Regulatory Report - September 2022

Generation

Prime Minister Liz Truss announced a new ‘Energy Price Guarantee’ to support households and businesses with their energy bills.

The UK Government published the details of its Energy Bill Relief Scheme, which will provide energy bill relief for non-domestic customers in GB initially through the period 1 October 2022 to 31 March 2023.

 

Delivery

National Grid Electricity Transmission published an update on its work to accelerate grid connections and increase network capacity, as a part of the transition towards a net zero system.

BEIS announced that it will be using collected electricity meter data to support the delivery of the Energy Bills Support Scheme.

The August Forecast Transmission Network Use of System (TNUoS) tariffs for 2023-24 were published by National Grid ESO.

 

Usage

Energy UK published proposals for a new voluntary energy efficiency scheme called ECO+.

Energy Systems Catapult published its report Clean Energy Retail – The Role of Clean Energy Retailers in the Net Zero Transition, highlighting that energy retailers must radically evolve to help customers navigate net zero.

Also covered in this Regulatory Report:

 

 



Generation

Prime Minister announces ‘Energy Price Guarantee’

Prime Minister Liz Truss announced a new ‘Energy Price Guarantee’ to support households and businesses with their energy bills on 8 September.

This will take effect from 1 October 2022 and means that a typical UK household will pay no more than an average £2,500 per year on their energy bill for the next two years. This takes account of temporarily removing green levies, worth around £150, from household bills and will supersede the existing Default Tariff Cap. The ‘Energy Price Guarantee’ is in addition to the £400 energy bills discount and will apply to all households, saving a typical household an average of £1,000 per year.

A new scheme is also being introduced for businesses and other non-domestic energy users to protect them, initially to be in place for six months, after which the government will provide ongoing focused support for vulnerable industries. The government said that it will provide energy suppliers with the difference between this new lower price, and what they would charge their customers were this not in place and confirmed that schemes previously funded by green levies will continue to be funded by the government during the two-year period. Further details were set out in the government’s policy paper.

The government added that it is also taking action to accelerate domestic energy supply, including launching a new oil and gas licensing round and lifting the moratorium on UK shale gas production. Following this, the government announced on 22 September that it has lifted the moratorium on shale gas production in England and will consider future applications for Hydraulic Fracturing Consent. It also confirmed its support for a new oil and gas licensing round, expected to be launched by the North Sea Transition Authority (NSTA) in early October and lead to over 100 new licences.


Details of Energy Bill Relief Scheme for businesses published

On 21 September, the UK Government published the details of its Energy Bill Relief Scheme (EBRS), which will provide energy bill relief for non-domestic customers in GB initially through the period 1 October 2022 to 31 March 2023.

The scheme will be available to those on non-domestic contracts that are on existing fixed price contracts that were agreed on or after 1 April 2022, signing new fixed price contracts, on deemed/out of contract or variable tariffs, or on flexible purchase or similar contracts. It is highlighted that there will be very limited exclusions to the EBRS, such as businesses that use gas or electricity for the purpose of generating power they are selling back into the grid. Recipients will receive a discount on their gas and electricity unit prices, calculated by comparing the estimated wholesale portion of the unit price that would be paid this winter against a baseline ‘government supported price’ – set at £211/MWh for electricity and £75/MWh for gas in GB with comparable rates to follow for NI. The support will be automatically applied to all eligible bills. The price reduction for those on a flexible purchase contract will depend on the difference between their monthly weighted average baseload price and the government supported price.

The government expects to publish a review into the operation of the scheme in three months’ time, to inform decisions on future support after March 2023.


Energy price relief schemes to cost £60bn

On 23 September, the Chancellor of the Exchequer released The Growth Plan 2022. It re-iterated a number of announcements but provided costings for the interventions.

The plan confirmed that the Energy Price Guarantee (EPG) and Energy Bills Support Scheme (EBSS) will cost the government £31bn in 2022-23. The Energy Bill Relief Scheme (EBRS) will cost the government £29bn in 2022-23.

The government also confirmed that it is bringing forward legislation to implement new obligations on energy suppliers to help customers take action to reduce their energy bills and stated that it would be bringing onshore wind planning policy in line with other infrastructure to allow it to be deployed more easily in England. In addition, it contained details on the £40bn Energy Markets Financing Scheme to help address “extraordinary liquidity requirements faced by energy firms from high and volatile energy prices”, which will open to applications from 17 October.


Energy UK backs UKERC plan to reduce power costs

On 1 September, Energy UK indicated its support for a plan – first outlined by the UK Energy Research Centre – that it expects could reduce bills for households and non-domestic customers by reducing the costs paid to low carbon electricity generators.

The voluntary scheme would work by offering nuclear plants and renewable generators with existing Renewables Obligation (RO) contracts the opportunity to secure a longer-term agreement with lower returns in place of selling electricity at wholesale market prices.

