SSE Business Energy - Weekly Updates

Week in Energy

Monday 01/01 –Secondary legislation comes into force amending the basis of the Capacity Market supplier settlement calculations from net- to gross- demand.

Tuesday 02/01 – Analysis issued by BEIS suggests that the UK will achieve 97% and 95% of the carbon reductions that are required to meet the fourth and fifth carbon budgets. National Grid confirms reduced procurement targets of 4.9GW and 49.5GW in the upcoming year ahead and four years ahead Capacity Market auctions respectively.

Wednesday 03/01 – Research carried out by Carbon Brief finds that in 2017 nuclear and renewable electricity producers in the UK generated more electricity than all fossil fuel generators combined. Media reports suggest that the number of onshore oil and gas wells in the UK has fallen to its lowest level in 50 years.

Thursday 04/01 – The Health and Safety Executive says that it is investigating the circumstances that led to a three-week outage of the Forties Pipeline. Responding to the UK government’s consultation on streamlined energy and carbon reporting, the UK Green Building Council says that while the new reporting will deliver much-needed transparency, it will not lead to the “significant energy saving potential” that the consultation identifies.

Friday 05/01 – BEIS issues its response to the coal closure consultation, confirming unabated coal will be regulated off the system by 2025 using an emissions limit. Responding to UK government figures that revealed the Scottish Highlands has seen a 28% increase in carbon emissions, Labour’s Climate Change spokeswoman, Claudia Beamish questions the Scottish government’s claim to show “global leadership” on climate change.

 

Back to top   


 

 

Policy 1 | UK to narrowly miss fourth and fifth carbon budgets: BEIS

Research by BEIS has found that the UK will just fail to achieve the carbon reductions required to meet the fourth and fifth carbon budgets.

The carbon budgets put in place a restriction on the total amount of greenhouse gases (GHG) that the UK can emit over a five-year period, with the aim of gradually reducing emissions by at least 80% by 2050 compared to 1990 levels. The fourth carbon budget covers 2023-27 and the fifth covers the period of 2028-32.

The government’s analysis, published on Tuesday, 2 January, found that the UK’s projected performance against its upcoming carbon budget has improved. However, BEIS’s current estimates suggest that the UK will only be able to achieve 97% and 95% of the performance required to meet the fourth and fifth carbon budgets respectively.

The department noted that while it expects the fourth and fifth budgets to be missed, the UK has still been “among the most successful countries in the developed world” in growing its economy whilst also reducing emissions. It added that the government’s recent Clean Growth Strategy “sets out ambitious policies and proposals to meet [the UK’s] carbon reduction targets while seizing the opportunities of clean growth.”

The UK has already met its first carbon budget (2008-12), with a headroom of 36MtCO2e, and is projected to meet the second (2018-22) and third (2023-27) budgets with a headroom of 125 and 143 MtCO2e respectively. While there are projected shortfalls for the fourth and fifth budgets, BEIS suggested that as policies and proposals put forward in the recent Clean Growth Strategy are more fully developed this could change.

In this issue of BEIS’s Energy and Emissions Projection (EEP), emissions are expected to be 3.6% lower overall for the period 2017 to 2035 compared to EEP 2016. This was attributed to updated data on key inputs, such as energy demand and temperature and fossil fuel price projections.

The analysis expects that the future trends in total primary energy demand will be similar to the 2016 projections, falling 11% between 2016 and 2025, from 201Mtoe to 179Mtoe, before increasing again to 193Mtoe in 2035. In the power sector BEIS’s central projection shows greenhouse gas emissions falling by 53% between 2015 and 2020.    

Government policies are expected to reduce non-traded GHG to around 290MTCO2e over the period covered by the fourth carbon budget – around 21% of all non-traded emissions over the period. Around four-fifths (81%) of this reduction is attributed to policies that were adopted after the Low Carbon Transition Plan was published in 2009.

CO2 emissions from major power producers are projected to decrease by nearly 70% between 2010 and 2020, while the low-carbon share of UK electricity generation is expected to rise from 22% to 58% over the same period.

Back to top

   

 


  

Policy 2 | DExEU publishes sectoral analyses of energy markets

On Thursday, 21 December, the Commons Committee on Exiting the European Union published several sectoral analysis papers produced by the Department for Exiting the European Union (DExEU) as part of its Brexit negotiation preparations. These included analyses of the electricity and gas markets.

