Britain running on sunshine as summer demand falls

The changes have come from an evolution in how energy is being used, and those who successfully manage these demand patterns, particularly if combined with Demand Side Response (DSR), could see significant cost savings.

Analysis from EIC has shown that maximum summer demand (seen between May and August) has fallen 17% in the last decade. From a peak of 44GW in 2012, maximum consumption for the current summer has fallen to just 35GW.

This near 10GW loss in demand is similar to the reduction seen during the winter. Furthermore, it’s not only peak consumption that’s been reduced but baseload generation. Minimum summer demand has fallen by 19% since 2009. How much of this is down to efficiency improvements or consumption moving behind the meter is unclear. However, the change does mean National Grid has nearly 10GW less electricity demand to manage on its transmission network.

 

maximum summer demand

 

The trend can be seen more clearly when broken down by month. Average peak demand during May 2012 was over 39GW. This year that figure was just 31.5GW, a reduction of over 7GW in only six years.

 

maximum demand per month

 

Improving energy efficiency

The cost of LED lighting halved between 2011 and 2013. During this time, consumers switching towards the more efficient bulbs helped facilitate a strong drop in demand. This could be helped further with news that the EU will ban the use of halogen lightbulbs from 1 September 2018.

Another major explanation for the demand drop, aside from efficiency improvements in appliances and lighting, is the significant growth in small-scale on-site solar capacity over the same period. Small-scale distribution connected solar has a capacity of under 4KW but the number of installations has grown from under 30,000 in 2010 to nearly 900,000 in 2018. An increase of almost 2,900%.

The total capacity of the small-scale solar now available is over 2.5GW, which is not far off the total capacity for the new Hinkley Point C nuclear power station.

As the use of small-scale solar (the type typically installed on housing or commercial property) has grown demand has fallen. More and more of within-day demand is being met by onsite generation. Consumers can take advantage of the bright and warm summer weather conditions to generate their own solar power, thus reducing the call for demand from the transmission network.

 

maximum demand vs solar

 

The solar impact

The introduction of high volumes of solar generation to the grid – total capacity across all PV sites is over 13GW – has also significantly altered the shape of demand. Consumption across a 24 hour period has flattened in recent years.

The traditional three demand peaks (morning, early afternoon, and evening) have shifted closer to the two peak morning and early evening winter pattern. The ability to generate high levels of embedded – behind the meter – generation during the day in the summer has flattened and at times inverted the typical middle peak. This has left the load shape peaking in early morning (as people wake up) and later in the evening, as people return home from work.

The absolute peak of the day has also shifted in time, moving from early afternoon to the typical early evening peak of 5-5:30pm, again similar to the winter season.

The below graph shows the change over time of the July load shape, which highlights both the reduction in demand and the change in shape, with consumption flattening during daylight hours as a result of behind the meter solar generation dampening network demand. With electricity costs – both wholesale and system – reflecting supply and demand, if consumption is being changed, then it also has an impact on these costs.

 

changing July load shape

 

Stay informed with EIC

Our in-house analysis highlights the impact of onsite generation on load patterns and the extent to which demand can be changed by taking action, and subsequently how behaviours can alter a business’ energy costs.

If you can shift demand away from historical high consumption periods, you can cut your energy costs and make significant savings. One such way to do this is by using smart building controls, such as our IoT-enabled Building Energy Management solution.

To find out more download our brochure, call 01527 511 757, or email info@eic.co.uk.

Reduce your CRC costs through the secondary market

The cost associated with CRC reporting will be replaced from 1 April 2019 with an increase in the Climate Change Levy (CCL), whilst the reporting element of the scheme is to be replaced with Streamlined Energy and Carbon Reporting (SECR).

Participants are required to order, pay, and surrender allowances each compliance year in order to comply with the CRC scheme. There is no further opportunity to purchase forecast allowances at a lower cost, and July 2019 will be the last time ‘Buy to Comply’ allowances will need to be purchased to meet CRC obligations. One allowance equates to one tonne of CO2 reportable, and allowances purchased in the ‘Buy to Comply’ sale will cost more than those sold in the forecast sale at around £1.10 additional cost per allowance.

Allowances can be purchased in government sales of allowances or, where available, through the secondary market.

