Ofgem faces pricing rebellion from energy network suppliers
National Grid has warned the energy regulator to rethink its plans to crack down on energy network companies as the industry prepares to mount an unprecedented rebellion against Ofgem’s proposals this week.
Energy network companies, including National Grid, are expected to fiercely oppose the regulator’s plans to halve the returns they make on investing in energy infrastructure in an industry consultation that closes on Friday.
Scottish Power and SSE have also spoken out in the brewing row between the regulator and the energy industry, which could lead to an investigation by the Competition and Markets Authority (CMA).
Ofgem set out plans earlier this summer to slash the spending of energy networks by £8bn over the next eight years and halve the returns they are allowed to make on their investments to 3.95%, down sharply from 7-8% under the current regulatory regime, in order to keep a lid on household bills.
Nicola Shaw, the head of National Grid’s networks business, said the financial crackdown could “hit the reliability” of Britain’s energy system and put “barriers in the way” of the UK’s net zero climate targets.
She said Ofgem’s “unprecedented” financial cuts meant crucial projects to help the UK reach net zero had been left out of the spending plans for the next eight years and alienated investors who had historically prized Britain’s stable regulatory regime.
“Investors are absolutely expecting a lower rate of return. That isn’t the concern,” Shaw said. “But they like predictability and stability. And they have none of that with Ofgem.”
National Grid spoke out after Scottish Power said Ofgem’s plans could “slam the brakes” on a green economic recovery, and SSE warned that companies could be forced to take the battle to the CMA.
Jonathan Brearley, Ofgem’s new chief executive and the former head of network regulation, said its proposals were the result of “extensive analysis” to determine “a fair balance between investment and customers”.
Ofgem controls the amount that monopoly energy network companies can spend on upgrading the country’s gas pipes and power lines because the cost is passed on to customers through their energy bills. Typically, network company costs make up about a fifth of the average household energy bill.
In the past, the regulator has faced fierce criticism from MPs and consumer groups for overseeing a regulatory plan that allowed energy company profits and shareholder payouts to rise at the expense of energy bills.
Whitehall’s spending watchdog, the National Audit Office, found that Ofgem’s so-called “price controls” allowed households to shoulder energy network costs that were £800m higher than they should have been over eight years.
The political outrage helped fuel an election manifesto pledge from the Labour party to nationalise Britain’s network companies and set up a new regulator.
A spokesman for Ofgem said its proposals would “create a greener, fairer energy system for consumers now and in the future”.
He said: “We’re unlocking unprecedented funding for projects that cut carbon emissions from our energy system. We’re planning on funding 90% of the shovel-ready green projects companies have proposed and stand ready to fund more throughout the price control if they bring us strong and well-evidenced proposals.
“The evidence makes clear that networks can attract investment at much lower rates of return and remain a stable and attractive proposition to investors.”
The Guardian
Carbon-cutting schemes to boost case for Sizewell C
EDF is exploring plans to produce hydrogen or to suck carbon dioxide out of the atmosphere using surplus power and heat from its proposed Sizewell C nuclear plant.
The French energy group is looking at deploying the technologies near the Suffolk power station as it seeks to bolster its case for the £20 billion project.
The plans could lead to electrolysis being used to produce clean-burning hydrogen for use as a low-carbon fuel in industry or to heat homes. Proposals in their early stages also could involve CO2 being removed from the air using “direct air capture”, an experimental technology to tackle global warming that has been championed by Dominic Cummings, the prime minister’s adviser.
The Sizewell C plant would have the capacity to produce 3.2 gigawatts of electricity, or enough to power six million homes. The project is in limbo as the government considers what financial support to offer after controversy about an expensive subsidy contract for its sister station under construction at Hinkley Point C in Somerset.
Critics of nuclear power point not only to its high costs but also to its relative inflexibility, as most reactors run at maximum capacity and have limited ability to adjust their output. As more cheap wind and solar farms are built, more flexible back-up will be needed.
EDF’s plans would mean that when Sizewell C’s power was not needed by the grid, the plant could be deployed to produce hydrogen or to power direct air capture. The company believes that both these processes could be made more efficient using heat generated by the reactors, as well as electricity.
Julia Pyke, a director of the Sizewell project, said that it was “working on the engineering to extract the heat” through a small design change to the plant. This would entail installing valves so that heat generated from the nuclear reaction could be extracted before it reached the turbines where electricity is generated.
