Week in Energy

Monday 28/08 – A study of the Neart na Gaoithe (NnG) offshore windfarm by the Fraser of Allander Institute finds that the project will provide £827.4mn to the Scottish economy over its lifetime.

Tuesday 29/08 – Data security company, Corero Network Security, finds over a third (39%) of national infrastructure organisations – including energy suppliers – in the UK have not completed basic cyber security standards issued by the UK government. A study by DNV GL finds that the European Commission’s draft Electricity Directive risks reducing the economic efficiency of demand side response (DSR) and distorting the energy retail market by taking an overly restrictive view on compensation.

Wednesday 30/08 – Ofgem challenges around 20% of National Grid’s proposed £840mn costs to connect the Hinkley Point C nuclear plant to the wider electricity network. The regulator recognises an upgrade to the high-voltage grid is needed but says the costs to consumers can be reduced. New Energy Minister Richard Harrington tells oil and gas leaders they have the “full support” of the UK government in maximising the economic opportunity in the North Sea. SSE announces it has issued a €600mn green bond, the largest ever issued by a UK company.

Thursday 31/08 – The government confirms it will remove the Data Communications Company (DCC) opt-out and require SMETS2 smart meters in the non-domestic sector to be operated via the DCC. BEIS’ latest Energy Trends show low carbon’s share of generation by major power producers has hit a record high of 50%, after rising 7.2% between April and June 2017. BEIS statistics also reveal 13,800 smart and advanced meters were installed in smaller non-domestic sites by large energy suppliers during the second quarter of 2017.

Friday 01/09 – The UK’s energy network companies publish plans for developing their first joint network innovation strategies.

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Policy 1 | Report calls for clear policy proposals to hit climate targets

The UK government should look to close policy gaps and drive towards future low-carbon policy with a clear, ambitious clean growth plan this year, according to a new report.

Released on 25 August, Why the UK needs an ambitious clean growth plan now, was co-authored by a range of groups including the Green Alliance. It outlined how investment in new renewables is projected to peak at £6.2bn in 2017-18 and, without clear government policy to the end of the decade and beyond, this figure is expected to drop 95% to below £0.3bn by 2020-21. The report found that energy saved from efficiency schemes dropped 89% between 2012 and 2013, and has since remained unchanged, while new infrastructure and interim targets were needed to ensure the UK’s electric vehicle (EV) rollout keeps pace with other countries.

If government required all new cars and vans to be zero emission by 2030, rather than 2040, the report claimed the UK could cut foreign oil imports by over half come 2035.

It explained more ambitious targets were needed to bring forward both public health and economic benefits. It drew on how Norway had almost ten times more EV charging points per head of the population than the UK, while 29% of new cars and vans sold there in 2016 were electric, compared to 1.4% in the UK.

It also recommended that government allocate an additional £1.7bn between 2020 and 2025 to low-carbon auctions. While renewable sources are now cheaper than fossil fuels, based on 2016 prices, the report said they need the long-term revenue certainty of government-backed contracts – provided through auctions – to be built. This would allow customers to benefit from lower bills and manufacturers to be able to invest in UK supply chains for the long-term.

With regards to energy efficiency, the report called for a target to improve the energy efficiency standards of all existing commercial and domestic properties to an Energy Performance Certificate (EPC) rating of C by 2035. It also advocated a zero carbon homes standard by 2020, explaining the energy bills of such homes are 80% lower than the UK average despite costing only 1.4% more to build than standard homes.

The report said the UK can become a centre for world class low carbon infrastructure, boosting jobs and competitiveness and developing UK expertise in the global low-carbon market. It stressed that an effective plan to achieve this must work across government departments. This would mean integrating with other plans such as the industrial strategy and the cost of energy review, thus releasing new investment for the renewable energy, transport and energy efficiency sectors.

Laura Taylor, Head of Advocacy at Christian Aid, one of the co-authors of the report, said: “The UK's position of leadership on the green economy is far from guaranteed. The US administration is squandering its opportunity by stepping back from global agreements on climate change, while many other countries are seizing the initiative. The UK government’s long-overdue clean growth plan needs to prove that this government is serious about speeding up the low carbon transition, not slackening the pace.”

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Policy 2 | DNOs could be fined for poor customer service

The energy regulator has said that electricity distribution network operators (DNOs) across all six groups could see their revenue cut by up to £13.9mn, after a review of how well they have dealt with new customers requesting connections.