 
 

What is the secondary market?

CRC allows the trading of allowances through buying or selling to another CRC account holder on the registry. This does not impact the ‘Buy to Comply’ allowance process and doesn’t have set deadlines for purchasing or selling allowances.

The appetite for trading on the secondary market is dependent on the use by other participants and there is no guarantee that buying and selling of allowances will occur when using the notice board.

 
 

Why use the secondary market?

The decrease in fossil fuel use for electricity generation and increase in renewable electricity production has had a positive impact on the emission factor. This has been a favourable outcome for most CRC participants, reducing their emissions and allowance obligations for electricity in CRC reporting.

Organisations that have utilised the lower cost forecast purchase option for CRC reporting have been caught out by the decrease in electricity emission factors for 2017/18 reporting by over forecasting allowances required. This has left some organisations with surplus allowances.

The cost to comply in the 2018/19 Buy to Comply sale has been set at £18.30 per tonne of CO2 reportable.

Purchasing on the CRC secondary market could save your organisation on average approximately £2.18 per tonne of CO2.

 
 

How can EIC help?

EIC can manage the transfer process for you from start to finish*, whether you have surplus allowances to sell or are looking to buy on the secondary market to reduce the cost of complying for the final year of CRC reporting.

The process is simple and if you would like to find out more our dedicated Carbon team is on hand to guide you. You can contact our team on 01527 511 757 or email info@eic.co.uk.

*EIC will not process payment of allowances on behalf of an organisation. Payments for allowances bought or sold on the secondary market are to be made off system between the participants involved. Any additional administration or transaction fees associated with the transfer will need to be pre agreed between the two organisations.

Europe cannot compete with Chinese dash for LNG

European storage started this summer at its lowest levels on record following the impact of the ‘Beast From the East’. This should have encouraged very strong injections right through the summer, ensuring there is enough supply to deal with winter demand.

 

Storage across Europe has been filling, and overall levels are closing in on the average seen over the previous five years.

 

European storage

 

However, when we look a little deeper, we can see that injections were very strong in June. As the summer has progressed the rate of injections has remained fairly constant, while in previous years the rate increased as we moved further into summer. Industrial shutdowns and school holidays in August freed up gas for increased injections.

 

Average daily storage injections

 

This August has only seen a moderate increase on July’s levels and, possibly more importantly, a slower rate of injections than last year. This is despite the need to put more gas into storage.

 

Why is less gas going into storage?

Demand and piped supply have remained at similar levels to previous years but the biggest difference is coming from Liquefied Natural Gas (LNG). Looking at total LNG send out across Europe we can see a significant reduction in volumes. The difference is almost the same as the equivalent reduction in injections.

 

Average daily LNG

 

The lower levels of LNG are because fewer cargoes are coming to Continental Europe and the UK.

This is due to prices elsewhere being much higher. Looking at the volume of LNG received in the UK, along with prices in the UK and the Far East, it’s clear to see when the difference between the prices has an effect on our level of imports. Suppliers will send the gas to the area they will make the most profit.

 

UK and Asian LNG price

 

Prices in Asia have such a large premium over Europe due to China’s insatiable demand for gas.

As the Chinese government looks to clean up the environment, it’s switching thousands of homes and businesses away from coal and onto gas. This has seen demand for LNG double in the last two years:

 

China by imports BCM

 

For UK consumers, as the gas market becomes ever more global, increased competition for gas will likely put pressure on prices, pushing them down. However, in the shorter term, if the UK needs extra gas (for instance due to a cold snap or supply issue) prices will have to at least match the Asian price to attract supplies for one of the UK’s three LNG terminals.

With Asian LNG prices for the coming winter over 20p/therm higher than in the UK this is an early indication of the cost of meeting higher demand in the heating season. This issue of reduced flexibility is particularly prevalent this year in the light of the Rough closure and the scaling back of Groningen production.

 

Stay informed with EIC

Our Market Intelligence team keep a close eye on the energy markets and industry updates, keeping our clients informed at a frequency to suit them.

Visit our website to find out more about our Market Intelligence offerings.

 

Long-term Price Forecasting

Electricity and gas are some of the most volatile commodities today. If you’re uncertain about how to budget effectively for your energy costs then we have a solution for you; access year-on-year price projections for the next five years with our Long-Term Price Forecast Report.

