Tag: Blog

Energy audits: what are the benefits for SMEs?

Posted on by Sophie Wyatt

With so many responsibilities to balance, it can be difficult for businesses to keep track of where and when they are using the most energy. But in order to reach a sustainable future, it is essential that businesses get to grips with their levels of consumption and begin to manage their consumption effectively. And with such a volatile energy market, controlling consumption has become even more vital.

Energy audits make this process simple. By collecting your energy data and looking at factors such as lighting, heating and air conditioning, audits can help you to identify areas where you could reduce your energy usage. By uncovering these insights, businesses could receive social, environmental and financial benefits.

As energy prices reach record highs, we know that SMEs are becoming increasingly concerned with the obstacles in front of them. And this is only set to increase over the winter period. Getting ahead of the auditing game will bring benefits and help to ease the burden that these companies currently face.

Here are some of the ways energy audits could benefit your business in the long run.

Lower consumption

Not only do energy audits save on costs by identifying where energy is being wasted, they also help businesses to make the move towards a greener future. Without the information obtained through an audit, businesses could be consuming more energy than they need to, wasting money and pushing up their emissions.

Businesses are also facing pressure from stakeholders and government to become greener, as environmentalism takes centre stage in policy making and finance. Energy efficiency is one of the most practical ways to reduce your environmental footprint, and benefits your business – in both the long-term and short-term.

Reduce energy costs

Once you start reducing wasteful energy consumption, you will begin to reap financial rewards. Energy expenses often go unnoticed due to old appliances, inefficient technology or poor insulation. But becoming energy efficient could be as easy as switching to energy-saving light bulbs, or upgrading your air conditioning.

With smart metering you can look at your consumption, create budgets and set targets. Consider installing a building management system, which will enable you to see and control your energy use in real-time. Being proactive with your energy management can save you time and money further down the line.

Longer equipment lifespan

Upgrading to energy efficient equipment will mean that your sites perform better, and equipment will last longer. This is because your appliances won’t need to work as hard to provide the same level of performance.

Keeping equipment up-to-date will streamline your operations, leading to more efficient ways of working. This will enhance the overall productivity of your facilities, which will lead to profitability.

Complying with regulations

Once you have analysed the results of your energy audit, you can set realistic energy efficiency targets and establish a baseline to track your progress. It is essential that you put a strong foundation in place, on the basis of clear audit data, so you can effectively engage with compliance schemes.

Understanding your energy consumption, and associated carbon footprint, isn’t just about boosting your green reputation. Energy and carbon reporting schemes such as Streamlined Energy and Carbon Reporting (SECR) and the Energy Savings Opportunity Scheme (ESOS) are now mandatory for large companies. To stay compliant with these schemes, and prepare for future legislation, businesses should carry out regular energy audits.

At EIC, we understand the importance of keeping up-to-date with compliance. Aside from our auditing services, we offer a full review of your organisation to assess your legal obligations and compliance status. We can provide you with a Compliance Report:

  • summarising our findings
  • explaining the legislation, and
  • outlining your next steps.

Get in touch today to find out more about our trusted compliance services.

Mitigating risk

Mitigating risk is a part of every business strategy, no matter the size or scope. It is crucial for future growth, and provides a level of certainty.

An energy audit provides transparency and assurance, helping businesses to take control of their consumption and costs. And because it can boost compliance and brand reputation, it can also help to secure funding for your business.

Investors are now taking climate-related risks more seriously, and this includes the levels of emissions that your business releases into the atmosphere. The greener and more efficient your business, the more likely you will be to receive financial support from these investors.

How can we help?

We know that a better understanding of your carbon footprint leads to a better reputation, in an increasingly competitive market. Energy and carbon reporting schemes such as SECR and ESOS are mandatory for large companies. But most businesses have to comply with some level of reporting – and it pays to get ahead of the curve.

Carrying out regular audits will help you to comply with these schemes, and prepare for future legislation. Staying transparent and being pro-active is now essential for any business. You will avoid fines for non-compliance, and attract eco-conscious clients to your business.

Whether it be improving monitoring and targeting, introducing compliance regimes or working on smart procurement, EIC can provide the technical expertise needed for enterprises to maximise the benefit of an energy audit.

Get in touch today to find out how EIC can help you incorporate energy audits into your business strategy.

 

The age of hydrogen

Posted on by Sophie Wyatt

Countries around the world are now beginning to recognise the need for clean energy, as reliance on fossil fuels becomes increasingly risky. Against this backdrop, hydrogen power is a particularly effective way to generate clean energy.

In the UK, innovation in the field of hydrogen power continues. Earlier this year, the UK Business and Energy Secretary set out the country’s first-ever ‘Hydrogen Strategy’. The aim is to drive forward commitments laid out in the Prime Minister’s ‘Ten Point Plan’ for a green industrial revolution.

In recent months it has become clear that hydrogen power, much like solar and wind, will revolutionise the UK energy market. Government analysis suggests that 20-35% of the UK’s energy consumption is likely to be hydrogen-based by 2050. This strategy could be crucial for the UK, as the country works towards net zero targets.

So, how will the UK’s ‘Hydrogen Strategy’ impact the UK and its businesses?

