An oarsome charity day for EIC at Race the Dragon

The charity regatta takes place in Worcester and requires crews to race 200m upstream against other teams. EIC’s team, “E. I at C” took part for the first time, alongside 25 other crews.

The heats!

The competition started with two time trial races in order to seed the competitors into two categories, the plate and the cup.

The 14 strong crew of E. I at C lined up for their first preliminary race against Pitmaston Paddlers and Severn Nation Army. After a rocky start, the crew paddled hard to place second with a time of 1 minutes 13 seconds.

In the second preliminary round the crew raced against Oars of Spontex which was a mighty battle with the team losing by 0.6 of a second. The E.I at C time was a fantastic 1 minute 9 seconds – 4 seconds faster than their first race!

Seeding

Next came a tense wait to find out where the crew had seeded.  Shock and disbelief followed as the team were told they were in the top 15 and now in contention for the cup.

In the final two races, E. I at C took on more crews but despite their determination failed to better their times, finishing the course at an average of 1 minute 15 seconds.

Silverware

The Worcester Dragons rallied their members to confirm the final scoring and the presentation began. The EIC crew were thrilled to be presented with a cup and placed 15th in the competition.

Thanks to the Worcester Dragon Boat Racing Club for hosting such a fabulous event and to all the crews competing. A special thank you for the EIC colleagues racing as E I at C, for taking part.

Charity fundraiser

The EIC crew were raising awareness and funds for their chosen charity of the quarter, St Richard’s Hospice. Based in Worcester, the hospice cares for adults with a serious progressive illness, improving their quality of life from diagnosis, during treatment and to their last days. The hospice also provides incredible support to their loved ones. EIC chose this charity after it was nominated by a colleague who experienced the care and support first hand.

If you would like to donate to this wonderful charity, you can do so here.

Celebrating TELCA success

We’re delighted to announce that EIC’s Flexible Account Manager, Becky Knowles, scooped the award for Secret Star at The Energy Live Consultancy Awards (TELCAs) 2019 last night.

The ceremony held at the Institute of Engineering and Technology followed by an after party aboard the Silver Sturgeon, is an annual event celebrating the premier consultants and experts in the Energy Industry.

Secret Star nomination

Becky was nominated due to her exceptional customer service and excellent industry knowledge. As an integral part of the Flexible Account Team, Becky regularly goes above and beyond expectations for clients and colleagues. Her meticulous nature and proactivity has secured £000s of savings for customers which includes identifying savings of over £90,000 for one customer due to a billing error.

Well-deserved win

We’re all really proud of Becky’s achievement. John Palmer, Flexible Procurement Team Manager, commented, “this award is so well deserved. Becky is incredibly conscientious, with a strong focus on doing the best that she can for her customers. She provides training and support for her colleagues both within the team and in the wider business, making time to help colleagues despite her own heavy workload. I’m thrilled for Becky, she deserves this success.”

Incredible night

We spoke with Becky after her success who said, “Thanks to Energy Live News for hosting an incredible night! I still can’t believe I won the Secret Star award. It was amazing to be nominated, let alone win so I am overjoyed to have been picked by the judges! A special thanks to all my amazing clients, supply contacts and colleagues.”

Smart Procurement

EIC supports major energy users with Fixed, Flexible and Group procurement solutions. Working with EIC you will receive a dedicated support team to fully manage your utility supplier relationships and queries, change of tenancies and timely consumption data. Read more about our service here.

Celebrating a double nomination at the TELCAs

Tonight is the annual Energy Live Consultancy Awards (TELCAs), held at the Institute of Engineering and Technology. EIC are thrilled to be nominated for Consultancy of the Year and Secret Star award.

Consultancy of the Year

Being shortlisted for Consultancy of the Year is a real achievement and testament to the hard work of the EIC team. We continue to deliver market-leading Strategic Energy Solutions to our client base focusing on Intelligent Buildings, Smart Procurement and Trusted Compliance.