This report calculates future energy prices which include the ever-increasing green subsidies, network costs, and taxes.

A new era for energy and building management

The building management industry is on a path to converge with IT and, with the rise of the Internet of Things (IoT), a world of opportunities has opened up.

How many of us used Uber to order a taxi, or Air BnB to book accommodation five years ago? New technology isn’t only disrupting the way we live, but also the way we work. In fact, 76% of businesses believe that IoT is critical to their future success.

At EIC the aim is to help businesses reduce their utilities consumption and energy-related costs. And, as IoT connects ever more devices, we’re using cutting-edge solutions to revolutionise how you run your business. In short, thanks to IoT, traditional building management systems (BMS) as we know them are a thing of the past. There’s never been a better time to upgrade your energy management strategy – but how?

We want to transform the way you control, monitor, meter, and manage your energy and water usage, as well as your sites’ critical business systems. To do this, we’ve teamed up with leading tech giants Dell EMC and Intel to launch our IoT-enabled Building Energy Management solution. The partnership unites the technologies needed to integrate a businesses’ critical energy systems with a single, remotely-managed platform. With instant access to actionable data insights, buildings can be managed in real-time.

Through our smart controls solution, you’ll have the power to implement, amend, and manage control strategies on a wide portfolio of sites from the single touch of a button.

 

Together, through IoT controls, we can provide you with; 

  • Full integration. View, manage, and control your energy consumption and your buildings’ critical business systems in one place with a cohesive, joined-up strategy that includes energy, water, security, heating, lighting, access control systems, and point of sale.
  • Real-time data. Access your building’s data 24/7/365, anytime and anywhere, from desktop to smartphone.
  • Actionable insights. Transform your utilities data into useable information, helping reduce your energy consumption, improve energy efficiency, and better control your costs.
  • Simple and quick implementation with minimal disruption. We can set up our equipment in minutes and there’s no need to re-wire. In fact, once we’re set up you can turn off your old systems. 
  • Valuable savings. Cut your operating costs by up to 20%, even on your most efficient buildings. ROI for our solution is typically under 12 months, in an industry where up to five-year paybacks are commonplace.
  • A truly bespoke solution. We can design a platform to connect, configure, and control what you need, specific to your business strategy and requirements.

 

By giving business owners and building managers unprecedented insight into how their buildings are using energy, they can make truly informed decisions about how to reduce their utility bills. Our IoT controls solution will leave you with intelligent buildings and a smarter business, giving you the potential to unlock huge savings, freeing up cash to be invested elsewhere.

For a taster of what our Building Energy Management solution can do for you, download our brochure and start your journey to a better-connected future.

Capacity Market under review

The overall objectives of this review are to assess whether:

  • the CM is needed in future;
  • the CM currently meets its objectives of ensuring security of supply, cost effectiveness, and avoiding unintended consequences;
  • these objectives remain appropriate; and
  • they can be achieved in the future in a way that imposes less regulation.

 

The call for evidence

Both the CM and EPS were introduced five years ago as part of the Energy Act 2013. The announced ‘call for evidence’ is the first step in the review process.

The Government believes both the Capacity Market and the Emissions Performance Standard are working broadly as intended. The initial document states they “do not foresee the need for fundamental change.” However, this review will allow feedback to help them understand more about stakeholder issues and whether there are any changes to be considered. With this in mind, the Government has already indicated that there are some desirable changes that could improve the CM to ensure it continues to meet its objectives in the future.

Based on stakeholder feedback, two initial priority issues have been noted for the Capacity Market review:

  1. There needs to be consideration as to whether, and how, to enable participation by subsidy-free renewables in the CM.
  2. Following the latest round of CM auctions there has been feedback in relation to interconnectors. It’s been suggested that the contribution to security of supply made by interconnectors added to the system in future will face diminishing returns, as they are reliant on the same limited pool of spare capacity in the interconnected countries. The Government will consider whether changes to the methodology are required to ensure future interconnectors are not over-compensated relative to their real contribution.

