Informer Issue 606 - 11/07/2023

The energy industry is calling for urgent changes to be made to the Contracts for Difference clean energy auctions to boost investment and lower bills. RenewableUK, Energy UK and Scottish Renewables have written a joint letter to the Government urging a broader approach to defining how best value is delivered from the scheme’s Allocation Round 5 (AR5) onwards. “This should take account of the current economic environment, international competition in the sector and the benefits to UK plc from the timely deployment of homegrown, cost-effective renewable energy,” they said. The letter warns that the current emphasis on securing renewable capacity at the lowest possible strike price is creating a less attractive investment environment in the UK. “The race to the bottom on strike prices incentivised by the current auction process is at odds with the reality of project costs and investment needs, jeopardising deployment targets,” it argues. Recommendations put forward include raising the budget for this summer’s AR5 auction and support emerging technologies such as floating wind and tidal stream projects by setting clear deployment targets and ringfencing budgets for each technology. Read more

The Government is again being taken to court by environmental groups over its strategy for tackling climate change. Friends of the Earth, ClientEarth and the Good Law Project argue the Government’s revised Net Zero strategy – the Carbon Budget Delivery Plan – is unlawful and have filed papers at the High Court requesting a judicial review. The revised strategy had following successful legal challenges by the three organisations in July 2022 when a judge ruled that it didn’t meet the Government’s obligations to produce detailed climate policies that show how the UK’s legally binding carbon budgets will be met. The three organisations argue that the new plan provides no real information on the Government’s assessment of the risk of the proposals and policies not being delivered and not meeting legally binding climate targets. ClientEarth argues that this approach is so clearly flawed that it is unlawful and fails to comply with central provisions of the Climate Change Act. Read more

A total of 1.6 million households and businesses took part in a flexibility scheme to reduce demand at peak times over the winter. National Grid ESO said the Demand Flexibility Service was the largest demand response scheme ever to have taken place on the GB network. It saw 20 test events and two live events taking place. delivering a total of 3,300MWh of electricity reduction. Independent research into the service found that overall consumer experience was positive with 83% saying they would participate again. Claire Dykta, ESO head of markets, said the research is an important tool as it looks ahead to this coming winter’s scheme and beyond. “Alongside the formal consultation process and wide-ranging engagement already underway, this analysis will support us in leveraging the success and lessons learned of last year’s scheme,” she said. Read more

Power prices may not return to their pre-Covid levels before the late 2030s, according to a new report. Cornwall Energy’s latest GB Power Market Outlook said that greater demand for power from electrification of heat, industry and transport will keep prices elevated for years ahead. Although rising levels of renewable generation power sources will reduce UK wholesale prices to below £100/MWh by 2028 rising demand will keep prices relatively high. Tom Edwards, a senior modeller at Cornwall, commented: “The challenges of rising power demand, increasing exports and reliance on gas continue to keep our power price forecasts above historical levels for many years to come. “Despite these concerns, we continue to be optimistic about the positive impact of low-carbon, cost-effective energy sources and favourable gas price trends. We are pleased to see prices are expected to fall below £100/MWh sooner than previously anticipated, which offers consumers a glimpse of the benefits of the ongoing energy transition.” Read more

A package of reforms have been announced for the UK Emissions Trading Scheme (UK ETS) aimed at accelerating progress. The scheme puts a limit on the total amount of greenhouse gases aviation, power and other energy intensive industries can emit. From next year, these industries will be required to bring their emissions down at the rate needed to reach net zero goals which the Government said sends a clear signal to industry to invest in decarbonisation. The UK ETS will be extended to cover more sectors – domestic maritime transport from 2026 and waste from 2028 – while rolling out a phased removal of free carbon allowances for the aviation industry in 2026 and supporting investment in new Greenhouse Gas Removal technologies. The Government said the scheme forms part of a wider strategy to provide a long-term framework to incentivise UK industries to decarbonise. Read more

National Grid ESO has published the Final BSUoS fixed tariff for the April 2024 to September 2024 charging period, and a Draft Tariff for the October 2024 to March 2025 charging period. Ofgem has published an open letter outlining the changes it has seen in the energy supply market over the last year in context of the historically high energy prices. It also sets out Ofgem’s expectations and approach to regulation in relation to the supply market. Ofgem has published the latest timetable for expected publication of decisions around code modification/modification proposals. Elexon has published the 2022/23 Balancing and Settlement Code (BSC) annual report which reveals it implemented 42 modifications and change proposals during 2022/23, the highest number of changes we have implemented in a single year since 2009. The Department for Energy Security and Net Zero has published the outcome of its consultation on Developing the UK Emissions Trading Scheme (UK ETS).