How is hydrogen power being implemented in the UK?

As the UK strives towards its 2050 net zero targets, it plans to cut 78% of carbon emissions by 2035. To achieve this, the country must work on reducing waste, increasing efficiency and switching to sustainable power sources – such as hydrogen.

Hydrogen power could also assist with plans to decarbonise. Earlier this year, London mayor Sadiq Khan introduced the first double-decker hydrogen bus fleet in London. The buses joined over 500 electric buses in the UK as part of the Go-Ahead London fleet, continuing London’s acceleration towards the goal of zero emissions by 2030. Steps like these ensure that the UK remains at the forefront of environmental progress.

The creation of secure, good quality green jobs should help to unlock local economic growth across the country. This strategy aims to create 9,000 green jobs and unlock £4 billion worth of investments by 2030. Hydrogen could play an important role in decarbonising energy intensive industries, including transport.

The impact of hydrogen power on business

Businesses around the world are working towards sustainable targets, whether that be their own science-based targets or adhering to government regulations. For this reason, businesses should ensure that their processes incorporate green energy and sustainable practices.

The strategy intends to accelerate the use of hydrogen within four key industry sectors:

  • Power
  • Industry
  • Transport
  • Building

Businesses operating within these sectors could receive funding from the government. This finance will be used to develop technology and support businesses, as they make the transition to hydrogen power. Aside from these sectors, hydrogen will help to reduce carbon in heating systems, heavy machinery and even cement.

Embracing new and innovative energy sources also provides businesses with a chance to get ahead of the curve. Switching to renewables could save time, reduce emissions and boost efficiency. This could also mean developing at a faster rate than competitors. Boosting your green credentials, this green innovation could also open up your business to a broader and more sustainably-aware client base.

Where does EIC come in?

The government must now seize the initiative and provide the necessary funding and support to make hydrogen happen. Firms looking to adopt a long-term view of their energy and heat usage could certainly benefit from our services.

EIC’s combined heat and power solution have saved businesses up to 40% on energy costs. EIC’s carbon management team are also on hand to help deliver a comprehensive net-zero strategy for your business. We are focused on helping our clients to take their first step towards their sustainability targets. Our vast range of comprehensive services help businesses to better understand their energy consumption, carbon reduction measures and greener procurement options.

Get in touch today to find out how EIC can help you understand the benefits of switching to renewable energy.

What has caused September price swings?

Posted on by Chris Taylor

Concerns over supply, demand and flexibility within energy markets ahead of the highest demand period of the year were highly price supportive.

Black Swans

In less than a week of trading, front-month gas prices climbed 25%, and the corresponding power contract rose 15%.
The Winter 19 power contract spiked £4.55 in just one day, while Winter 19 gas jumped over 6p/th, the largest daily move on a seasonal contract since at least 2008.

gas season prices

The initial price spikes were triggered by the simultaneous discovery of three ‘black swans’, an industry term describing unpredictable events that go beyond normal expectations of the situation.

season power prices

A fourth such event occurred a few days later when rebels attacked Saudi Arabian oil facilities. Brent and WTI crude oil prices saw the highest within-day spikes in 30 years, with both markets gaining more than $8/bbl in one day. The jump in the oil market provided more bullish support to the wider energy mix, with longer-dated gas and power contracts moving to new highs on the back of the increased oil costs.

crude oil prices

As these unpredictable events have developed, energy prices have given back some of the exceptional gains. However, prices remain elevated across the month, above the lows seen in early September. Here we explain what these issues were and how they are impacting on the energy market.

Groningen Gas

The Dutch Government reported that the production cap at its Groningen gas field will be lowered to 11.8bcm for the upcoming gas year from 1 October 2019. The state also confirmed that the site – previously Europe’s largest – would close entirely by 2022, eight years earlier than expected.

groningen gas production

Production at the field has been gradually slowing for seven years after drilling led to a series of earthquakes, forcing legislation to limit output. In 2013 the field was producing 54BCM/y, declining to 11.8BCM for 2019/20. While the reduced supply from Groningen was somewhat expected within the market, supply was expected to be available for another eight years. This curtailment helped to support a sudden price rise across the curve.

dutch gas production

The loss of production has been reflected in the loss of flexibility within Dutch gas supply, and therefore reducing the ability to respond to spikes in demand or other supply issues. Five years ago Dutch gas production was able to ramp up to 277MCM/d in response to high demand on a cold day. However, production last winter peaked at just 164mcm, while output so far in September 2019 has averaged under 50mcm/d.

OPAL Pipeline

The OPAL pipeline in Germany connects the Nord Stream pipeline with connections in central and western Europe. This month the European Commission overturned a ruling in 2016 which had effectively allowed Russian giant Gazprom a near monopoly of the volume of the pipeline, with 90% access. A complaint from neighbouring countries, led by Poland, saw this ruling challenged and the Russian transit through the link must now be cut to 40%.

The OPAL pipeline had allowed Russian gas to reach central Europe via Nord Stream and onwards, without transiting war-torn Ukraine. The EU decision will see Gazprom’s access cut by half, potentially reducing the availability of Russian gas to enter Europe, unless other transit routes are made available.

