As we look ahead to 2019, we’ve outlined key energy industry changes and dates to take action by.
EU ETS – Market Stability Reserve (MSR)
1 January – MSR Implementation
The European Commission is introducing a solution to the oversupply of allowances in the carbon market, which will take effect in January.
EU carbon allowances, or European Allowances (EUAs) serve as the unit of compliance under the European Emissions Trading Scheme (EU ETS). In response to a build-up of these allowances, following the 2008 global financial crisis, the European Commission has introduced a long-term solution known as the Market Stability Reserve (MSR). With Brexit looming, there’s uncertainty as to whether these changes will affect the UK.
Energy Price Cap
1 January – Price Cap implementation
Price protection for 11 million customers on poor value default tariffs will come into force on 1 January 2019. Ofgem has set the final level of the price cap at £1,136 per year for a typical dual fuel customer paying by direct debit.
When the price cap comes into force suppliers will have to cut the price of their default tariffs, including standard variable tariffs, to the level of or below the cap, forcing them to scrap excess charges. The cap will save customers who use a typical amount of gas and electricity around £76 per year on average, with customers on the most expensive tariffs saving about £120. In total, it is estimated that the price cap will save consumers in Great Britain around £1 billion. Read more here.
Ofgem’s Targeted Charging Review (TCR) – the end of Triad season?
4 February – Consultation conclusion
Ofgem has launched a consultation, due to conclude on 4 February 2019, into how the costs of transporting electricity to homes, public organisations, and businesses are recovered. Proposed changes could remove the incentive for Triad avoidance.
Costs for transporting electricity are currently recouped through two types of charges:
- Forward-looking charges, which send signals to how costs will change with network usage
- Residual charges, which recover the remainder of the costs
In order to ensure that these costs are shared fairly amongst all users of the electricity network, Ofgem are undertaking a review of the residual network charges, as well as some of the remaining Embedded Benefits, through the Targeted Charging Review (TCR). Ofgem are exploring the removal of the Embedded Benefit relating to charging suppliers for balancing services on the basis of gross demand at the relevant grid supply point. This is important as it would eliminate the incentive of Triad avoidance.
29 March – Scheduled date to leave the EU
Whilst not a specific energy policy announcement, the UK’s departure from the EU is a significant event that has raised a lot of questions concerning UK energy security.
We put together a Q&A on how Brexit may impact the UK energy industry and climate change targets. Read more here.
Closure of the Feed-in Tariff (FiT) scheme
31 March – Scheme Closes
The Government has confirmed plans to remove the export tariff for solar power, which currently provides owners of solar PV panels revenue for excess energy that they generate. This will coincide with the closure of the Feed-in Tariff (FiT) scheme.
The FiT scheme was introduced in April 2010 in order to incentivise the development of small scale renewable generation from decentralised energy solutions such as solar photovoltaics (PV), wind, hydro, anaerobic digestion and micro Combined Heat and Power (CHP). Generators were paid a fixed rate determined by the Government, which varied by technology and scale.
The scheme will close in full to new applications from 31 March 2019, subject to the time-limited extensions and grace period.
Streamlined Energy and Carbon Reporting (SECR)
1 April – SECR implementation
Streamlined Energy and Carbon Reporting (SECR) is on the way, due to come in to effect from 1 April 2019. The introduction of this new carbon compliance scheme aims to reduce some of the administrative burden of overlapping schemes and improve the visibility of energy and carbon emissions when the CRC scheme ends.
EIC can help you achieve compliance. Read more about Streamlined Energy and Carbon Reporting (SECR) by clicking here.
UK Capacity Market
The UK Capacity Market is currently undergoing a temporary suspension, issued by the European Court of Justice (ECJ), on the back of a legal challenge that the auction was biased towards fossil fuel generators.
The ECJ’s decision means that payments made under the Capacity Market (CM) scheme will be frozen until the UK Government can obtain permission from the European Commission to continue. In addition, the UK will not be allowed to conduct any further CM auctions for energy firms to bid on new contracts.
The UK government has since iterated that it hopes to start the Capacity Market as soon as possible and intends to run a T-1 top-up auction next summer, for delivery in winter. This is dependent on the success of a formal investigation to be undertaken by the European Commission early in the New Year.
Spring Statement and Autumn Budget
The UK Government’s biannual financial updates are always worth looking out for.
The Spring Statement will be delivered in March and the more substantial Autumn Budget is scheduled for October. The 2018 budget had a very heavy focus on Brexit, with very little to say concerning energy policy. It is likely this will be the case for the Spring Statement and potentially going forward.
Energy Savings Opportunity Scheme (ESOS)
5 December – ESOS Phase 2 compliance deadline
ESOS provides a real chance to improve the energy efficiency of your business, on a continual basis, to make significant cost savings.
In Phase 1 of ESOS we identified 2,829 individual energy efficiency opportunities, equivalent to 461GWh or £43.9m of annual savings across 1,148 individual audits. Our team also helped over 300 ESOS Phase 1 clients avoid combined maximum penalties of over £48million.
With EIC you can achieve timely compliance and make the most of any recommendations identified in your ESOS report.
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