Regulatory Report - June 2021

Generation

The government’s official advisory group, the Climate Change Committee, published its annual net zero progress report to Parliament on 24 June, assessing the UK’s progress towards net zero and making several recommendations.

A report released by National Grid Electricity System Operator (ESO) has found that GB’s electricity network is on track to becoming fossil fuel free by 2025.


Delivery

US firm PPL Corporation has completed the sale of Western Power Distribution (WPD) to National Grid for £7.8bn, it announced on 14 June.

The ESO held a series of workshops in June on its work on enabling net zero electricity markets. 

Economics academics have recommended to the government that it establish a specific department for net zero to provide the central leadership that the net zero challenge requires.


Usage

Ofgem issued the outcome of its Consumer Insights Survey for 2020. 

Battery storage firm Zenobe has selected EDF as the company’s trading and optimisation partner for a new 100MW battery.


Also covered in this Regulatory Report: 

 


 

Generation


CCC: UK needs a net zero strategy

The government’s official advisory group, the Climate Change Committee (CCC), published its annual net zero progress report to Parliament on 24 June, assessing the UK’s progress towards net zero and making several recommendations. The CCC notes that the government has made significant climate promises over the last year but is yet to release comprehensive plans. 

To this effect, the committee calls for the publication of the Net Zero Strategy before the COP26 climate conference in November, with clear policy plans and full backing from the Treasury. This should:

  • Provide a comprehensive plan for achieving net zero, the 2030 Nationally Determined Contribution and the carbon budgets, setting out ambition for sectors and key technologies and behaviours that together will meet the challenge.
  • Set timelines for how policies will start to deliver decarbonisation with the required urgency and ensure that wider policy development is consistent with the UK’s climate goals.
  • Introduce processes for monitoring progress and mechanisms to course-correct over time – this is listed as a priority recommendation for 2021.

Another priority recommendation, this time for 2021-22, is that the government must develop a public engagement strategy for net zero which builds on the findings of the UK Climate Assembly by involving members of the public in decision-making. The CCC says this strategy should link to engagement on adaptation and identify “preferred policy options to empower people to contribute fully towards the path to net zero”.

On power, the CCC is calling for, by 2022, a plan for reaching an emissions intensity of 50 gCO2/kWh by 2030, with a total of around 350TWh of low carbon generation – this would include setting out a schedule for regular auctions to procure low carbon generation. In 2021, the government should commit to phasing out unabated gas generation by 2035, subject to ensuring security of supply. 


GB on track for periods of zero carbon electricity in 2025

A report released by National Grid Electricity System Operator (ESO) has found that GB’s electricity network is on track to becoming fossil fuel free by 2025. Published on 15 June, the ESO included data demonstrating the growth in renewable electricity generation and progress towards periods of zero carbon operation of the GB electricity system – an ambition first announced in April 2019.

The ESO included data demonstrating the growth in renewable electricity generation and progress towards periods of zero carbon operation of the GB electricity system, which was an ambition first announced by the ESO in April 2019.

The key drivers of the rapid change in the electricity mix is the dropping off of coal and the growth in renewables generation. Coal power has gone from generating almost a quarter of our electricity five years ago, to just 1.6% of the mix in 2020. Since 2004 electricity generated by renewable power has increased tenfold. In the past decade we have witnessed an ever-larger change – in 2011 under 5% of GB electricity was renewable; by 2019 that reached a record high of 37.1%. The ESO says this growth has been made possible due to several policy initiatives, such as the Climate Change Act 2008, or market frameworks and initiatives such as the Connect and Manage and Contracts for Difference, which have supported renewable generation onto the grid.


Committee launches inquiry into governance of net zero

The BEIS Committee launched an inquiry on net zero governance on 24 June, which will examine the leadership and coordination which it says will be needed by government to deliver on the UK’s commitment to reach net zero by 2050. The committee’s inquiry will examine BEIS’ leadership role in delivering net zero, how effectively the department is driving coordinated action across Whitehall and the role that devolved administrations and local and regional authorities can play. The inquiry will also examine the government’s success in engaging with public sector bodies, regulators, businesses and citizens on net zero and the role and oversight of net zero performance metrics in government.

BEIS Committee Chair Darren Jones said: “Getting to net zero will require a significant increase in the scale and pace of change across every part of the UK, especially in the decade ahead. We need the government to quickly move from announcing targets to setting out delivery plans, to ensure a fair and just transition, and to bring about genuine public engagement and consent for the measures necessary to achieve our climate targets.”


Government confirms coal phase-out to move forward to October 2024

GB will phase out unabated coal generation on 1 October 2024, the government announced on 30 June. This decision is the outcome of the Early Coal Closure consultation. The government has also decided that the emissions intensity limit will be implemented at a level of 450gCO2/kWh on unit-by-unit basis and the 300MWth minimum threshold will not be introduced. 

Any coal plant complying with the emissions intensity limit by burning biomass will need to calculate CO2 emissions on a net basis, in that emissions from other fuels co-fired with solid fossil fuel are to be included in the calculations for emission intensity, BEIS has decided. The emissions related to the biomass component should be calculated considering the whole life cycle of the fuel.