French nuclear power plants

EDF reported welding issues with at least five of its nuclear reactors, which could force shutdowns of the power stations. This would greatly reduce available power supplies for France, where 80% of its generation is supplied by nuclear and the majority of domestic heating is electric. Demand for imports will increase as will demand for more expensive and less efficient gas and coal plant, which also increases the consumption of carbon.

The UK’s interconnection with France sees imports from France provide the marginal supply to Britain, ensuring the countries’ pricing is closely aligned. Issues with French nuclear manufacturing had previously occurred in autumn 2016 when over 40% of France’s nuclear fleet closed down. This caused record spikes in UK power prices, with the Day-ahead market at over £150/MWh, and the front-month contract doubling from £40/MWh to over £80/MWh.

UK day ahead power prices

The potential loss of nuclear generation adds significant risk to the coming winter, particularly if tighter power supplies coincide with cold, windless weather conditions when gas demand is already at its highest levels for the year.
Since the initial announcement, EDF Energy has confirmed just six nuclear reactors are affected by the welding issues identified. The company believes no immediate action is required, an announcement which triggered a pull back in prices. However, the ultimate decision on whether to close nuclear plants for repairs lies with the French nuclear regulator ASN.

Saudi Arabia oil attack

The last piece of news impacting energy markets in September was a series of rebel drone attacks on major Saudi Arabian oil processing facilities at Abqaiq and oil fields at Khurais. The United States has blamed the attack on Iran, but Tehran claim no involvement. US-Iranian tensions were already heightened after a failed nuclear power agreement last year and attacks on oil tankers in the Middle East.

The rebel attack in Saudi Arabia forced around 7 million barrels per day of production offline, halving the country’s output and impacting on more than 5% of global oil supply.

However, Saudi Arabia confirmed it met customer orders by tapping into substantial storage reserves. Furthermore, the affected facilities would be back to pre-attack volumes by the end of September. Tensions remain heightened in the region but the swift return to operation of the affect facilities prompted oil prices to drop back from the earlier peaks.

Price Outlook

Uncertainty lingers over these issues, despite fresh developments so the potential for further price spikes remains in play. However, within the recent volatility on energy contracts, prices across gas, power, oil, coal and carbon remain within a sideways range. In fact, the majority of contracts range-bound since the start of the summer season.

The threat of a break below this range has been mitigated by the recent price spikes. However, the highs reached in July have yet to be tested. How the energy market breaks out of this range will determine future price action.

Updates to the SECR Scheme

Posted on by Chris Taylor

The Streamlined Energy and Carbon Reporting Scheme (SECR) came into force at the start of this month. Quoted companies and large unquoted companies and LLPs are affected, and will now be required to make a public disclosure within their Directors’ Annual Report of their UK energy use and carbon emissions.

Over the last few months the ETG (Emissions Trading Group) have been consulting with various parties and collating feedback and queries regarding the guidance for the scheme. As a result, a number of minor updates have been made to the SECR section (Chapter 2) of the Environmental Reporting Guidance.

 

A guide to the updates

All of the updates can be found in Chapter 2 of the Environmental Reporting Guidance.

Below is a summary of the changes:

  • Page 14, 20, 36 – hyperlinks for ISO 14001, BS 8555, ISO 14064-3 and ISO 14064-1 have been updated.
  • Page 26 – reference to public sector has been expanded (first paragraph and footnote 22) and also for charitable organisations (second bullet point).
  • Page 26 – new paragraph inserted to ensure that guidance is not seen as a substitute for the SECR Regulations.
  • Page 30 – reference to corporate group legislation has been expanded (sections 1158 to 1162 of Companies Act 2006) in the last paragraph of section 2.
  • Page 33 and 39 – amended reference to NF3 to reflect that it is not currently listed as a direct GHG in section 92 of the Climate Change Act.
  • Page 45 – footnote 39 referencing Government consultation published on 11 March 2019 on the recommendations made by the Independent Review of the Financial Reporting Council.
  • Pages 50-56 – changes to reporting templates to recommend grid-average emission factor is included as the default by those organisations that choose not to dual report.


Our view on the changes

These updates provide useful clarification on outstanding queries raised by EIC such as dual reporting of electricity. Dual reporting remains voluntary but doing so allows companies to demonstrate responsible procurement decisions. For example, those selecting to procure electricity from renewable sources with a lower emissions factor can demonstrate this within their energy and carbon report if they choose to dual report.

EIC work closely with the ETG and BEIS to help the group reach key decisions regarding carbon compliance scheme development and implementation, including SECR, and will continue to do so. As a result we are able to ensure all of our customers receive the most up-to-date information and we are always on hand to support with SECR compliant reporting.

Click here to learn more about the Streamlined Energy and Carbon Reporting scheme.

