and Clean Technology (REA)’s report into the Review of Electricity Market Arrangements (REMA) said it was important that changes build on existing market mechanisms that are understood and trusted by developers and investors, rather than radically changing the market by pursuing other proposals such as a ‘split market’ or ‘green power pool.’ The report makes recommendations on how existing market mechanisms, the Contracts for Difference and Capacity Market, could be adapted to better reward both flexibility and firm contracts. Dr Nina Skorupska, Chief Executive of the REA, said: “The REMA process must both be delivered in a timely manner and create renewed confidence by evolving our existing market, rather than trying to re-write the rules. The industry is speeding ahead with the energy transition and delivery of a fit for purpose wholesale market must keep up.” Read more

The Government has been urged to “regroup” on Net Zero and commit to bolder delivery by its climate change advisor. The Climate Change Committee (CCC) said although the Government has now published its Carbon Budget Delivery Plan providing much greater transparency on its Net Zero plans, its confidence in the UK meeting its goals from 2030 onwards is now “markedly less” than it was a year ago. The CCC said UK greenhouse gas emissions have so far fallen 46% from 1990 levels. However, at COP26, a stretching 2030 commitment was made to reduce them by 68%. “In only seven years, the recent rate of annual emissions reduction outside the electricity supply sector must therefore quadruple,” it said. “Time is now very short to achieve this change of pace. Glimmers of the Net Zero transition can be seen in growing sales of new electric cars and the continued deployment of renewable capacity, but the scale up of action overall is worryingly slow.” Read more

Britain won’t have access to back-up coal power this winter after closure plants were confirmed by generators. Drax and EDF are to close units at plants in Nottinghamshire and Selby which were kept on standby last winter following talks with National Grid ESO. Uniper’s Ratcliffe-on-Soar plant will remain open but will only operate on a commercial basis and will not be available for winter contingency. The coal plants were ‘warmed up’ on a number of occasions during last winter but only used once in early March. The contingency cost about £400m. National Grid ESO’s recent early outlook for the upcoming winter suggests there will be more than enough power to meet demand. Read more

Major energy users are being urged to apply for Government help to reduce their energy bills. Energy-intensive businesses and heat network operators have less than a month left to apply the support available through the Energy Bills Discount Scheme. The scheme was put in place to keep costs down by offering a higher rate of support for those using significant amounts of energy such as ceramic and textile firms. These companies are exposed to strong international competition, meaning they can’t raise their prices to cover the increase in costs they’ve faced. Consumer Energy Minister Amanda Solloway said: “Energy prices are falling but we will continue to stand by businesses and do all we can to help and make sure they remain competitive in a challenging market, as we have done over the winter.” Businesses that become classed as an Energy and Trade Intensive Industry after the window closes, will have 90 days from the first date they can apply to submit an application for support.
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Energy UK has published a response to Ofgem’s Operational Allowance Review.

Ofgem has published the latest Feed-in Tariff quarterly report covering the 1 January – 31 March 2023 period. It includes information on the number of installations and total installed capacity (kW), in addition to the levelisation process.

Ofgem has launched a consultation on Balancing Mechanism reforms aimed at preventing electricity generators from making excessive profits. It closes on 27 July.

The Association for Renewable Energy and Clean Technology has launched a report into the Review of Electricity Market Arrangements (REMA). The report feeds into the Government’s ongoing REMA workstream that is looking to set out the future design of the wholesale electricity market.