 

Ofgem review

In addition to the Government review, energy regulator Ofgem will carry out a separate review on the Capacity Market to support the process. Ofgem will be announcing the details concerning the content and arrangements of their review at a later date. However, it can be assumed that it will seek to address very similar themes.

 

The Emissions Performance Standard

The objective of the EPS is to ensure that new fossil-fuel-fired electricity generation helps improve security of supply but still contributes to the UK’s decarbonisation objectives. The mechanism is a limit on the carbon dioxide emissions produced by new fossil-fuel generation plants. The Government is seeking stakeholder views on the effectiveness of the EPS. The five-year review of the EPS will answer similar high-level questions to the CM Review.

 

What to look out for

The call for evidence will be open between 8 August and 1 October 2018. A summary of the responses will be published later this year. The outcomes of these reviews will then be reported to Parliament in summer 2019.

 

Impact on consumers

The Capacity Market’s annual auctions define both how much capacity has been bought and at what price. The overall costs for both the capacity bought and the administration of the scheme are passed on to consumer bills, with the cost of capacity being the largest element.

EIC supports security of supply and any move to maintain a fairly structured scheme that keeps price impact to customers at a minimum. We can help you prepare for and control the impact of all your non-commodity costs, including Capacity Market Charges, with the help of our Long-Term Price Forecast Report.

With this report, you can access year-on-year price projections for the next five years. The report calculates future energy prices which include the ever-increasing green subsidies, network costs, and taxes.

Is wind technology facing an uncertain future?

With a remaining budget of £557m (in 2012/13 prices) Utilitywise estimates that funding may not be able to cover all of the offshore wind projects currently in development, let alone provide support for any other technologies.

The next CfD auction is expected to focus heavily on offshore wind projects, with the Government eager to develop the country’s geographical advantage towards this technology. Offshore wind also faces less local opposition and environmental challenges than onshore wind. Onshore wind has been banned from entering the CfD auctions, although the next round will have an exception for projects within the Scottish Islands. This is due to the Government’s focus on what it defines as ‘less established’ technologies, and the application of onshore wind in this location fits their definition.

Growth in offshore wind across the UK is already set to accelerate from the current 6GW of capacity in operation. Just over 18GW of additional capacity is in various states of development, with 8GW of that already contracted with a CfD or FIDER subsidy agreement. A further 1.5GW is under construction (meaning the project has broken ground, so is likely to have secured funding arrangements).

All this leaves more than 8GW of offshore wind capacity up for grabs in the upcoming Capacity Market auction. However, if the clearing price in next year’s auction is similar to that in the previous auction – around £57/MWh – EIC calculations show the cost of subsidising all of this capacity would exceed the £557m budget within the next decade, when the new schemes come online.

 

What if the Strike Price falls?

Should the offshore wind Strike Price fall to £55/MWh, which some reports indicate the technology could still operate at, then the budget could support around 80% of the planned capacity by 2030.

However, if costs fell even further, and the Strike Price can be set at levels equivalent to current wholesale prices of £50/MWh at the time of agreements, then this could support all of the in development offshore projects and 40% of the planned onshore sites. In this case, projects would effectively be zero-cost with inflation the main factor providing uplift.

Currently, there is 8GW of onshore wind capacity in differing states of development, only 0.7GW of which has already secured a CfD contract (this was in earlier auctions when the technology was still allowed to take part). Around 6.5GW of the remaining capacity has yet to begin construction and would likely be seeking a subsidy contract of some kind.

 

How will this impact you?

Based on the funds currently provided to the new auctions, regardless of the Strike Price, consumers are expected to face an increase on their electricity bills of around £2.50 to £3/MWh per year by 2030.

The cost to consumers could rise further if the Government wanted to support onshore wind while still pushing for the bulk of planned offshore to be developed, and if Strike Prices were higher than those noted above. This would need a larger budget for CfD contracts and would lead to additional costs, which would then require even higher bills to ensure customers pay for the increased green energy capacity.

 

Long-term price forecasting from EIC

EIC can help you remain informed of price increases and help you budget for any impact these auctions may have on your costs. If you’re uncertain about how to budget effectively for your energy costs then we have a solution for you; access year-on-year price projections for the next five years with our Long-Term Price Forecast Report.

This report calculates future energy prices which include the ever-increasing green subsidies, network costs, and taxes.