7 things you need to know about SECR

Posted on by Chris Taylor
  1. SECR stands for Streamlined Energy and Carbon Reporting, a new UK Carbon Reporting framework. Companies in scope of the legislation will need to include their energy use and carbon emissions in their Directors’ Report as part of their annual filing obligations.
  2. It starts on 1 April 2019 and companies will need to report annually, reporting deadlines align with the company’s financial reporting year.
  3. The scheme affects UK quoted companies and ‘large’ unquoted companies and LLPs, defined as those meeting at least two of the following; 250 employees or more, annual turnover of £36m or more or an annual balance sheet of £18m or more.
  4. It will affect over 11,000 firms from high street retailers to manufacturers.
  5. SECR requires companies to report the following: their Scope 1 (direct) and Scope 2 (indirect) energy and carbon emissions (electricity, gas and transport as a minimum). Previous year’s figures for energy and carbon. At least one intensity ratio (e.g. tCO2/turnover). Detail of energy efficiency action taken within the reporting year. Reporting methodology applied.
  6. Not meeting the reporting requirements can result in accounts not being signed off and missing the filing deadline could lead to a civil penalty. So it’s important for organisations to fully align communications between their energy and finance teams and to get a head start where possible!
  7. There is an overlap with other reporting and compliance schemes such as ESOS so savvy businesses can save time and hassle by using data collection from one to support compliance with another.

Find out more at our Streamlined Energy and Carbon Reporting (SECR) service page.

Is the Triad past its peak?

Posted on by Chris Taylor

The Triad season has concluded for another year and the three Triad dates, as published by National Grid, are listed in the table below. EIC have once again called an alert on each of these days.

 

The Triad season runs from the start of November to the end of February every year. In this period, National Grid identifies the three highest half-hour periods of demand. Each Triad needs to be at least ten clear days apart from each other.

These three Triads form the basis of National Grid’s electricity transmission charges. For half-hourly consumers with direct pass-through of transmission costs, these Triad points are of particular importance. If these consumers can predict when the Triads will occur and reduce their demand when they happen then their final transmission costs can be significantly reduced.

 

Demand continues to decline

Total UK winter electricity demand for 2018/19 (Nov-Feb) has declined by 19% since 2009/10 as a result of energy efficiency, demand side management, and warmer weather trends. Consequently, these trends, supported by targeted demand-side management schemes such as the Triad, have created a declining trend in the Triad peak demand and, more recently, a flattening of the profile seen during the peak periods.

Another factor contributing to the decline in demand is the steady increase in installed wind capacity over the past decade. Most of this capacity is connected to the Grid so does not impact demand. However, around 6 GW (~30%) of wind capacity is embedded so is connected to local distribution networks. Embedded wind generation is invisible to National Grid and can instead influence outturn demand. Average embedded wind output has increased by more than 1 GW over the past 10 years which has contributed to the decline in average demand seen in the graph below.

 

Throughout the past winter embedded wind generation varied by 3 GW, depending on nationwide wind conditions, which led to a demand swing of the same amount. Embedded wind generation is having a growing influence on Triad forecasting as the increasing demand swing reduces the risk of a Triad occurring on days with high wind output. This was demonstrated during the previous winter as all three Triads occurred on days when embedded wind output was less than 1 GW.

 

Errors in National Grid forecasting increase

This winter, National Grid demand forecasts showed a significant error against outturn demand. The graph below shows that across the Triad period National Grid day-ahead forecasts averaged 2.4% higher than demand outturn on 76 days and 1.3% lower than demand outturn on 6 days. Furthermore, on EIC alert days National Grid day-ahead forecasts were 3.6% higher than actual demand levels. This equates to a difference of 1,600 MW which is the equivalent of 2 million microwaves or half a million kettles being used at the same time. In comparison, the average day ahead error for the last Triad period was 1.5%, which shows that uncertainty in forecasting has increased.

 

Warmer weather trends

Another contributing factor to the fall in peak demand was milder temperatures, with an average UK temperature of 5.7°C this winter. This is higher than the previous winter average of 4.1°C and the 10-year average of 4.7°C. There has only been one milder winter in the past 10 years; in 2015/16 when the average temperature was 6.2°C. The graph below shows the link between low temperatures and high demand. This winter there were only 36 days below seasonal average temperature, whereas last winter there was 61. Nearly half of these days fell within the same cold spell at the end of January so only one Triad fell during this period. This meant there was an increased chance that the remaining two Triad dates would fall on milder days with low wind. This was the case with the Triad on 10th December as the temperature was above seasonal average but wind output was only 1.7 GW.

 

Demand Side Response

National Grid estimate that demand side response (DSR), where consumers reduce energy usage during peak times, can lower national demand by up to 2 GW. The impact of DSR is typically larger during periods of cold weather and when all suppliers have issued a Triad warning. However, as we have seen from the December Triad, a lower level of demand response on milder days can inadvertently increase the risk of that day being a Triad.

The implementation of DSR has also affected the timing of the peak demand period. The graph below shows that the evening peak on Triad alert days was both longer and flatter than on non-alert days. When EIC issued a Red or Amber alert the evening peak typically lasted from 4pm to 8pm and was 4 GW higher (~10% increase) than afternoon demand (12pm to 2pm). Whereas on Green alert days the evening peak occurred between 5pm and 7pm and was 5.7 GW higher than afternoon demand (~15% increase). This suggests that a large number of businesses are reacting to Triad alerts by reducing demand during the typical evening peak.