Our flexible procurement traders locked in savings for our clients of £1.6m in the first quarter of 2019 alone and we’re supporting our clients with delivery of ESOS phase 2 and the new Streamline Energy and Carbon Reporting SECR scheme. We’re also innovating and refining our IoT-enabled controls solution working with leading partners such as Intel. The day after the TELCAs we’re holding an Intelligent Buildings event with our partners Intel at their offices in Canary Wharf. If you would like more information on our Intelligent Buildings solution you can download our brochure here

Secret Star

Flexible Account Manager, Becky Knowles, is shortlisted for Secret Star due to her exceptional customer service and excellent industry knowledge. Becky is an integral part of the Flexible Account Team managing a wide range of larger clients. She regularly goes above and beyond expectations for clients and colleagues, proactively checking information that has secured £000s of savings for customers. This includes identifying savings of over £90,000 for one customer due to a billing error.

The client who supported Becky’s nomination commented, Becky provides key communication between myself, as the customer, and our supplier; who aren’t always the easiest to contact. That communication link has been critical, especially when changing suppliers or having issues, for example with invoices. She has gone above and beyond what I would expect a person in her role would do. She also provides me with a number of bespoke reports that have been very useful for my organisation. Any new reports she has gone through and explained the workings around them and is able to make any bespoke adjustments if needed.

We’re keeping our fingers crossed!

Our teams work really hard every day to ensure our clients get the right solutions for their businesses so it’s great to have been recognized for our efforts. We’re looking forward to the ceremony tonight, and would be delighted to win!  Follow our LinkedIn and Twitter pages to see the events as they unfold.

Best of luck to all our fellow nominees too!

Capacity Market T-1 auction clears at all-time low

Capacity Market T-1 auction clears at all-time low

The rescheduled 2018 T-1 Capacity Market (CM) auction cleared at an all-time low price of £0.77/kW, falling from the previous low seen at the last CM auction of £6.00/kW. A total of 129 CMUs (Capacity Market Units) were awarded agreements, procuring a total 3.6GW capacity.

Overall, gas-powered and combined heat and power (CHP) units received the majority of agreements, obtaining 45 and 30 respectively.

The low clearing price proved discouraging for demand-side response (DSR) units with a total of 29 DSR agreements awarded to providers, down from 74 DSR agreements in the 2017 T-1 auction. Storage projects were also deterred, with 6 total projects awarded agreements.

A full breakdown of the results and applicants is provided by National Grid ESO here.

Current State of the Capacity Market

The CM scheme is currently under suspension, following a ruling on 15 November 2018 by the European Court of Justice that its design was biased against small-scale, clean energy units and therefore shouldn’t be eligible for State Aid approval. Under EU State Aid rules, it is required that member states need to consider alternative options to meeting power demand, before subsidising fossil fuel generation.

The Court’s decision means that payments made under the CM scheme will be frozen until the UK Government can obtain permission from the European Commission to continue in an official capacity.

The European Commission has to undertake a formal investigation of the CM to clear it. If successful, the Department of Business, Energy and Industrial Strategy (BEIS) has said that auction results to date will still stand and that payments are legal.

In the meantime, BEIS has asked the National Grid Electricity System Operator (ESO) to keep the Capacity Market scheme running, short of making payments. BEIS has said that if those with contracts deliver their obligations, they may then be eligible for deferred payments if the market is reinstated.

BEIS expects a decision by the Commission to be made by early next year.

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An update on Smart Export Guarantee

The Department of Business, Energy and Industrial Strategy (BEIS) has published a response to their consultation on the future for small-scale low-carbon generation, which sought views on policy proposals for a Smart Export Guarantee (SEG).

The SEG will require suppliers with at least 150,000 domestic customers to provide a minimum of one tariff offer to small-scale low-carbon generators. Exporters of up to 5MW capacity of anaerobic digestion, hydro, micro-combined heat and power, onshore wind, and solar photovoltaics are eligible for payment.

It is the government’s opinion that small-scale low-carbon electricity generation should be supported by competitive, market-based solutions. To this effect, the government will not specify a minimum tariff rate in order to allow the market to develop. However, a supplier must provide payment greater than zero at all times of export.