Within its 2015-2023 price controls Ofgem set DNOs an incentive to engage effectively with larger customers requiring new connections. Failing to meet minimum expectations can lead to a finance penalty.

Following feedback from customers to its July consultation, which sought views on how well DNOs were engaging with connections stakeholders, Ofgem concluded that all DNOs may have fallen short of these expectations.

Many of the failings involved poor communication. This included instances where some customers struggled to get progress updates on their connection requests.

In some cases, customers found the information they were provided by a DNO was not detailed enough. In others, the DNO had failed to explain the cost of reinforcing its network when making quotations for connections work.

Ofgem said that while in general DNOs do seem to be improving both their engagement and services, some specific issues raised by stakeholders remain unaddressed. Therefore each of the DNOs faces a reduction in its revenue of £13.89mn from an allowed maximum £25.84mn.

The regulator said the figure could go up or down in light of responses to a new consultation. This would allow stakeholders and the DNOs a further opportunity to provide evidence on performance, it explained. Views are invited until 18 September.

Ofgem will issue a final decision on each DNO’s performance, including confirmation of any financial penalties, by the end of November.

In response, the Energy Networks Association (ENA) said DNOs had delivered a reduction in the time it took to connect customers while “accommodating rapidly increasing demand from renewable generators” last year. The ENA added: “Where the consultation highlights specific areas to improve, [DNOs] will work with Ofgem and stakeholders to ensure they continue to meet the needs of their customers.”

The regulator has already told network companies to prepare for a “tougher” round of price controls from 2021, having seen “clear evidence” the cost of investment required in networks was “significantly lower” than assumed under the current round of price controls.

The new RIIO-2 price controls are set to reflect this and will fall in line with other utility regulators. Ofgem had explained that its price controls would have enabled near to £80bn of investment in electricity transmission and distribution infrastructure since privatisation. Setting tougher price controls would therefore ensure the networks deliver “even better value for consumers.”

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Policy 3 | ORE Catapult to provide funding to Scottish wind industry

The Offshore Renewable (ORE) Catapult announced on 24 August that its Fife facility will receive £920,000 of funding to advance offshore wind research in Scotland.

The Scottish government will provide £460,000 of the funding, which the ORE Catapult is matching. The new programme will enable businesses to take advantage of the Catapult’s expertise and its industry and academic partnerships, while it is also set to fund the establishment of a lidar test facility and facilitate the creation of a “virtual windfarm”. The Catapult claimed the investment should hand Scottish companies a “crucial edge” when it comes to developing technology and services for the new wave of offshore wind developments.

Paul Wheelhouse, Scottish Minister for Business, Innovation and Energy, said: “It’s becoming increasingly clear that offshore wind is integral to Scotland’s sustainable energy future – as well as helping us to achieve our ambitious climate change targets.”

The virtual windfarm is to be created using operational data from the Levenmouth Turbine, where the programme will be based. It will deliver a platform for the sharing of research, data and findings to Scotland’s industry and academic research communities, bolstering understanding of how offshore wind farms work and how they can be made more efficient.

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Policy 4 | UK’s critical infrastructure skipping basic cyber security checks

Corero Network Security, a provider of real-time defence solutions against Distributed Denial of Service (DDoS) attacks, has found that over a third (39%) of national critical infrastructure organisations, including energy suppliers, in the UK have not completed basic cyber security standards issued by the government.

The data, revealed under the Freedom of Information Act, found that a number of organisations had not completed the 10 Steps to Cyber Security programme, indicating a lack of cyber resilience within organisations key to the functioning of UK society. The programme gives companies guidance on how to protect themselves in cyberspace.

Under the UK government’s proposals to implement the EU’s Network and Information System directive, organisations that fail to comply with cyber security standards could be liable for fines of up to £17mn, or 4% of global turnover.

Sean Newman, Director of Product Management at Corero, said: “Cyber attacks against national infrastructure have the potential to inflict significant, real-life disruption and prevent access to critical services that are vital to the functioning of our economy and society. These findings suggest that many such organisations are not as cyber resilient as they should be, in the face of growing and sophisticated cyber threats.”

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Industry 1 | SSEN explores energy trends in the north of Scotland

On 17 August, Scottish and Southern Electricity Networks (SSEN) published a paper analysing the energy trends unique to the north of Scotland. The analysis covers the 10-year period between 2005 and 2015. It is part of the planning for the next transmission price control (RIIO-T2), which will begin in 2021. It is also the first stage in identifying points of difference that will need to be included in the localised Future Energy Scenarios for the north of Scotland.