 

The flattening of the evening peak on Triad alert days created problems with several suppliers’ Triad forecasts. The table below shows that six large suppliers all incorrectly predicted the peak time period on a number of occasions. For example, on 3rd January all six suppliers in the table below recommended reducing demand at some point between 4:30pm and 7pm. However, the peak half-hourly period fell between 4pm and 4:30pm before many businesses started to reduce demand. EIC managed to correctly predict the timing of the peak half-hourly period for all 24 of the alerts issued, eliminating the risk to our customers of reducing demand at the wrong time and potentially missing a Triad.

 

Uncertain future for Triads

As a result of the success of the Triad scheme in reducing peak demand as well as other fundamental changes to supply and demand, we have now reached a point where Ofgem are considering a different charging methodology. The Targeted Charging Review aims to introduce a charge that Ofgem consider is fair to all consumers and not just those able to reduce consumption during peak periods. Ofgem’s preferred option is for a fixed charge, however there is also the potential for a capacity based charge.

It is possible that next winter will be the last for Triad forecasting although at this point no timescales have been confirmed. The removal of the Triad scheme will increase costs for many business that currently benefit from Triad avoidance. An innovative way for these businesses to reduce future electricity costs is to invest in on-site generation and Intelligent Buildings solutions. EIC can help with this.

 

Next Steps

As the Triad dates have been confirmed for the 2018/19 season we are now able to calculate your Transmission costs for the next year. This forms part of our 360 Strategic Review which is the ideal first step to creating a Strategic Energy Solution for your business. It is key to unearthing hidden savings potential within your business. We’re offering businesses this insight for FREE. Claim yours here https://hubs.ly/H0gG7j20

 

Our IoT-enabled Intelligent Buildings solution brings together the required technologies to integrate your critical energy systems with a single, remotely-managed platform. This means you can manage your buildings in real time, reacting to Triad alerts, saving valuable time, money, and hassle. Find out more here https://hubs.ly/H0gYtTJ0

An insight into SECR

Posted on by Amy Coniff

SECR will require all quoted companies, large UK incorporated unquoted companies, and limited liability partnerships (LLPs) to report their energy use and carbon emissions relating to gas, electricity, and transport, and apply an intensity metric, through their annual Directors’ reports.

 

Summary of the Government’s proposed SECR framework

From April next year, large organisations in the UK will need to comply with the SECR regulations. The new scheme is part of the Government’s reform package.

Its aim is to reduce some of the administrative burden of overlapping carbon schemes and improve visibility of energy and carbon emissions. As such, it will be introduced to coincide with the end of the current Carbon Reduction Commitment (CRC) Energy Efficiency Scheme.

SECR will build on the existing mandatory reporting of greenhouse gas emissions by UK quoted companies and the Energy Savings Opportunity Scheme (ESOS).

 

Who needs to comply with SECR?

SECR qualification will follow the Companies Act 2006 definition of a ‘large organisation’, where two or more of the following criteria apply to a company within a financial year:

  • More than 250 employees.
  • Annual turnover greater than £36m.
  • Annual balance sheet total greater than £18m.

There is no exemption for involvement for energy used in other schemes – e.g. Climate Change Agreements (CCAs) or EU Emissions Trading Scheme (ETS).

 

What are the reporting requirements?

From 1 April 2019, affected organisations will be required to:

  • Make a public disclosure within their annual directors’ report of energy use and carbon emissions.
  • Report using a relative intensity metric e.g. tCO2/number of employees.
  • Provide a narrative on energy efficiency actions taken during the reporting period.

Reporting will align with an organisation’s financial reporting year.

 

Is anyone exempt from SECR?

Yes – those exempt from complying with SECR include:

  • Public sector organisations.
  • Organisations consuming less than 40,000kWh in the 12-month period are not required to disclose SECR information.
  • Unquoted companies where it would not be practical to obtain some or all of the SECR information.
  • Disclosure of information which Directors think would be seriously prejudicial to interests of the company.

 

There seem to be similarities to ESOS – can ESOS compliance help with SECR?

Yes. Though ESOS and SECR are separate schemes, and will continue as such, the information from your ESOS compliance can be used to support SECR reporting.

 

Where do I start with compliance?

The detailed guidance for SECR will soon be published. EIC can assist with compliance as well as providing bespoke reporting to ensure that you have real visibility of your energy and carbon emissions both at organisational and site level.

If you would like to know more about SECR, what it means for your business visit our Streamlined Energy and Carbon Reporting (SECR) service page.

UK Capacity Market suspended by European Court of Justice

Posted on by Amy Coniff

Somewhat lost amongst the noise surrounding the proposed Brexit Agreement comes the news that UK’s Capacity Market (CM) will undergo a temporary suspension.

 

What is the Capacity Market?

The Capacity Market allows plant to offer capacity to the electricity system at a price set by auction. The market has been introduced to prevent a short-fall in electricity generation due to the closure of older fossil fuel plant. Every year, the Government decides how much capacity will be needed to safeguard the system. Both generators that are currently operating, and those that are being developed, can take part in the scheme.

 

The Court’s Ruling

The ruling from the European Court of Justice (ECJ) follows Tempus Energy’s challenge to the UK Government that took place in 2014. The company took issue with the decision to grant the UK’s Capacity Market with State Aid approval, making claims that the design was biased against small, clean energy, making it easy for coal, gas, and diesel generators to control the market.