The SEG is a replacement for the Feed-in Tariff (FiT), which closed to new generators in March 2019. The Feed-in Tariff scheme was originally introduced in April 2010 in order to incentivise the development of small-scale renewable generation from decentralised energy solutions. Generators were paid a fixed rate determined by the Government, which varied by technology and scale.

How will this impact you?

All suppliers that meet the SEG criteria will be required to offer at least one tariff by an expected date of 31 December 2019, providing small-scale generators with a choice of who they want to export to.

Currently, there are very few suppliers that offer tariffs of this nature. However, as the deadline approaches it can be expected that all larger suppliers will begin to offer their own options, allowing generators to choose the best tariff for themselves.

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An Insight into Gas Storage

Gas storage in the UK and on the Continent are both continuing to fill up fast and are much higher than normal levels for the time of year. With so little of the injection season having passed, for storage to be at these record high levels could pose problems later in the summer, when assets are even fuller and demand even lower.

UK

Medium Range Storage in the UK is 66% full, with considerably more gas in store for this time of year than at any point in the last six years.

The high inventories are partially boosted by Interconnector (IUK) maintenance happening in April as opposed to June. However this schedule change was to coincide with a time when the conduit was typically less active. With just 5TWh of working gas capacity left to fill, IUK exports will be key in using up any excess supply.

In September 2016, storage was at almost full capacity and the IUK was flowing at its maximum level. This pushed prompt prices as low as 20.6p/th. However, this situation is less likely now as the BBL pipeline, which currently only flows from the Netherlands, is undergoing maintenance to enable reverse flows (UK to the Continent). This will open up a route for a further 40 MCM/d of gas to flow away from the UK.

Europe

European storage reserves are 100 times bigger than the UK with a working gas capacity of 1087 TWh. This is currently 62% full. Having entered the injection season at the highest levels on record due to the additional LNG coming to Europe, injections have actually begun the season fairly strongly. Additions to gas storage are only marginally below last year’s levels when the injection season began with inventories at record low levels.

Injections across Europe through summer 2018 run at, on average, 3.3 TWh/d. However in June, July and August this moved to 4.0 TWh/d. If we run at that rate of injections this summer, then storage will be full by the middle of September.

However, as assets fill, due to increased pressure within the facility the rate of injection slows. At this rate, European assets will be 90% full by late August. Assuming the injection rate then halves, Europe will have to accommodate, or see a supply reduction, of 1TWh of gas per day throughout September, that would typically go into storage. This is over half of the UK’s total demand on a summer day.

This scenario is likely to tip the supply demand balance and could put very strong pressure on gas and power prices later this summer.

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Government to make further adjustments to Capacity Market

Following a consultation in March on additional measures to keep the Capacity Market (CM) running smoothly during the current standstill period, the government has published a decision detailing planned legislative changes.

The government maintains that the CM scheme is still the right mechanism to provide security to electricity supplies at the least cost. In order to continue this, the government intends to:

  • Replace the planned T-4 auction with a T-3 auction for delivery in 2022/23.
  • Allow certain renewable technologies to participate.
  • Remove the historical floor from the interconnector de-rating methodology.
  • Make minor corrections and additions to the CM Rules to ensure they are clear and operate as intended.

When implemented, these rules will see renewable technologies allowed to bid for contracts for the first time under the Capacity Market, having previously failed to qualify due to funding through subsidies. Renewable generators that do not receive support via the Contract for Difference, Renewables Obligation or Feed-in Tariff schemes will be allowed to participate.

The rearranged date for the delayed 2018 T-1 Capacity Market Auction is scheduled to go ahead on 11-12 June 2019 for delivery in the 2019/20 year.

The current state of the Capacity Market

The CM scheme is currently under suspension, following a ruling on 15 November 2018 by the European Court of Justice that its design was biased against small, clean energy and therefore shouldn’t be eligible for State Aid approval. Under EU State Aid rules, it is required that member states need to consider alternative options to meeting power demand, before subsidising fossil fuel generation.

The Court’s decision means that payments made under the CM scheme will be frozen until the UK Government can obtain permission from the European Commission to continue in an official capacity.

The European Commission has to undertake a formal investigation of the CM to clear it. If successful, the Department of Business, Energy and Industrial Strategy (BEIS) have said that auction results to date will still stand and that payments are legal.