She said: “Decarbonising heat in the UK is hard. We need to develop more storage to balance out intermittency and nuclear can make a very useful contribution. The ideas are a step towards the more co-ordinated systems thinking we need as a country to decarbonise successfully.”
The Times
GB carbon emissions from electricity hit record low in lockdown – report
Carbon emissions from Britain’s electricity system plunged by more than a third during the coronavirus lockdown after renewable energy played its largest ever role helping to keep the lights on, according to a report.
During the spring bank holiday weekend in May, the energy grid’s carbon intensity reached a record low of 21 grams of CO2 per kilowatt-hour due to a slump in energy demand triggered by Britain’s lockdown measures and a surge in renewable energy.
The Covid-19 impact also caused electricity market prices to tumble by more than 40% to £23 per megawatt-hour while the carbon intensity of the electricity system fell by a fifth to an average of 153 grams of carbon per kilowatt-hour.
Although Britain’s electricity has become cheaper and greener in recent months, the energy system has become more expensive for National Grid to operate, according to the report.
The electricity system operator has spent an average of £100m every month over the first half of the year paying companies to turn off their generation projects, or charge their batteries, when there is more electricity than the grid can use.
Dr Iain Staffell of Imperial College London, and the lead author of the report, said the past few months have “given the country a glimpse into the future for our power system, with higher levels of renewable energy and lower demand make for a difficult balancing act”.
“To help the country decarbonise further it is vital that flexible technologies which provide power and system stability play an increasing role in our grid,” he added.
At the start of the decade, the cost of balancing the grid added about £1 per megawatt-hour to the cost of electricity shouldered by energy users. But in the last quarter the cost surpassed £5 per megawatt-hour for the first time, up more than a third higher than expected.
The Guardian
Extinction Rebellion activists to blockade Parliament in push for new climate bill
Extinction Rebellion activists are set to blockade streets around Parliament tomorrow (1 September) in an attempt to force climate change to the top of the political agenda as MPs return from their summer break.
Campaigners will descend on Parliament Square with a plan to disrupt the start of the Parliamentary session until MPs agree to radical climate action.
The planned protest is the first major action by XR this year, after an April rebellion was cancelled due to the pandemic. It follows a weekend of regional demonstrations, with banners, marches and ‘die-ins’ at business headquarters across the country.
XR said this week’s protest will be peaceful and socially distanced, but is likely to include the blocking of some roads. Action is also planned in Manchester and Cardiff city centres.
Extinction Rebellion has three core asks: For politicians to “tell the truth” about the scale of the climate crisis, for the UK to target net zero emissions by 2025, and for the creation of a Citizen’s Assembly on climate change.
The protestors are also expected to lend their backing to a new Climate and Ecological Emergency Bill, set to be tabled in Parliament by Green Party MP Caroline Lucas on Wednesday.
The Bill would toughen up goals set in the 2008 Climate Change Act, such as by including emissions from international trade, aviation and shipping in the UK’s net zero goal. It would also meet XR’s demands for the creation of formal Citizen’s Assemblies, to allow the public a greater say in how the UK cuts carbon.
“The Climate Change Act urgently needs updating in the face of an accelerating climate crisis,” said Ms Lucas. “We need far earlier, bolder and more comprehensive action to reduce emissions and to restore nature.”
Ms Lucas’ office said the legislation has support from MPs from Labour, SNP, the Lib Dems, Plaid Cymru and the SDLP. But as a Private Member’s Bill, the legislation has only a slim chance of becoming law without government backing.
iNews
Jobs in pipeline as Scottish power generator SSE looks to plug skills gap
SSE, the Perth-headquartered energy provider, has launched a pilot jobs programme at it looks to help plug the industry skills gap and “bolster the race to net zero”.
The FTSE-100 group, which is focused on green power generation after selling its household energy supply business, has teamed up with STEM Returners to support people who have taken a career break or are looking to return to the sector.
The 12-week programme will help people with the requisite skills restart their career and all returners who take part will have the opportunity to gain a full-time position with the company.
SSE estimates that the wider energy industry will need to recruit some 200,000 people in the next decade. The firm has already announced more than 1,000 additional jobs since June as part of a £7.5 billion investment programme over the next five years to spur a green recovery from the coronavirus pandemic.
John Stewart, director of human resources at SSE, said: “The energy industry was facing a skills gap before the coronavirus took hold and now with real momentum to build a cleaner, more resilient recovery from the economic impact of coronavirus and reach net zero, the industry will need to recruit thousands more green jobs for the future.