The ECJ said that the European Commission was wrong to not more closely investigate the UK’s plans to establish the CM in 2014, when the organisation was originally responsible for assessing whether the policy complied with State Aid rules.

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 rules also require any measures taken to increase capacity to be designed in a way that encourages operators of new clean technologies.

 

What’s next?

The ECJ’s decision means that payments made under the Capacity Market scheme will be frozen until the UK Government can obtain permission from the European Commission to continue.

Furthermore, the UK will also not be allowed to conduct any further CM auctions for energy firms to bid on new contracts. The nearest auctions were scheduled for early 2019.

Sara Bell, CEO of Tempus Energy, said: “This ruling should ultimately force the UK Government to design an energy system that reduces bills by incentivising and empowering customers to use electricity in the most cost-effective way – while maximising the use of climate-friendly renewables.”

 

How will this affect you?

The Government has released a statement saying that security of supply will not be impacted over this winter.

They acknowledge a ‘standstill period’ on the Capacity Market during which they will be working closely with the European Commission in order to aid their investigation and seek approval for the Capacity Market.

The cost of the Capacity Market is recouped via customers and currently accounts for 2.9% of an electricity bill.

The suspension of the payments to generators may result in customers receiving a refund, or at least a halt to ongoing payments while the suspension is in place.

However, if the scheme is cancelled all together it would lead to the removal of one cost to customers; the Capacity Market charge is just one of numerous non-commodity charges, paid on top of the wholesale price of energy, that are rapidly increasing.

 

Stay informed with EIC insights

For the latest news on the energy markets and industry updates, you can find us on Twitter.

Follow @EICinsights today.

How will Brexit affect the UK energy industry?

Posted on by Amy Coniff

The energy sector in the UK had already seen significant changes with the Energy Act 2011 and various proposals for reform of the electricity market. The potential impacts of Brexit on the UK and global economy could be far-reaching. However, the direct impact on the energy industry is likely to be more muted.

Oil and gas markets are traded on an international level and the EU has little influence over the make-up of a member states energy mix. There will be no danger of blackouts or supply shortages and in the short-term you may see little day-to-day change.

However, the longer-term outlook for post-Brexit energy may be altered, with one of the major issues being the UK’s relationship with, or role within, the EU Internal Energy Market (IEM).

 

The EU Internal Energy Market (IEM) – will the UK stay a part?

The IEM is a borderless network of gas and electricity transfers between EU member states. Common market rules and cross-border infrastructure allow for energy to be transferred tariff-free between countries.

Post-Brexit, the UK is likely to have less influence over EU energy regulation but will be able to adopt a different, potentially lighter, framework for its energy polices. The extent to which the UK still adheres or follows the EU energy regulation will be dependent on any ‘deal’ reached before March 2019.

Continued access to the IEM is a key priority for the UK Government in its Brexit negotiations. This would allow the country to continue to take advantage of various benefits associated with the IEM including increased security of supply, market coupling, cross-border balancing and capacity market integration.

Having recognised the benefits of the IEM the Government is seeking to retain as free as possible access to internal market and to maintain a strong influence on energy within the EU.

Plans to increase interconnectivity with the Continent are continuing and enhancing with many new interconnector links currently in development (see below). Irrespective of negotiations, this will require close cooperation with the EU Internal Energy Market going forward.

However, there are some inconsistencies in regards UK plans encompassing full membership of the IEM. Continued participation in the IEM is likely to involve the UK adopting various European legislation, which may not tally fully with UK judicial ambitions unless the UK remains part of the institutions which handle EU energy regulation (ACER, ENTSO-E and ENTSO-G for example).

 

Will Brexit impact on connectivity between the UK and Europe? What about Interconnectors?

The ongoing Brexit negotiations are having no real impact on developments, with four new Interconnector links now under construction.

The Government wants to see all the current planned projects through to operation, the majority of which will not be completed until after the UK has left the EU. Business Secretary Greg Clark had indicated he was keen for the UK to remain in the EU’s Internal Energy Market, although the final result will depend on the outcome of Brexit negotiations.

Regardless of the outcome, the UK’s energy network connections to the EU will remain in place. The Government recently posted guidance on the trading of gas and electricity with the EU if there is no Brexit deal. The publication highlights that there are only small changes expected to Interconnector operations, advising operators to engage with relevant EU national regulators to confirm any requirements for the reassessment of their access rules.

The main area that may see impact is for proposed Interconnectors; those which are still in the stages of project development, without final financial decisions. Uncertainty caused by Brexit, surrounding commercial, regulatory, and operational impacts, will likely see planning stages revisited to adjust for these challenges.

The UK may lose access to the Connecting Europe Facility (CEF) going forward. The CEF help to provide funding for Interconnectors across Europe through targeted infrastructure investment. The Government has confirmed any commitments that have already been made by the CEF regarding Interconnectors into the UK will be safe following the UK’s withdrawal. However, it is not clear whether companies in the UK will be able to seek investments for new projects.

 

Will EU State Aid rules still apply to the UK?