Energy UK states the proposals could reduce energy bills by between an estimated £10.8-£18bn per annum from next year, equating to a £150-£250 saving for a typical household, in addition to a £6.7-£11.1bn reduction for non-domestic users.

BEIS announces successful nuclear projects to receive funding boost On 2 September, BEIS announced that it is providing £3.3mn in funding through the Advanced Modular Reactor Research, Development and Demonstration (AMR RD&D) programme to support the development of cutting-edge nuclear technology in the UK.

Of this, £2.5mn will be assigned to six projects, delivered by five companies, which have received funding as part of the first phase of the programme. The projects will seek to test the feasibility of high temperature gas reactor (HTGR) technology and coated particle fuel. In addition, the government is providing up to £830,000 to the Office for Nuclear Regulation and the Environment Agency to develop their capability and consider innovative regulatory approaches to HTGRs.

The AMR RD&D programme, part of the £385mn Advanced Nuclear Fund, focuses on developing high temperature gas reactors (HTGRs), with an ambition for a demonstrator by the early 2030s, as they optimise opportunities for decarbonising industrial heat.

The government announced on the same day that the Future Nuclear Enabling Fund (FNEF) is now open to applications. The fund will provide up to £120mn to help mature potential nuclear projects ahead of the expected government process to select the next nuclear projects through a reduction of project risks, so they are better positioned for future investment decisions. On the same day, BEIS also issued updated guidance for entry to the Generic Design Assessment (GDA) for advanced nuclear technologies to account for those wishing to apply to the FNEF.

 



Delivery

NGET shares plans to promote low carbon power

On 7 September, National Grid Electricity Transmission (NGET) published an update on its work to accelerate grid connections and increase network capacity, noting the importance of these activities in promoting low carbon power as a part of the transition towards a net zero system.

NGET highlighted three ongoing workstreams to develop and upgrade physical infrastructure and to continue supporting improvements to the transmission network connections process. The first is developing a Transmission Entry Capacity (TEC) amnesty procedure to streamline the connections process. Currently, NGET is required to manage connections on a first come first serve basis, with developers often reluctant to relinquish positions in the connections queue due to the long lead times faced. This voluntary process would allow customers to leave the connections queue with little or no termination liability. This is alongside efforts with Ofgem, other network companies, and industry stakeholders to develop new queue management tools, which would reduce connection queue times and ensure that those most able to connect are progressed first.

NGET is also exploring new approaches to accommodate multiple customers at one physical connection point, called “grid parks”. These would ensure the existing network is used efficiently by allowing three small <50MW customers to connect at 33kV to the transmission network.

Following this, National Grid ESO launched its Transmission Entry Capacity (TEC) Amnesty.


BEIS to use electricity meter data to support EBSS

On 7 September, BEIS announced that it will be using collected electricity meter data to support the delivery of the Energy Bills Support Scheme (EBSS). The data will be used to allow BEIS to monitor the progress and operational delivery of the EBSS.

It will also be used to conduct financial checks on EBSS payments and for the evaluation of the scheme to understand its impact and to inform future government policy. BEIS states that it will collect the personal data from electricity suppliers, which will be kept only as long as required to support the evaluation and scrutiny of the EBSS. It highlights third parties will be unable to access the data and that customers will be able to object to the processing of their personal data.


Draft 2023-24 TNUoS tariffs published

The August Forecast Transmission Network Use of System (TNUoS) tariffs for 2023-24 were published by National Grid ESO on 31 August. The total revenue to be recovered is ~£4.08bn, an increase of ~£133.62mn from the April five-year forecast. The average generation tariff is forecast at £11.91/kW, a decrease of 71p/kW from the five-year forecast, due to a decrease in generation revenue and increase in charging base. The average Half Hourly demand tariff is £5.28/kW, an increase of £0.51/kW. The average Non Half Hourly demand tariff is 0.25p/kWh, an increase of 0.02p/kWh since the five-year view. The ESO said that the impact on consumers is expected to be £40.09 per household.

The 2023-24 charging year is the first that will apply the Transmission Demand Residual (TDR) banded charges methodology. From April 2023, demand residual banded charges will make up majority of the TNUoS demand charge, which will see a fixed annual/daily charge applied to each site across the banding categories and thresholds. Charges for 2023-24 will be updated in November and finalised by the end of January 2023.

 



Usage

Energy UK proposes new energy efficiency scheme

Energy UK published proposals on 21 September for a new voluntary energy efficiency scheme called ECO+ that it states will help households reduce their energy bills in the long-term while strengthening the UK’s security of supply and boosting economic growth.

In an accompanying report, Energy UK outlines how the scheme would provide partial subsidies for building fabric energy efficiency measures to be made available to owner-occupier households in in Council Tax bands A to D. Consumers would get access to funding through energy suppliers that choose to participate in the scheme, while subsidies would be funded through government spending. It is intended that ECO+ would build on the existing supply chain partnerships that energy suppliers have established through the government’s existing Energy Company Obligation (ECO).