In the meantime, BEIS has asked the National Grid Electricity System Operator (ESO) to keep the Capacity Market scheme running, short of making payments. BEIS has said that if those with contracts deliver their obligations, they may then be eligible for deferred payments if the market is reinstated.

BEIS expects a decision by the Commission to be made by early next year.

How the closure may affect you

In the short-term the Capacity Market charge will still be levied on customer’s bills, currently accounting for 0.3p/kWh, approximately 2.5% of a bill. This means that consumers will likely see little immediate change.

However, the ongoing suspension could mean a halt to the charge. An unsuccessful investigation by the European Commission could potentially see UK consumers receive a refund for previous CM charges paid through their electricity bills. This could be partially offset by a resultant hike in wholesale energy prices as guarantees of supply from larger operators are no longer certain.

Smaller operators in the scheme may be faced with a dilemma as missed capacity payments could result in cash flow issues. However, a closure to the Capacity Market could see the early shutdown of some coal plants, raising market power prices, and providing opportunity to these smaller operators.

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Ofgem update Targeted Charging Review timeline

Ofgem has published a letter to stakeholders to provide an update on timing and next steps on Future Charging and Access reforms. The regulator has three ongoing projects that serve as a review of transmission, distribution and balancing charging to help facilitate a transition to a more effective network. These are:

  • Electricity Network Access and Forward-looking Charging reform (Access reform)
    • A Significant Code Review (SCR) designed to develop improved access and forward-looking charging arrangements
    • A wide-ranging review of Distribution Use of System (DUoS) charges
    • A focused review of Transmission Network Use of System (TNUoS) charges
  • Targeted Charging Review (TCR)
    • A review of residual network charges, as well as some of the remaining Embedded Benefits to explore how costs may be more fairly shared amongst users
  • Balancing Services Charges Task Force
    • Designed to operate in parallel to the SCR and TCR, Ofgem have established an industry-led task force to evaluate Balancing Services Use of System (BSUoS) charges
    • The Task Force are evaluating how cost reflective and effective current BSUoS charges are

The new timeline

Ofgem have updated the timelines for the TCR and Access reform, providing clarity on dates in their original consultations.

The TCR consultation nominated April 2020 and April 2021 as potential dates for the reform of Embedded Benefits to come into effect. Ofgem have now ruled out April 2020, citing April 2021 as their preferred date. Options for the implementation date for new residual charging arrangements were April 2021 or phasing between 2021 and 2023. The regulator has indicated that they now consider April 2023 as a leading option, alongside the other two.

Regarding the Access reform, Ofgem originally scheduled changes to transmission charges to come into effect in April 2022, and changes to distribution arrangements in April 2023. This has now been revised to April 2023 for both changes.

Future Triad periods

Under the TCR proposals transmission demand residual charges (Triads) would be changed to a fixed or agreed capacity, avoiding the incentive for Triad avoidance in the future. The nomination of a potential implementation date of April 2023 for new residual charging arrangements increases the likelihood that the last Triad could be Winter 2022/23, totaling three Triad periods overall.

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UK LNG terminals filling up fast

With 16 tankers now booked for May, this month has already marked more LNG coming to the UK in 2019 than the whole of last year. With that, capacity at the terminals is dwindling. Across the three terminals – South Hook, Dragon and Isle of Grain – there is enough capacity to store 1.25BCM of gas, a similar amount to all the UK’s Medium Range gas storage. However, despite the strongest average daily sendout since 2011, storage at the three terminals is rapidly filling and there is limited scope for demand to increase to absorb further LNG on to the grid.

The gas market remains well supplied with demand continuing to edge lower. The plentiful supply is largely thanks to LNG which in recent weeks has been making up an increasing share of UK supply to over 30%. Average daily sendout for the last month has been the highest since 2011.

Of the 16 tankers that are booked so far this month 12 have gone to South Hook which has enabled the terminal to send out at over 50MCM/d. Of these tankers seven have been Q-Flex carrying around 126MCM of gas and five have been Q-Max carrying 155MCM. With sendout at 50MCM/d it is getting through a Q-Flex every two days, and a Q-Max every three. This means stock at the terminal has grown from 35% full at the end of April, and is expected to be over 90% full at the end of this week, with three tankers set to arrive in the next six days.