The department found that EU legislation has had a noticeable impact on the energy sector, and that as a result much of UK electricity and gas policy is driven by policy that is agreed at the EU level. It added that the UK has to date played a leading role in negotiations around EU energy policy and that much of EU policy is modelled on UK arrangements.

However, there are a number of important areas where the UK, and other member states, have the freedom to decide their own national policy. Most notably on security of supply, their choice of fuel mix and the use of indigenous energy sources.

In the future, changes in UK wholesale energy prices will be driven by changes in fossil fuel and carbon prices, as well as the generation mix. At present the price of EU Emission Trading Scheme (ETS) allowances do contribute to the setting of the wholesale electricity price in the UK. However, carbon prices in the UK tend to be higher than those seen in the rest of the EU because the UK charges an additional levy on CO2 emissions from the power sector. Prices are also dependent on the share of renewable generation available on the system.

The report also identified that the production of gas from the UK Continental Shelf has been decreasing since the start of the millennium, although small increases were seen in 2015 and 2016 due to new fields. Between 2000 and 2013 gas production fell at an average of 8% per year. It rose by 2.4% in 2016, representing the second year-on-year increase since the peak in 2000, but production was still just 37% of that in 2000. Despite this, the UK, along with the Netherlands, remains one of the two main gas producing members of the EU.

Despite being a major producer within the EU, the UK has been a net importer of petroleum products since 2013. As this dependency has increased there have been a number of significant developments in import infrastructure, with pipelines connecting the UK to Europe and additional liquified natural gas (LNG) import terminals. This allows the UK to obtain gas from a wide range of sources, thereby improving security of supply.

In the future LNG is expected to play an increasing role in UK gas supply and the existing LNG import infrastructure in the UK has the ability to receive further shipments if the market signals are present.

The European Parliament has separately published its own analysis recently of how Brexit could impact the EU energy system, which found that “given their mutual interest” the EU and UK will most likely develop arrangements that will enable continued energy exchanges. However, the report noted that there will most likely be “substantial efficiency losses, especially in the long term.” It warned that impacts of this would disproportionately fall on the UK as the continental market is larger and better integrated than the UK’s.

Back to top

   

 


  

Policy 3 | National Grid reduces Capacity Market procurement target

National Grid has published the procurement targets for the forthcoming T-1 (one year ahead) and T-4 (four years ahead) Capacity Market auctions.

The auctions are the primary means of guaranteeing energy security, with power stations paid for their availability over winter months. On Tuesday, 2 January, National Grid set a target of 4.9GW to be procured in the T-1 auction which is 1.1GW less than it had previously suggested, in its role as the EMR Delivery Body, in the guidelines published in July 2017. In the case of the T-4 auction, National Grid set the target of 49.5GW to be procured – 0.6GW less than set out in the July guidelines. The target capacity for the T-4 auction is also lower than the 51.7GW goal that had been set for the last T-4 auction, for delivery in 2020-21.

National Grid explained the decision was made after a range of new information and insight, adjustments to the volume of autogeneration capacity that is outside of the Capacity Market and alterations to National Grid’s view of underlying peak demand during average cold spells.

The T-1 auction is set to start on Tuesday, 30 January, while the T-4 auction is scheduled for Tuesday, 6 February.

Back to top   

 


  

Policy 4 | BEIS says Advanced Meter Exception should be extended

Following a consultation, BEIS has concluded that both the large and small energy supplier Advanced Meter Exception (AME) should be extended until 13 July 2018.

The AME allows for the installation of advanced meters to meet the roll-out obligation at designated non-domestic sites. BEIS said that, as it had set out within its consultation letter, both this date as well as the SMETS1 end date will be kept under review throughout January 2018. It explained this will allow for an assessment of whether any industry-wide barriers exist that could contribute to preventing the transition to SMETS2 meters by the Friday, 13 July deadline.

The proposed extension intends to give both large and small energy suppliers to smaller non-domestic opportunities an opportunity to benefit from the work that is already underway with SMETS2 product development. It also allows them more time to undergo a successful transition from advanced meters to SMETS2 meters in the Data and Communications Company systems.

Three large and small suppliers, from 15 responses, agreed with the proposal to extend the AME end dates without comment. While the remaining respondents welcomed the proposal in general, there were some that expressed concerns about the availability of SMETS2 meter variants as well as the ability for smaller suppliers to access SMETS2 meters in general. There were three respondents that felt AME end dates should be extended to the 2020 rollout deadline. They argued this would give suppliers and end consumers the option to use either technology in the meantime.