Energy UK highlights that this scheme would help create a commercial market for energy efficiency measures. It adds that while the suppliers are well placed to deliver re-fits holistically, changing government schemes have hindered this. ECO+ would be a voluntary scheme that “can unlock a market-led approach to energy efficiency improvements by driving private finance into the refurbishment of homes”. It adds that this is a sustainable and long-term solution and would create opportunities for green finance.

Going into more detail, the report states that budgets must be ambitious to support long-term delivery and points to a scaling budget and pathway which leads to the scheme budget of £1bn. It also notes that the purpose of the scheme will only be achieved if it is adopted voluntarily by suppliers, supporting the delivery of subsided measures.

With regards to eligibility, Energy UK states that it should incorporate those in Council Tax bands A to D that are outside of the scope of ECO. It adds that some of the budget should be ring-fenced so vulnerable households receive energy efficiency measures that are fully subsidised. To keep consistent with ECO, Energy UK recommends that Ofgem is appointed the scheme administrator.


ESC’s policy reform recommendations for energy retailers

On 7 September, Energy Systems Catapult (ESC) published its report Clean Energy Retail – The Role of Clean Energy Retailers in the Net Zero Transition, highlighting that energy retailers must radically evolve to help customers navigate net zero.

The report sets out that policy reform is needed which should focus on enabling energy retailers to develop offers which incentivise people to make low carbon choices and become more flexible; making low carbon energy options simple and easy to move to while maintaining trust; and ensuring the transition to clean energy is accessible for all.

It notes that this will require energy retailers to build trust and strengthen relationships with customers, and develop innovative propositions, that focus on consumer outcomes, low carbon products and services, vulnerable households, financing, and innovative tariffs.

The report concludes with the acknowledgement that immediate action is required to alleviate the hardship caused by the current energy crisis, emphasising the actions imposed are to align with the medium- and longer-term vision for energy retailers.


Recommendations to increase green investment

On 2 September, the New Economics Foundation (NEF) published a report Green Credit Guidance, highlighting that green private investment must increase by £140bn over the next five years to meet the UK’s net zero goals. It said that the UK’s emission targets are ‘threatened’ by the rise in interest rates and that the UK economy is suffering from prolonged lack of investment. As such, it recommends that:

  • The Bank of England should set up a secondary, lower interest rate via its existing Term Funding Scheme that protects vital green investments from rate hikes, boosts green activities, and reduces UK vulnerability to future energy price shocks.
  • The new chancellor should give the Bank of England an annual target for boosting lending to green activities.
  • The Bank of England should set targets for how much commercial banks must lend to the green activities essential for reaching the UK’s net zero targets.

 


Over 35% increase of pure-electric car sales

New data was released on 5 September from the Society of Motor Manufacturers and Traders (SMMT) and Zap-Map indicating that, compared to August 2021, new registrations of pure-electric cars showed a year-on-year increase of 35.4% despite overall sales of new cars growing by 1.2%.

Ultra-rapid charging devices have also seen a rise in demand of 75% since August last year. Based on the August 2022 figures, the cumulative total of plug-in cars on UK roads has risen to 940,000. The breakdown is 530,000 battery electric vehicles (BEVs) and 61,000 plug-in hybrid electric vehicles. In addition, the data shows that BEVs accounted for 14.5% of overall car sales in August. On the issue of charging, the report stated that 218 rapid and ultra-rapid devices were installed talking the total to 6,236.


Free Zap-Map Premium subscription for Nissan EV customers

On 22 September, Zap-Map announced that it has partnered with Nissan Motor GB to provide purchasers of Nissan’s electric vehicles (EVs) with three years’ free subscription to Zap-Map’s Premium service. It stated that the partnership will allow new Nissan customers to plan electric journeys quicker and drive smarter with in-car support through Apple CarPlay or Android Auto.

Nic Thomas, Marketing Director, Nissan Motor GB said: “Nissan is thrilled to be partnering with Zap-Map in this exciting move towards more integrated electric motoring. Nissan have always been pioneers of the electric vehicle market and Zap-Map lead the way for charge mapping, this partnership is a logical next step as both companies continue to pave the way for intuitive electric travel.”


Trial of new EV chargepoints launched across London

Energy consultancy, Element Energy, has announced the full launch of its electric vehicle (EV) chargepoint trial as part of its Subsurface Technology for Electric Pathways (STEP) project. The trial will take place across London, with 150 EV drivers signed-up to test the chargepoints, designed by Trojan Energy, which sit flat and flush with the pavement with no permanent raised structure.

According to Element Energy, the technology will provide vital on-street charging for those without driveways or garages, while keeping the streets clear. If the trial is successful and passes council consultation, Element Energy states that the system will remain in use for years to come.

Posted by Kate Morley-Hurst - Cornwall Insight

Kate Morley-Hurst is a Writer within the Content team at Cornwall insight, supporting the delivery of a range of publications capturing key developments across the GB energy sector and how businesses are adapting to net zero energy markets.

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