The report found that the average industrial and commercial (I&C) electricity consumption in the north of Scotland increased by 13.5%, up from 62,530kWh to 70,969kWh. This goes against the trend seen in the rest of GB, where I&C demand fell by an average of 7%. Only three of the eleven local authorities in the region saw a decrease - Aberdeen City, Angus and Dundee City. The remaining authorities all saw increases, with the highest occurrences in Aberdeenshire (30.8%), the Highlands (30.5%) and the Orkney Islands (110.9%). SSEN said initial engagement suggested that much of this increase is due to the growing production in the Scottish food and drink sector, but added that further investigation is required to properly understand the reasons behind these increases at a local level.

I&C gas consumption was found to have increased further than in the rest of GB, despite a reduction in recent years. The north of Scotland saw an increase of 16%, from 718,804kWh to 834,144kWh, whereas the GB average increase was just 4.7%. Nearly two thirds (63%) of local authorities in the region saw an increase in gas consumption between 2005 and 2015. As with electricity consumption there were a number of significant increases, notably in Moray (76.5%), Angus (51.1%) and the Highlands (43.7%). The report said that due to the type of industry in the area it may be less likely that there will be a noticeable shift from gas to electricity as the main heating fuel, but that other alternatives were a possibility. As with electricity consumption, further investigation will now be undertaken to identify drivers of these changes.

SSEN also assessed sources of electricity generation in the north of Scotland. It found that the transmission network in the area has gone through a period of substantial growth in the last decade, largely due to increasing renewable energy generation. In 2015 there was 4,623MW of generation capacity present on SSEN’s network, more than double the generation capacity available in 2005. Fossil fuels play a relatively small role in the electricity generation mix, with the gas station at Peterhead representing just 9% of generation capacity in 2015.

Between 2005 and 2015, 90% of new generation came from low carbon, intermittent sources. Onshore wind was the largest source of this new capacity, accounting for 2,406MW, followed by Hydro (220MW) and solar (22MW). The remaining 60MW of new capacity came from other technologies, such as tidal, biogas and combined heat and power.

Embedded generation was found to play an important role in the region, representing over half of the total generation capacity on the network. Therefore, SSEN said it is important that it, as the transmission owner, works closely with the distribution network owner to understand how this can best be managed from a whole system perspective.

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Industry 2 | Report finds global solar capacity set to surpass nuclear for first time

A report by GTM Research has predicted that 81GW of solar is expected to be commissioned globally during 2017, more than double the amount of capacity installed in 2014.

GTM’s latest Global Solar Demand Monitor estimated that by 2022, global solar capacity will reach 871GW, more than double the current global nuclear capacity. This is also around 43GW more than the cumulative wind installations expected in the same year. GTM added that by the end of 2017 solar PV could rival global nuclear capacity.

The report suggested that this is because over the past three years growth rates and cost reductions for solar have exceeded projections. Meanwhile high costs, slow construction and competitive renewable alternatives are all having an impact on the nuclear industry.

GTM did point out that despite an increasing level of global solar capacity, nuclear still accounts for a much greater share of electricity generation. Currently, nuclear generates 2,476,671GWh per year, equating to roughly 11% of global generation. In comparison, solar generated just 375,000GWh/year, around 1.8% of global generation. The report added that “the generation gap is significant. But a crossover is approaching.”

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Industry 3 | University launches solar forecasting service

A research group at the University of Sheffield has developed a solar forecasting service, which it says will help to increase the efficiency of the electricity system and reduce energy costs.

The service provides forecasts for energy generation from photovoltaic (PV) systems in the UK for up to 72 hours ahead and is intended to be used by electricity grid operators, solar generators and traders. In a statement on Friday, 18 August the research group said that following the rapid uptake of solar PV systems, there is a growing need to accurately measure and forecast solar’s impact in order to mitigate its disruption on the electricity network.

Due to its intermittent nature, solar affects the balance of supply and demand on the grid. At present uncertainty in forecasting PV results in the need for standby generators to provide additional reserve capacity, making it more expensive to manage the costs of the grid. However, with accurate forecasts the amount of reserve can be reduced, cutting costs for National Grid and bill payers.

The service is currently being trialled on the University of Sheffield’s Sheffield Solar website. However, the group plans to further develop the service with researchers, initially releasing a half hourly forecast followed by a regional forecast. Finally, the group intends to provide forecasts for individual systems around Great Britain.

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