Skip to main content

Certainty Forecast Update - Non-Energy Costs at February 2018

Posted February 28, 2018

James Chaplin, Market Analyst at EDF Energy, sums up the latest news in the non-energy costs forecasts:

“There’s lots of movement and lots of change. Non-energy costs are due to grow by almost 20% in 2018-9, with the largest year on year movements in the Contract for Difference, Renewable Obligation and Capacity Market Supplier Charge over the next 12 months.”

Watch James to for a quick-fire update on the non-energy costs forecast, fast >

"There’s lots of movement and lots of change. Non-energy costs are due to grow by almost 20% in 2018-9..."



Watch James give the latest update

Read the transcript

Key ups and downs

Our energy experts James Chaplin and Katherine Moriame run through the latest forecast.

Increased capacity, increased costs. FiT up.

Feed in Tariff costs on the rise as capacity increases.

What should you watch out for? Our analysts expect FiT costs to rise over 2018-2019, as more capacity continues to enter the scheme. Worth noting are the utilisation caps and the EII exemptions.

Why is that? Firstly, we’ll continue to monitor the extent to which caps placed on the scheme are being met. Secondly, since the implementation date for EII exemptions is dependent on State Aid approval and legislation going through Parliament, we’re expecting them to come into effect from April 2019. We’ll keep track of any changes to this.

Gentle rise. RO up.

Renewable Obligation costs are set to increase as we see new capacity enter the scheme.

What can we be sure of for this year? We have certainty around the 2018-9 cost as DESNZ have released the obligation level and the buy-out price. We also have certainty around EII exemptions as these passed through Parliament at the end of 2017 and will be implemented on 1 April this year.

What should we expect looking further ahead? Our experts see the RO costs set to increase further but at a slower rate due to the RO scheme closing new capacity at the start of 2017 – there are some grace periods but then we don’t forecast any capacity entering the scheme past 2019.

New generators. CfD up.

As the newest of the low-carbon schemes, we expect the Contract for Difference cost to increase as new generators come online.

What should you watch out for?  There’s a bit of uncertainty here as we kick off 2018-9.

Why is that? The CfD cost depends on power price movements and new generator start dates so our experts will continue to monitor these on a regular basis. You can monitor power prices on our Market Insight portal.

Set and certain. TNUoS and DUoS slightly up.

Final charges have been set for TNUoS for 2018-9 with a small increase across all zones. Final charges have also been set for DUoS for 2019-20, with minimal changes overall, however some variation by region and by tariff.

What should you watch out for? Ofgem have now started their Targeted Charging Review (TCR), which is considering options for network charging for both transmission and distribution.

When can you expect the outcome? They’re expected to consult in the Summer with change proposals to be implemented by the industry in time for April 2020.

New HVDC link. BSUoS down.

With the new HVDC link between England and Scotland, we expect balancing costs to decrease over the next year.

What’s this all about? The HVDC link is an undersea cable connecting England and Scotland, which will provide the National Grid with more options to transport electricity to balance the system, so driving costs down.

What should we watch out for? It is important to be aware of the price differential between the Winter and Summer months.

Why is that? Last year, BSUoS costs were higher in the Summer months than Winter. This was caused by lower demand, lower flexible plant availability and higher costs of managing unrequired wind generation.

Decreasing and more certainty. CMSC down.

The T-1 auction for delivery in 2018-19 cleared earlier in February, and the news is good but be aware of the charging period.

What was the outcome? The T-1 auction secured 5.8GW of capacity at a cost of £6/kW, which is slightly lower than anticipated. The final rate will depend on our turned demand but we now have a good view of total cost this winter.

What to watch out for? The CMSC charge is reliant on time of use, so it will be levied between 4pm and 7pm on working days between the months of November 2018 to February 2019.

What can we expect looking ahead? Hot off the press, the T-4 auction for delivery in 2021-22 also cleared in February, securing 50.4GW of capacity at a cost of £8.40/kW, considerably lower than previous T-4 auctions. We’ll know more about the T-1 auction for next winter later in the year.

3 tools, 3 ways to keep up

As non-energy costs continue to rise, it’s important for you to keep up to date and on top of the latest updates so you can plan ahead.

Here are 3 tools you can trust from our EDF Energy experts to help you:

Get involved with our TalkPower programme, through blogs, conferences and webinars.

Catch our latest Quarterly Monitor Report to read up on the latest predictions and forecasts from our experts.

Sign up to our Market Insight Portal and follow experts’ news and views, including day-by-day power market reporting, regulatory updates and the all-critical Triad alerts.

Finally, of course, if you need answers, advice or just a chat make the right decisions for your business on your next contract renewal, talk to your account manager. They’re always on hand, on top of all things energy and keen to help.

James Chaplin is one of our Market Analysts at EDF Energy, with special responsibility for CfD, RO and FiT.

Katherine Moriame  is our Cost Stack Senior Analyst, responsible for forecasting Non Energy Costs.  

Post a comment

Your email address will not be published.

Related articles

August 15, 2022

Registration window open for new Energy Broker Dispute Resolution Scheme

Following Ofgem's ‘Microbusiness Strategic Review’, energy brokers who are delivering services to microbusinesses will need to sign up to an approved dispute resolution scheme.