Week in Energy
Monday 11/06 – At the start of onshore wind week, Scottish Renewables publishes analysis showing the benefits the technology could deliver to Scotland. BVG Associates finds that supporting 5GW of new onshore wind from 2019-25 could ultimately benefit consumers by £1.6bn.
Tuesday 12/06 – BEIS awards £22mn in funding to facilitate the development of ultra-fast charging for electric vehicles. Shadow Business and Energy Secretary Rebecca Long Bailey criticises the government for pursuing a “shambolic policy on the solar and onshore wind sectors in recent years”. New data shows Scotland's greenhouse gas emissions were down almost 50% in 2016 on 1990 levels.
Wednesday 13/06 – Appearing before MPs, BEIS Minister Richard Harrington states a lack of specificity is needed in the 2040 target around transport decarbonisation due to the potential development of technology. Vivid Economics research finds the UK could meet its future power demand predominantly through wind and solar generation without jeopardising security of supply.
Thursday 14/06 – The EU agrees a binding renewable energy target for 2030 of 32% with an upwards revision clause by 2023 and a sub-target that at least 14% of transport fuel must come from renewable sources by 2030.
Friday 15/06 - Samsung announces that its facilities in China, Europe and the USA will run on renewable energy by 2020.
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Policy 1 | Government criticised for lack of clarity over EV targets
On Wednesday, 13 June BEIS Minister Richard Harrington appeared before the Commons Business, Energy and Industrial Strategy Committee as part of its inquiry into developing the market and infrastructure for electric vehicles (EVs). Following the session, the government received criticism for the lack of clarity around its 2040 EV target.
The committee discussed the government’s recent Grand Challenge Missions announcement on the future of mobility, asking what the aim of achieving “effectively” zero-emissions meant. Richard Bruce, Director of Energy, Technology and Innovation at the Department for Transport explained that the government’s approach was outcomes-focused and was not to pick technologies. He said the government required all vehicles to be effectively zero-emission by 2040, but added that it was premature to pick individual technologies as the target was still 22 years away. The use of the term “effectively” therefore provided a degree of flexibility.
The committee did not approve of the use of the term and after further debate they agreed that the lack of specificity around the lack of clarity around the target “effectively” constituted no target at all.
Following the session, Committee Chair Rachel Reeves said: “The government has pledged that all new cars and vans should be ‘effectively zero’ emission by 2040, but rather worryingly the Minister was unable to properly explain what this means. […] We’re still waiting for the Government’s promised Road to Zero strategy to eliminate emissions from road transport but from the words of the Minister today it would seem that zero does not mean zero.”
The hearing also covered policy mechanisms to stimulate the EV market. It was noted that cost was one of the biggest barriers to the uptake and, with the plug-in grant only due to run until 2020, it was asked whether the government could provide confidence and assurance to the sector that it was committed to EVs. Harrington suggested that industry had been unreasonable on this issue, as it was aware production costs would continue to fall. The government, he said, had pledged that the plug-in grant would continue until 2020 and it would then be reviewed. However, he added that in the long-term it was the responsibility of industry to drive down costs.
Last week also saw the government announce funding for ultra-fast EV charging innovation projects. In an announcement on Tuesday, 12 June BEIS explained that this was one of 12 innovation projects that received funding through the government’s Faraday Battery Challenge. In total £22mn was awarded to consortia as part of the latest round of funding. The PowerDrive Line project is being led by Ilika and is focusing on solid state battery cell development, in particular how it can be manufactured at scale in the UK. It will also investigate how to build in ultra-fast charging technology of less than 25 minutes, as is seen in some current battery systems.
Business and Energy Secretary Greg Clark said: “Innovative battery technology is changing the way we live, travel and work and the Government is committed to putting Britain at the heart of this energy revolution.”
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Policy 2 | EEVS and Bloomberg identify non-domestic energy efficiency trends
The latest Energy Efficiency Trends report, published Wednesday, 13 June, has found that energy efficiency supplier confidence remains low due to a slowing of customer orders and the impacts of ongoing Brexit negotiations; and that sector feedback on government performance has been largely negative. The latter, it says, expresses “a deep sense of industry frustration”.