 

Sendout, other than boil off, from the other two terminals has largely stopped since 14 May. With Dragon 64% full, and having only a third of the capacity it will have to increase flows in order to accommodate a tanker. Following the arrival of the Ougarta, from Algeria, into the Isle of Grain this week the terminal is going to be over 90% full and therefore will have no room for further cargoes without increasing withdrawals.

 

Therefore, if the UK is going to receive similar amounts of LNG in the near future sendout is going to have to increase. How much potential demand there is to absorb this gas is limited, with the interconnector running at booked capacity and storage already 50% full. The potential for further and prolonged oversupply in the gas system could lead to more declines in short-term energy prices. The front-month gas contract has already dropped to its lowest level in three years at 30p/th.

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Record Breaking Solar Generation

A week of clear skies and warm temperatures has seen the UK break its all-time record for solar PV generation twice in as many days.

National Grid reported a new all-time peak for solar generation on Monday 13 May at 9.47GW. This surpassed the previous record which had held for two years, when supply hit 9.38GW in May 2017.

 

 

This record was then broken again the following day, when output peaked at 9.55GW on Tuesday 14 May. On that day, at its peak, solar generation was producing 27% of UK electricity.

Peak solar generation has averaged 8.7GW since Saturday as temperatures climbed over the weekend and weather conditions turned significantly brighter. The previous week when conditions were far cloudier, generation peaked at less than 5GW on average.

 

Growth in Solar Capacity

The new record for solar generation has come despite minimal growth in installed solar capacity in recent years. Total installed solar capacity has risen by just 0.5GW since April 2017, following the closure of the Renewables Obligation subsidy scheme. Total capacity is currently 13GW, having grown nearly 10GW in the three years from 2014 to 2017.

 

Impact on Demand

Solar output has a narrower window of generation than other fuel sources. High levels of solar generation during daylight hours are more impactful on reducing system demand, both the overall daily peak and the afternoon low. Solar generation raises the volume of embedded electricity, in which homes and businesses are generating their own supply via solar panels. Embedded generation removes the demand for that electricity from the transmission network. The higher the availability of embedded generation the lower the system demand. This is why the transmission network sees a sizable reduction in consumption across the middle part of the day, when solar output is at its strongest.

During the record solar generation on Tuesday, demand on the transmission network saw a drop of more than 6GW from the early morning high. Consumption dropped to just 25GW before climbing again for the post-work peak.

 

 

Peak electricity demand on the network is at record lows and is forecast to fall even further as the summer season progresses. 2019 as a whole has seen peak consumption trend lower than previous years, reflecting the greater efficiencies and renewable availability on offer. In the last week of May, a half-term school holiday, electricity demand is forecast to peak at just 31GW, an all-time low.

 

 

A Benefit to All Customers

In addition to the environmental advantages of renewable generation, distributed solar provides many benefits to the grid and by extension to all electricity consumers. Reduced demand on the system improves grid security and the often onsite nature of solar generation leads to less losses in electricity.

The demand reductions caused by higher levels of distributed solar generation, mean that less fuel is being used to power the electricity network. As demand falls wholesale prices fall,  the less efficient gas plants are no longer required so overall cost of generation is lower. These dips in demand means that hourly prices for the early afternoon are now on at similar levels to the prices normally recorded in the middle of the night. As more solar reduces prices in the daylight hours the cumulative effect of all the additional generation is to bring prices lower.

The government is currently analysing feedback on the proposal for a Smart Export Guarantee (SEG), designed to replace the now-closed Feed-in Tariff. This scheme would legislate for suppliers to provide tariffs to pay small-scale low-carbon generators, such as solar panel owners, for the electricity they export to the grid. Some suppliers have already begun to offer tariffs, based on the same concept, to incentivise the export of solar power to the grid.

