Posted on: 27/02/2024
This week's energy news headlines: The upcoming CfD auction could help double the UK’s offshore wind capacity; The latest T-1 Capacity Market auction secures record back-up power; A new structure is unveiled ahead of the launch of a new system operator. Our industry round-up includes the latest updates from Government departments and energy regulators.
Energy UK has published its response to Ofgem’s forward work programme.
The Department for Energy Security and Net Zero has published the outcome of its consultation on its Strategy and Policy Statement for GB energy policy.
Elexon has published its response to Ofgem’s Consultation on the market facilitator delivery body.
Ofgem has launched a consultation on its latest thinking and proposals around early competition in onshore electricity transmission networks. It closes on 20 March.
Ofgem has published details of its rejection of two Capacity Market Rule Change Proposals without Consultation: CP365 and CP366.
The UK’s offshore wind capacity could be doubled in this year’s CfD auction, according to industry leaders.
RenewableUK said that 14 wind farms are already eligible to bid, providing a record of nearly 10.3GW of new capacity. A further 4.7GW of new capacity could become eligible before applications open for the auction at the end of March.
The total of 14.9GW of potential new capacity compares to the current 14.7GW of fully operational offshore wind.
With the Government due to set out the overall budget and parameters for this summer’s auction next month, RenewableUK is calling for ministers to “aim high” to maximise the amount of capacity that could be secured.
Meanwhile Energy UK said the shortfall left by the failure of the last auction round to attract any bids from new offshore wind projects means that the next two rounds must deliver around 20GW of new capacity if this is to be in operation for 2030 when the Government’s target is 50GW.
The industry body said further pressure has come from challenges facing developers due to the low prices in AR4 with one major offshore wind project having been terminated.
A record 7.6GW in agreements was secured in the latest T-1 Capacity Market auction.
The provisional results for the year-ahead auction saw a clearing price of £35.79/kW, around 40% less than the previous auction. The Low Carbon Contracts Company, which manages Capacity Market operations, said the fall signalled increased competition “which will enable low costs to consumers”.
The lion’s share of agreements went to gas generation (38%). Demand-side response achieved over 9% of capacity with energy storage batteries achieving 8.58%.
The T-4 auction for delivery year 2027/28 will take place this week. The target for the four-year ahead auction has been increased by 0.5GW to 45GW.
The system operator has unveiled a new operating structure which it said was a key milestone ahead of a new body being established.
The ESO will become Great Britain’s National Energy System Operator (NESO) this summer and will be responsible for planning electricity and gas networks while continuing to operate the electricity system.
A new operations executive committee is being established and will be led by Kayte O’Neill as Chief Operating Officer.
The committee will operate alongside an Executive Committee chaired by Fintan Slye, Chief Executive Officer.
Kayte O’Neill said: “Leading the operations executive team will allow me to focus on meeting our current and future customers’ needs while continuing our commitment to ensure that Britain’s energy system is secure, affordable and forges a sustainable future for everyone.”
The UK is to leave the Energy Charter Treaty after Government said efforts to align it with net zero had failed.
The treaty was designed to promote international investment in the energy sector, historically providing protections for investors in fossil fuels. Proposals to modernise it to better to support cleaner technologies have been subject to months of talks between European countries, resulting in a stalemate.
The UK has now joined 9 EU member states, including France, Spain and the Netherlands, in withdrawing from the treaty.
Minister of State for Energy Security and Net Zero, Graham Stuart, said: “The Energy Charter Treaty is outdated and in urgent need of reform but talks have stalled and sensible renewal looks increasingly unlikely.
“Remaining a member would not support our transition to cleaner, cheaper energy, and could even penalise us for our world-leading efforts to deliver net zero.”
The domestic energy price cap for the second quarter of 2024 will fall by 12.3%, seeing costs reach their lowest level since Russia’s invasion of Ukraine.
However, Ofgem said it recognised many customers continue to struggle with their bills as standing charges rise and energy debt reaches a record figure of £3.1 billion.
It has announced a series of measures including levelisation of standing charges and a ban on acquisition-only tariffs for up to another 12 months.
Jonathan Brearley, CEO of Ofgem, said: “This is good news to see the price cap drop to its lowest level in more than two years but there are still big issues that we must tackle head-on to ensure we build a system that’s more resilient for the long term and fairer to customers.”
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