Published quarterly, Energy Efficiency Trends is the result of a research partnership between EEVS and Bloomberg New Energy Finance. The report provides market insight for consumers and suppliers of non-domestic energy efficiency, focusing on areas such as what energy efficiency projects and technologies other businesses are implementing; changes in return on investment, sources of finance and projects costs; and the impact of government policy and the wider economy on supplier confidence.
The most recent report relates to the first quarter of 2018 and surveyed 33 suppliers and 35 consumer organisations. On industry confidence, it found that despite a previous recovery confidence has been on a downward trajectory for the last 18 months. One possible reason for this ongoing trend is related to orderbooks. Specifically, the first quarter of this year saw the continuation of a downward slide in reported orders over the last 12 months. This was also reinforced by consumer feedback, which recorded a material drop off in projects being commissioned. It is reported that, despite the tightening of sales suppliers have not reduced staff levels over the last six months; while pricing levels have increased.
However, it noted that those suppliers surveyed were “significantly more upbeat” about the outlook for the next three months with a significant spike in confidence reported for Q2 2018 – a potential reason for this are given as anticipation of receiving approval for projects that, until now, have not been given the go-ahead. In regard to orders, suppliers also anticipate favourable conditions in the months ahead, with 76% reporting an expected uptick in Q2 2018.
Suppliers were said to be “unequivocal” in their feedback on the performance of government during the first quarter of the year. The reports stated that: “Strongly negative feedback has continued for 12 months, with more than eight out of ten suppliers now considering government action on energy efficiency to be either ‘neutral’ or ‘ineffective’.” Specifically relating to the government’s management of the UK economy on a larger scale, it was found that only one in 10 suppliers believe it to be “effective”.
Six out of ten consumer respondents reported making energy efficiency purchases in Q1 2018, which shows a “notable step down” in volume over last year. In terms of those purchases, upgrades to lighting appeared most but there were also notable increases in “smart building technologies such as building energy management systems (BEMS).
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Policy 3 | Scottish GHG emissions from energy supply fall by over two-thirds
Statistics from the Scottish government have revealed that in 2016 greenhouse gas (GHG) emissions from energy supply fell by 68.5% (15.6MtCO2) between 1990 and 2016. This was driven almost entirely by a decrease in the use of coal for power generation, which fell by 41.4% (5.1MtCO2e)
The report, published on Tuesday, 12 June, explained that this reduction in emissions from energy supply was a primary driver behind Scotland’s overall GHG emissions falling by 49% between 1990 and 2016 (37MtCO2). In 2016 GHG emissions were estimated to be 38.6MtCO2e), which was 10.3% (4.4MtCO2e) below the 2015 figure.
In energy supply it was noted that renewables were the single largest source of electricity generated in Scotland in 2016, accounting for 42.9% of demand. This was closely followed by nuclear generation at 42.8% with fossil fuels only accounting for 13.2%. Overall, electricity generation in Scotland decreased by 5,506GWh to 45,845GWh in 2016.
Climate Secretary Roseanna Cunningham commented: “These statistics are hugely encouraging and show we have almost halved the greenhouse gases emitted in Scotland – underlining our role as an international leader in the fight against climate change.”
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Policy 4 | Ofgem could save consumers £4.1bn through price controls: Citizens Advice
Citizens Advice has argued that Ofgem could save consumers a further £4.1bn through the next set of network price controls (RIIO-2).
Analysis by the consumer group, published on Monday, 11 June, suggested that network companies could potentially benefit by £4.1bn if the regulator does not revaluate how “risky” they are to investors. It noted the findings of a study commissioned by UK Regulators Network (UKRN), saying that Ofgem could deliver “major savings” for consumers of it applied the findings.
This study suggested that the current methodology that Ofgem uses to calculate the risk to investors may be flawed. It proposed a new approach, which the Citizens Advice analysis found could have major financial benefits for consumers. The current methodology estimates that energy network firms are as risky as an average company on the stock market. However, the UKRN study found that energy network companies are in fact “far less risky” and “pose less risk still than Ofgem have acknowledged” in its RIIO-2 proposals.