 

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Increase in carbon costs likely as EU cut supply of allowances

The European Commission has published the annual surplus indicator for the EU Emissions Trading System (ETS) Market Stability Reserve. As long as the surplus exceeds the level set in the legislation, a total of 397 million allowances will be placed in the reserve, 24% of the total permits currently in the market. This is an increase on the 2018 publication, which saw almost 265 million allowances placed into the reserve in January 2019. The allowances will be placed into the reserve in the period of September 2019 to August 2020.

 

Purpose of the Market Stability Reserve

The Market Stability Reserve (MSR) was introduced to address the large oversupply of carbon allowances that built up following the 2008 global financial crisis. This saw carbon prices reach all-time lows for an extended period of time and by the end of 2016, the European Emissions Trading Scheme had an oversupply of 1.7bn tonnes worth of EUAs. The oversaturation of allowances provided a weaker incentive to reduce emissions.

The MSR will see 900 million allowances, which were removed between 2014 and 2016, transferred to the Reserve, rather than be auctioned in 2019-20. After this, unallocated allowances will also be transferred to the reserve.

Each year, the Commission will continue to publish the total number of allowances in circulation by 15 May. This will allow them to examine whether more allowances should be placed into the reserve or whether allowances should instead be released. This will allow the Commission to better regulate the allowances available.

 

An impact to carbon prices

The restriction of carbon allowances as part of the Market Stability Reserve has been the cause of substantial price increases since 2017. The cost of carbon is currently at €26/tCO2e, having doubled in value year-on-year.

The impact of further allowances placed in the reserve is likely to see continued price rises, as the MSR continues to restrict the availability of supply to the market. The introduction of the reserve caused prices to rise from €4 to over €25 in eighteen months. With the volume of allowances into the EU ETS system remaining tightly restricted, there is the likelihood of further price rises, notably towards the all-time high of €30/tCO2e, last seen in 2008, shortly after the EU ETS was created.

A further increase in carbon prices, particularly if prices were to break to new highs at over €30/tCO2e, would provide a strong bullish signal to the wider energy mix, and likely result in higher wholesale gas and power prices.

 

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UK holds record storage levels

UK medium-range storage stocks are at record highs for the time of year with reserves more than 50% full just over a month into the summer season. A combination of low gas demand during Q1 2019 and the record levels of LNG imports that have reached the UK since October left the UK oversupplied. Medium-range storage stocks reached full capacity by the end of November 2018 and remained at record highs through December and January before operators began a spell of heavy withdrawals, seeking re-injections during the summer season when prices were expected to be even lower.

Since 1 April excess gas was exported to Continental Europe over the Interconnector. However, annual maintenance on the UK-Belgium gas interconnector halted the availability for the UK to export gas to the Continent. Britain had previously acted as transit nation for Norwegian supplies passing to Europe. While exports were unavailable LNG imports continued at a record pace. Twenty LNG tankers arrived in April delivering the most LNG in one month since 2011.

With demand limited – particularly during the very hot Easter holiday weekend, oversupply in the gas system forced flows into storage.

During the Interconnector’s ten day shutdown injections into storage averaged over 400GWh per day. Stocks more than doubled from 3.2TWh to 7.8TWh. The average level of storage for this time of year is just 3.8TWh and the previous highest level was just under 5TWh in 2016/17. Current reserve levels are 107% above average for the time of year.

With the loss of the Rough storage facility, the UK has limited storage capacity, with around 15TWh of medium-range sites. These offer a faster injection and withdrawal process, but lack the scale of the Rough facility which operated on a seasonal basis. Total European gas storage reserves are also at very high levels. LNG imports flooded North West Europe during Winter 2018/19 and the Continent enjoyed a similarly mild Q1 2019. Total European reserves are broadly tracking the previous strongest year for storage in 2013/14. Before the end of April, total gas stocks in Europe were over 50% full with 500TWh of gas in reserve.

The healthy short-term fundamentals have driven Balance of Summer gas contracts back towards the levels from early April, with the front-month contract at lows not seen since August 2017. With storage stocks fuller than ever before at this stage of the summer, there will be limited availability for injections later in the season. This will limit demand and could lead to further price falls over the summer, unless LNG imports or Norwegian production turns down significantly.

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