Unless the UK remains part of the European Economic Area (EEA), then the EU State Aid rules would no longer apply. The Government has said it will transfer existing EU State Aid law into domestic law after Brexit. The Competition and Markets Authority (CMA) will take over responsibility of State Aid enforcement. Going forward, UK rules may diverge from the EU but the extent of this will be limited by the terms of a future UK-EU trade deal.

In the immediate aftermath of Brexit, no significant change to State Aid rules is expected.

 

Will coal plants stay open?

Coal-fired power plants in the UK are required to adhere to the EU Industrial Emissions Directive (IED) which places conditions on such plants in order to control and reduce the emissions and waste they generate. Strict emissions limits often require substantial investment in technology to reduce pollution. Several plant determined this was not cost effective, and will close down. All but one coal plant has chosen not to adhere to the new regulations and will close by 2023, and several have already done so.

Despite Brexit, these unabated coal plant will close. The Government has confirmed its policy to remove coal from the fuel mix entirely by 2025.

The Medium Combustion Plants Directive 2015 (MCP) operates in a similar manner, limiting the emissions of harmful pollutants. The UK has adopted both the IED and the MCP into its European Union (Withdrawal) Act, meaning that in the short-term these regimes will continue beyond March 2019. In the long-term the UK and EU will need to agree on common standards following Brexit.

 

What about EU investment in energy projects?

Several EU initiatives promote investment in energy infrastructure which encompasses funding towards UK projects. The EIB, for example, has invested over €13bn into UK energy projects since 2010.

The draft EU Withdrawal Treaty anticipates this funding will continue, at least for projects approved by the EIB for investment before 29 March 2019.

After withdrawal from the EU, the UK will not be eligible for specific financial operations from the EIB which are reserved for EU member states. New projects may be supported by the EU depending on the nature and if it aligns with the EU’s own energy policy. Cross-border projects, such as Interconnectors and pipelines, may be available to non-member states.

The UK Treasury has sought to boost funding certainty and has vowed to underwrite all funding obtained via a direct bid to the European Commission and has also confirmed Horizon 2020 projects will still be funded.

 

What about the gas market, will supplies or prices be affected?

The UK already operates a diverse import infrastructure, consisting of Interconnectors and Liquefied Natural Gas (LNG) terminals to allow for the import of gas, mitigating against supply risks. Operations and gas flows are expected to continue as normal, irrespective of Brexit.

A more significant impact is likely to come from the expiry of long-term supply contracts and restrictions which allow for selling capacity on a long-term basis. The tariff network code restricts the price at which Interconnectors can sell their capacity. With Brexit it is unclear whether Interconnectors will continue to be bound by these restrictions.

Other benefits like the Early Warning Mechanism and the Gas Advisory Council may be lost unless the UK can negotiate to retain its role in these.

For Brexit to have a significant impact on gas prices (barring any substantial currency moves) then the withdrawal from the EU would need to lead to export tariffs on EU gas flowing to the UK.

 

How will Brexit affect the nuclear sector?

The UK indicated its intention to withdraw from the European Atomic Energy Community (Euratom) and the associated treaty (the Euratom Treaty) on 29 March 2017 as part of the Article 50 withdrawal process.

A report from the House of Lord’s energy sub-committee in January 2018 highlighted the potential for this withdrawal to impact UK nuclear operations such as fuel supply, waste management, and research.

However, the Government has made clear withdrawal from Euratom will not affect nuclear security and safety requirements. A Nuclear Safeguards Bill was introduced to Parliament in October 2017, highlighting how this will be achieved by amending the Energy Act 2013.

The Government will also continue to fund nuclear research in the UK, through programs like the Joint European Torus, Europe’s largest nuclear fusion device. Going forward, the UK will negotiate nuclear cooperation terms with other Euratom and non-Euratom members.

 

What about environmental impacts?

We’ve taken a look at the potential affect of Brexit on the UK’s climate change and renewable energy targets – find out more at our blog.

 

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Follow @EICinsights today.

Autumn Budget light on energy

Posted on by Amy Coniff

During the Chancellor’s hour-long speech the overall focus was on tax and spending, with little said about climate change. What energy-related announcements were made?

 

Climate Change Levy

CCL is a tax on energy delivered to non-domestic users within the UK. Businesses participating in Climate Change Agreements (CCAs) can avoid up to 90% of this levy by investing in agreed energy efficiency and emissions reduction measures.

This latest Budget announced upcoming changes to CCL rates. The Government’s ongoing efforts to rebalance the main rates paid for corporate gas and electricity use will see the two prices brought more in line with each other.

The electricity rate will be lowered in 2020-21 and 2021-22, whilst the gas rate will be increased in 2020-21 and 2021-22 so that it reaches 60% of the electricity main rate by 2021-22. Other fuels, such as coal, will continue to be aligned with the gas rate.

 

The impact to your energy bills

The increase in revenue for the Treasury will come as a direct result of higher energy bills for businesses. An increase in the CCL for 2019 was already expected as a result of the closure of the Carbon Reduction Commitment (CRC).

 

Carbon Price

Carbon Price Support (CPS) is applied to the power sector in the UK, with the exclusion of Northern Ireland, and has been a key driver in the reduction of coal usage in the UK fuel mix.