Additionally, emergency powers allowing the Secretary of State to suspend or modify the coal phase-out arrangements will not be introduced, the government said. It will designate an ‘Enforcement Authority’ with the power to verify compliance on an ad hoc basis. The government will allow the designated Enforcement Authority to determine an appropriate reporting frequency. 

Energy and Climate Change Minister Anne-Marie Trevelyan said: “Today we’re sending a clear signal around the world that the UK is leading the way in consigning coal power to the history books and that we’re serious about decarbonising our power system so we can meet our ambitious, world-leading climate targets.”


Lower wind speeds saw renewable output down 16% in Q121

The government released its updated Energy Trends bulletin, containing statistics on all major aspects of energy in the UK. 

Published on 29 June, it reveals that lower wind speeds led to a 16% decrease in renewable generation in Q121 compared with Q120. As a result, there was a 15% increase in fossil fuel generation on Q120. Nuclear generation was 12% down on Q120 as outages continued at many of the UK’s nuclear plants. Low carbon generation fell 6.8 percentage points on last year’s record to 55.%. 

Energy consumption in the first quarter of 2021 was low as COVID-19 restrictions continued to reduce demand. Energy requirements for industrial use were down 2.1% on the same period last year, and demand from other final users were down 4.6%. Domestic demand was up 8.9%.


 

Delivery


National Grid buys WPD amidst CMA investigation

US firm PPL Corporation has completed the sale of Western Power Distribution (WPD) to National Grid for £7.8bn, it announced on 14 June. National Grid first announced its intention to buy WPD in March. The Competition and Markets Authority announced on 10 June that it will launch an investigation into the acquisition, issuing a hold separate order, meaning National Grid will own the WPD asset but not control it until regulatory approval has been received.

In the 10 June announcement, the CMA stated it has “reasonable grounds for suspecting” that if the acquisition was completed, it would lead to National Grid and WPD “ceasing to be distinct”. The CMA has also ordered that the two businesses remain separate, except with prior written consent of the CMA, until the investigation is complete.

National Grid’s proposed acquisition of WPD was announced alongside its intention to sell a majority stake in its UK Gas Transmission business for £6.4bn.

"Today's sale recognises the economic value that PPL created by advancing WPD into the premier collection of electricity distribution networks in the UK, a company that year after year delivered operational excellence, superior customer satisfaction and innovative solutions to advance a cleaner energy future," said Vincent Sorgi, PPL president and chief executive officer.


ESO updates industry on net zero market signals workstreams

National Grid Electricity System Operator (ESO) held a series of workshops in June on its work on enabling net zero electricity markets. The ESO has started on phase two of the project, which concerns the scale of the reform needed. Concerning investment, based on the ESO’s Future Energy Scenarios (FES), the UK will require between 220GW and 320GW of installed capacity (including storage and interconnectors) on the electricity system by 2050 to meet demand. The question the ESO is considering is, are current market signals working to deliver this investment in capacity that is needed for net zero. 

In terms of location, there are questions around constraint costs. Under the four different FES pathways, constraint costs could vary dramatically. ‘Steady Progression’ would see the lowest peak in constraint costs but would not enable the UK to reach net zero by 2050.


Experts suggest Ofgem needs clearer net zero remit

Economics academics have recommended to the government that it establish a specific department for net zero to provide the central leadership that the net zero challenge requires. 

Speaking to the Lords Industry and Regulators Committee on 29 June, Joe Perkins, Senior Vice President and Head of Research, Compass Lexecon, said such a department would provide Ofgem with more guidance on its role in the net zero transition. Cloda Jenkins, Professor of Economics, University College London, said that there is currently no central coordinating body for net zero to make the transition happen, and the UK does not have the “very clear pricing signals” that would lead market actors to make the switch to low carbon heating. Jenkins added that BEIS’ successor, DECC, had more joint working with Ofgem.

Perkins suggested the removal of some extraneous functions of Ofgem, such as the delivery of some environmental schemes. But, he said, what could make a large difference to the performance of Ofgem would be systemic changes such as the creation of a system architect separate from National Grid Electricity System Operator. 


 

Usage


Consumers slow to adopt low carbon heating and EVs 

On 24 May, Ofgem issued the outcome of its Consumer Insights Survey for 2020. For the first time, the survey included questions on consumer attitudes towards climate change and their intentions to change behaviour to help reduce the impact of climate change. The results of the survey covered four main areas: consumer understanding and engagement with decarbonisation; transportation with a focus on electric vehicle (EV) users; home heating and insulation; and smart meter adoption While BEIS’s Public Attitudes Tracker indicates the ~80% of consumers are concerned about climate change, the results from the Ofgem survey show that there is a mismatch between what consumers think they need to do to reduce the impacts of climate change and the actual behavioural changes needed. 