Back to top

  


Industry 1 | 2017 sees low-carbon records broken

Over the course of 2017 the UK broke 13 different energy records across a range of low-carbon sectors, making 2017 the greenest year yet for clean electricity production.

Analysis conducted by Carbon Brief revealed during 2017 more than half of generated electricity within the UK came from low-carbon sources, with their total share doubling between 2009 and 2017. By contrast fossil fuels supplied 47.5% of generation – a substantial reduction compared to their 2010 level of 75.4%.

A major milestone was achieved on 21 April 2017 – the first full day without the use of coal power since the industrial revolution, with the longest period recorded without the use of coal reaching 40hours 35mins. Coal generation has dropped significantly over the past five years, with a generation decreased of 25% to 23TWh in 2017, in line with the government’s commitment to phase out coal power by 2025.

Meanwhile, gas generation throughout 2017 remained the single largest fuel, supplying a total of 40% of electricity. However, gas production has also fallen by 7% to 134TWh, well below its 175TWh output in 2010, to allow the increase in low carbon sources.

Over the past year the largest increase in generation for a single source came from wind, with total generation increasing year on year by 31% to 49TWh. This accomplishment was achieved through an increase in capacity by a fifth and favourable wind speeds increasing by 7% in the first 11 months of 2017. Wind alone produced more than twice as much electricity than coal, over the year supplying more power every month except within January. Records were reached for the most electricity production from all wind sources (12.4GW), solar power (8.9 GW), and hydropower (1.4GW) at any one moment during 2017. Over the year solar power increased 11% from 2016 figures breaking additional records on 2 July with the highest percentage of solar (26.8%) produced relative to national demand.

Out of all low-carbon sources nuclear remained the single largest contributor of low-carbon electricity in the UK, generating 70TWh in 2017. The government has indicated plans to secure new nuclear capacity to replace the existing fleet which is expected to see closures throughout the 2020s. However, progress on new nuclear plants has seen recent delays.

Overall during 2017 the UK produced the largest amount ever of electricity from renewable sources exceeding 19.2GW. This considerable rise in renewable generation saw the lowest recorded amount of carbon produced by electricity production at any one moment of 73g CO2/KWh, allowing the UK to achieve its “greenest” summer on record.

Gareth Redmond-King, Head of Energy and Climate at WWF commented on the findings, saying: “We have never been cleaner or greener – and we are on course for an even better year in 2018”.

Back to top

   


  

Industry 2 | National Grid issues draft TNUoS tariffs for 2018-19

National Grid issued the draft transmission network use of system tariffs applicable from 1 April 2018 on Thursday, 21 December.

Transmission Network Use of System (TNUoS) charges recover the cost of installing and maintaining the transmission system in England, Wales, Scotland and Offshore. Suppliers are charged based on their demand forecast, with charges ultimately passing through to energy user bills.

Allowed revenue has increased by £8.9mn since the last forecast in October. Average generation tariffs have increased by £0.24/kW, reflecting a decrease of 3.1GW in chargeable Transmission Entry Capacity.

The allowed revenue increase is reflected in demand tariffs, such that the forecast average gross demand half hourly tariff is £46.17/kW; the average embedded export tariff is £26.91/kW; and the average non-half hourly demand tariff is 6.21p/kWh.

Final tariffs will be issued by the end of January.

Back to top

   


 

Industry 3 | Green Investment Group to co-develop waste-to-energy projects

The Green Investment Group (GIG) has announced it has entered into a partnership with Covanta Holding Corporation to jointly develop, fund and own new waste-to-energy projects in the UK and Ireland.

GIG has invested a total of €136mn in a 50% stake in Covanta’s newly operational Dublin facility capable of processing a minimum of 600,000 tons of residual waste annually. Together Covanta and GIG have identified a further six projects across the UK suitable for inclusion into the partnership. Once acquired, these facilities are expected to treat close to 2mn tonnes of residual waste per annum.

The additional projects will add to Covanta current portfolio of waste-to-energy project consists of 43 facilities capable of processing more than 18mn tonnes of waste per year while generating up to 1,499 MW of renewable energy.

President and CEO of Covanta, Steve Jones said: “The creation of this partnership and investment by GIG into the Dublin project allows us to fully fund an expanded UK development pipeline and enables successful international development and growth on a consistent and repeatable basis.”

Back to top

Subscribe to Email Updates

Recent Posts