Gillian Guy, CEO of Citizens Advice, said: “Regulators face a difficult balancing act. Firms need to be able to attract investment and investors need suitable levels of returns. But regulators need to ensure that the decisions they make don’t allow companies to make billions in excess profits […] A new approach to analysing the risk of these firms will mean lower returns for investors, but the result is a better deal for consumers.”
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Industry 1 | Onshore wind backed to deliver lowest cost power by latest research
Two pieces of in-depth research have backed an enduring role for onshore wind to deliver the lowest cost power for Britain’s future power system.
Released on Monday, 11 June at the start of Onshore Wind Week, trade association Scottish Renewables released research highlighting the benefits of the technology. Firstly, it represents the cheapest option – generating electricity from 1GW of onshore wind in the early 2020s would be £100mn cheaper per year than generating the same amount of electricity from nuclear or biomass, and £30mn cheaper than offshore wind. Second, it would enhance UK competitiveness, with Germany and France expected to deploy 20GW and 30GW of onshore wind to 2030, compared to 2GW in the UK under current plans. Finally, the report highlighted the enduring popularity of onshore wind, with a recent government poll showing three quarters (76%) of respondents backed further deployment.
Scottish Renewables Chief Executive Claire Mack added: “This situation flies in the face of the UK Government’s manifesto commitment to reduce energy bills for consumers. Instead of doing that, they are ruling out one of the most popular – and the cheapest – forms of energy generation available. We continue to urge the UK Government to recognise the enormous social, economic and environmental benefits of this technology, as demonstrated by this website and report, and remove the barrier to onshore wind competing in the market for long-term power contracts as a matter of urgency.”
The potential contribution of onshore wind was reinforced further in analysis released by BVG Associates on Monday, 11 June.
This found that that awarding contracts for 5GW of new onshore wind power between 2019 and 2025 could deliver a net payback to UK consumers of £1.6bn. Forecasts show that the costs of new onshore wind projects will drop beneath the government’s forecast wholesale electricity price from 2023, delivering a net benefit for UK electricity consumers. Over the five auctions it is expected that 86% of the projects by capacity will be built in Scotland and 12% in Wales. Less than 2% will be built in England made up of small scale projects (sub 50MW) of a type typically developed by communities.
Bruce Valpy, Managing Director at BVGA said: “It is good to get these messages into the public domain. As the onshore wind industry moves “subsidy free”, recognising its role in job and value creation in local neighbourhoods is important. In the UK, we need to build a sustainable electricity mix that plays to our strengths in terms of natural resources and capable workforce.”
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Industry 2 | City of London moves to 100% renewables
The City of London Corporation – the governing body of London’s Square Mile – has unveiled plans to source 100% renewable electricity from October 2018 onwards.
The plans will see an increase in solar panels on City Corporation buildings and investments in installations such as wind or solar farms.
The City Corporation is a major public services provider in the capital, managing a portfolio including social housing across six London boroughs, 10 academies, three wholesale markets and 11,000 acres of green space. The proposals will contribute to the City Corporation’s energy resilience and carbon reduction, driving UK demand for renewable energy and providing the opportunity to make long-term savings on energy costs.
Catherine McGuinness, Chairman of the City of London Corporation’s Policy and Resources Committee, said: “Sourcing 100% renewable energy will make us cleaner and greener, reducing our grid reliance and running some of our buildings on zero carbon electricity. We are always looking at the environmental impact of our work and hope that we can be a beacon to other organisations to follow suit.”
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Industry 3 | Carlsberg considers onsite energy storage
Brewing company Carlsberg has said it is considering installing on-site battery storage to support its energy generation facilities. \
Reported by Edie.net on Friday, 8 June, Carlsberg’s Director of Environment and Utilities Adam Pawelas said the company was in the “early stages” of exploring integration methods for energy storage. Pawelas said: “We have some locations where we would like to grow our solar projects where our base load will not be able to consume the installed capacity of those solar PV systems, and there, we will consider the extension of battery storage.” Carlsberg currently sources 45% of its electricity onsite and has set a target of sourcing 100% renewable electricity by 2022.
The article noted more broadly that more than 100 not-for-profit organisations, including the National Trust, RSPB and Oxfam, have collectively saved almost £7m on energy procurement costs, after generating more than 48GWh on renewable energy to power estates in 2017.
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