“These are skilled, sustainable roles which will benefit the UK regions; we’ll be building the world’s biggest offshore wind farm off the coast of Yorkshire, Scotland’s largest offshore wind farm off the coast of Moray and two huge projects on Shetland, not to mention the raft of opportunities that exist across many other areas of our business.
“This scheme will help us support people already skilled in STEM industries, back into work where they are very much needed. In a difficult jobs market, the energy sector is providing some much-needed good news for long-term career prospects in all areas across the UK and Ireland.”
The Scotsman
‘Hackers for hire’ scare UK cyber‑chief
Britain’s cyber-chief has warned about the growing threat from “hackers for hire” and rogue states such as Russia that are weaponising computer viruses to steal academic research and government secrets.
Ciaran Martin, the outgoing chief executive of GCHQ’s National Cyber Security Centre (NCSC), also expressed fears about the largely unregulated global market where “cyber-tools”, including ransomware, can be purchased by anyone to carry out attacks ranging from data and identity theft to disrupting a country’s critical infrastructure such as its power grid.
Writing today online, Martin says such cyber-weapons — which are often used for financial gain, or deployed by rogue states to intrude into government networks — could easily spin out of control to infect and disrupt companies and public services they did not mean to attack.
“What keeps me awake at night is worrying about the damage a rogue, state-backed or stateless criminal group could do with a cyber-tool they don’t fully understand, and can’t control once they’ve launched it,” he writes.
“The most likely cause of the so-called ‘category one’ attack that the UK has so far been fortunate to avoid is an uncontrolled virus, accidentally released by incompetent attackers, infecting and disrupting companies or public services they didn’t intend to target.”
The Sunday Times
“Who are you?” Margaret Thatcher asked Robert Evans at a Downing Street reception. When he replied, she turned on her heel and walked away.
That confrontation occurred at the height of the emotive campaign to privatise British Gas in which Evans’s chairman and mentor, the irascible Sir Denis Rooke, fell out with the prime minister in a big way over whether the industry should be floated on the stock market as one entity or several.
Rooke and Evans wanted their empire to stay intact, ignoring economists’ arguments about regional gas companies having to compete with one another. The pair won that battle.
Even though gas was then the biggest privatisation, and the accompanying “Tell Sid” advertising blitz went a long way to realising Thatcher’s dream of a nation of small shareholders, neither Rooke nor Evans rate even a mention in her memoirs. Thatcher later got her way with the water and electricity industries, which were divided before being sold to the public.
For Evans, who spent virtually his entire working life with British Gas, apart from a brief spell with Burmah Oil, the 1986 privatisation was two-edged. It brought him a knighthood, but he was never entirely comfortable in the limelight.
Critics called him plodding and tongue-tied, grey and characterless, qualities emphasised by his following the larger-than-life Rooke and being succeeded by Richard Giordano, the American matinee idol lookalike who was seen as “urbane and devastatingly charming”.
Yet Evans, a medium-built, dark-haired six-footer, was nobody’s fool. Not for nothing did dancing become one of his favourite pastimes. A canny Liverpudlian who counted the comedian Ken Dodd among his school pals, he admitted to being “a bit of a ducker and diver”, living on his wits, instinctively working around problems rather than trying to barge through them.
His career, beginning at the end of the Second World War, coincided with a technical revolution in the gas industry as it moved from using coal as its raw material to oil-based “high-speed gas”, then from 1965 tapping North Sea natural gas.
When Rooke retired in 1989, the always impeccably dressed Evans expanded British Gas abroad, buying huge exploration acres in the US and taking over Consumers Gas of Canada. Teams hunted for prospects in eastern Europe, north Africa, Latin America and southeast Asia.
However, his later years as chairman were coloured by controversies over pay, perks and pension rights. In 1991, on the back of a rise in profits of 42 per cent, his pay rose by 66 per cent to cries from the Labour opposition of “sheer unbridled greed”.
That was followed by the revelation that his Bournemouth penthouse overlooking the sea had been fitted with a catalogue of gas-fired appliances, including shower, lights, barbecue, dishwasher, tumble dryer, fire, oven grill, cooker-hob, Aga and central heating.
A spokesman for British Gas said at the time: “As far as we are concerned, there is nothing wrong or improper about the chairman using the goods in his home.”
It then emerged that Evans and his counterpart at the newly privatised BT were retaining the index-linked pension rights that had been given to them as public sector employees for accepting lower salaries than the commercial world paid. “We’re not ripping off the customers,” Evans said. “They enjoy some of the lowest prices in Europe.”
To read the fill obituary (subscription required) click here
The Times
Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.