More than half of participants (56%) think that they are already doing all they can to save energy at home, with almost half saying they have made home energy efficiency improvements. However, it is those that already have a greater involvement with the energy industry – those who have bought an EV or solar panels – that have the greatest intentions to change home energy use or transportation habits. The regulator also noted the term “decarbonisation” is not well understood and considers that this term may best be avoided when communicating with consumers.

On the theme of transportation, Ofgem found that the uptake of EVs is still low, with only 3% of participants owning a fully electric car or van. Despite this, one-quarter of those without an EV believe they are likely to adopt one in the next five years. 

Only one in seven consumers stated that they intend to install low carbon heating such as heat pumps, although younger consumers, those with higher incomes and those living in houses built since 1990 showed a greater inclination to do this. Awareness of low carbon alternatives is also low, but Ofgem notes that low carbon heating initiatives are in their infancy. Aside from awareness, the main barriers to adoption are high perceived costs, scepticism that it will save money by reducing energy bills and perceived disruption to install. 


EDF to optimise one of Europe’s largest batteries

Battery storage firm Zenobe has selected EDF as the company’s trading and optimisation partner for a new 100MW battery. Announced on 28 June, the battery will be located at Capenhurst, near Chester, and will be the largest transmission-connected battery storage project in Europe, according to Zenobe. Currently Zenobe has 175MW of operational grid-scale battery capacity and aims to have 1GW by 2026. EDF currently has 490MW of battery storage contracted.

The long-term agreement will see EDF optimise the battery via its trading platform allowing EDF opening access revenue streams, including ancillary services such as Dynamic Containment, balancing mechanism and wholesale optimisation. EDF will also provide a floor price ensuring minimum income levels are protected.

Stuart Fenner, Head of Energy Trading Services at EDF said: “We are very pleased that the team at Zenobe have chosen EDF as their trading and optimisation partner on this pioneering battery project and we are committed to expanding our partnership with Zenobe in the future.”


BEIS survey finds 83% of public concerned about climate change

Research carried out between October and September last year published by BEIS on 28 June shows that 83% of the public is concerned about climate change. Around half (49%) of participants perceived transport as contributing “a great deal” to carbon emissions.

14% of participants perceived climate change as affecting their local area by ‘a great deal’ while 86% perceived other countries to be experiencing climate change effect to ‘at least some extent’. Around half (54%) of participants perceived their local area to be experiencing climate change effect to ‘at least some extent’.

On the issue of net zero around 39% participants stated they had ‘a lot’ or ‘a fair amount’ of knowledge of net zero, with 87% having heard of net zero. After providing information on net zero, around 78% of all participants said they strongly or somewhat supported the net zero target.

When asked about actions to be taken energy efficiency measures were perceived to be the change most likely to generally occur across society with 66% of participants perceiving this change as ‘extremely likely’ or ‘somewhat likely’ to occur in the next few decades. 50% stated that the UK should pursue an equal mix of technological and lifestyle changes to reduce UK carbon emissions.


Nissan confirms £1bn gigafactory to drive EV production

Nissan unveiled a £1bn electric vehicle (EV) Hub on 1 July. Launched with partners Envision AESC and Sunderland City Council, Nissan EV36Zero will be centred around the company’s plant in Sunderland and will be comprised of three interconnected initiatives: bringing together EVs, renewable energy and battery production, setting a blueprint for the future of the automotive industry. 

Of the investment, £423mn will be put towards producing a new-generation all-electric vehicle in the UK and Envision AESC will invest £450mnn to build the UK's first gigafactory adjacent to the Nissan plant, powered by renewable energy and next-generation battery technology.

Additionally, Sunderland City Council is leading a project that aims to deliver a 100% renewable electricity 'Microgrid' that will save 55,000 tonnes of carbon annually. With the ability to incorporate the existing Nissan wind and solar farms, initial plans suggest there could be as many as ten solar farms created, with an anticipated 132MW generation. This project is estimated to be an £80mn investment and also includes plans for a 1MW battery storage system using second-life Nissan EV/Envision AESC batteries, which will also allow for excess energy generated during daylight hours to be captured and used at another time, helping to balance demand on the grid. Additional infrastructure projects enabling the creation of the new EV Hub take the total initial investment above £1bn.


GRIDSERVE launches UK-wide network Electric Highway

GRIDSERVE launched UK-wide network GRIDSERVE Electric Highway on 30 June. Incorporating more than 50 high power ‘Electric Hubs’ with 6-12 x 350kW chargers in each, plus almost 300 rapid chargers installed across 85% of the UK’s motorway service stations, more than a 100 GRIDSERVE Electric Forecourts are also in development.

Toddington Harper, CEO of GRIDSERVE, said: “I was named after Toddington Services, built almost 60 years ago. In that time, vehicle technology has incrementally improved however still remains noisy, polluting and is ultimately detrimental to a stable climate. Now, in just a few years, we will see one of the most rapid and far-reaching revolutions in the history of transport.”

 

Posted by Nick Palmer - Cornwall Insight

Nick Palmer is Editor of Cornwall Insight’s weekly news publication, Energy Spectrum, and a contributor to Energy: Net zero, Cornwall Insight’s monthly update on how businesses are adapting to net zero energy markets.