The Government has decided to maintain the UK’s carbon tax at £18 per tonne of CO2, until April 2021. However, the budget provides plans for the Government to reduce the CPS from 2021-22 if the total carbon price remains elevated.

In addition to this, the Government has published plans for the implementation of a UK carbon tax in the case of a ‘no-deal’ Brexit. Under a ‘no-deal’ scenario, the UK would be excluded from participating in the scheme. This would mean current participants in the EU ETS who are UK operators of installations will no longer take part in the system.

In this instance, the Government will initially meet its existing carbon pricing commitments through the tax system. A carbon price would be applied across the UK, with the inclusion of Northern Ireland, starting at £16 per tonne of CO2, marginally less than the current EU ETS price, maintaining the level of carbon pricing across the UK economy post-Brexit. The tax would be applied to the industrial installations and power plants currently participating in the EU ETS from 1 April 2019.

 

A freeze on fuel duty

Already announced ahead of the Budget, the Government has promised that fuel duty will be frozen for the ninth year in a row. This will see the tax on fuel, currently 57.95p per litre of petrol, diesel, biodiesel, and bioethanol, remain fixed over the winter period.

 

Enhanced Capital Allowances

The Budget also included changes to Enhanced Capital Allowances (ECAs), which are designed to encourage UK businesses to invest in high-performance energy efficiency equipment. The Government plans to end ECAs and First Year Tax Credits for technologies on the Energy Technology List and Water Technology List, from April 2020. The Government believe these ECAs add unnecessary complexity to the tax system and that there are more effective ways to support energy efficiency.

There is no new funding in place yet, but savings will be reinvested in an Industrial Energy Transformation Fund, to support significant energy users to cut their energy bills and help transition UK industry to a low carbon future.

The Government will extend ECAs for companies investing in electric vehicle charge points to 31 March 2023. This is part of the Government’s ambition for the UK to become a world-leader in the ultra-low emission vehicle market.

 

What about renewable energy?

Despite the recent landmark ‘1.5C report’ from the Intergovernmental Panel on Climate Change (IPCC), the Budget was very light on details concerning climate change and the environment. There were no announcements within the Budget to encourage new investment in renewable energy in the UK, despite industry calls to support new onshore wind and solar.

Leading renewable developers have previously urged the Government to clear a path for subsidy-free onshore wind farms, allowing developers to compete for clean energy contracts. Cost projections, published by the Department for Business, Energy and Industrial Strategy (BEIS), show that onshore wind is currently the cheapest power source available.

 

Stay informed with EIC

Our Market Intelligence team keep a close eye on the energy markets and industry updates. For the most timely updates you can find us on Twitter. Follow @EICinsights today.

Visit our website to find out more about EIC Market Intelligence and how we keep our clients informed at a frequency to suit them.

The role of renewables this winter

Posted on by Amy Coniff

The increase in wind and solar capacity in recent years has contributed to the overall reduction in demand. Higher volumes of on-site renewable capacity allow more generation to be provided off-grid, as homes and businesses generate their own electricity supply during windy or sunny spells.

This reduces demand on the national transmission system. The high levels of solar availability during the summer season were a particularly strong influence on demand levels this year, as on-site solar panels increased embedded generation, reducing demand requirements for the transmission network.

During stormy weather conditions, installed wind capacity can now provide around 12GW of electricity to the grid. Average wind generation in the UK last month was 5.3GW a day; over 50% higher than in September 2017.

 

average wind

 

What happens when there’s no wind?

While high winds can reduce power demand, one of the biggest dangers to the National Grid electricity network is a high-demand scenario at a time when wind output is very low. Lighting has a bigger impact on electricity demand than heating, as the majority of home heating is gas-fired.

However, during severe cold periods, electricity demand does spike as additional electric heating is needed to cope with the very low temperatures. This scenario occurred during March as a result of the Beast from the East, when peak demand jumped around 10% as temperatures dropped. The cold snap also brought very high winds to the UK. Wind output at the time topped 10GW, which provided high levels of low-cost electricity to the grid. However, this renewable supply may not be available during another cold spell.

National Grid’s Winter Outlook report forecasts an electricity margin this winter of 7GW, while also expecting 7GW of wind output during the peak winter. Find out more here.

 

How could this impact energy bills?

Supply margins would be placed under significantly more stress during a similar cold snap this winter, if wind output was low or non-existent. This would require another 10GW of supply being provided by gas and coal plant or imports. Such a scenario is likely to require significant price rises in the Within-day and Day-ahead markets.

 

Renewable energy solutions with EIC

If you’re interested in generating energy from your own renewables sources we can support your business to implement solar at your site.

A cost-effective and sustainable energy source, generating power from solar panels will cut your emissions, help the environment, and can be linked with a battery storage solution to maximise ROI. With our support you can install a battery solution as part of your wider energy strategy. Batteries can work in tandem with renewable energy sources such as solar or wind and can help you generate additional revenue via potentially lucrative demand side response (DSR) schemes.

To find out more, call us on 01527 511 757 or email info@eic.co.uk.

Control the clock change in an instant

Posted on by Amy Coniff

The seasonal trend towards higher demand during the colder, darker winter months will accelerate as a result of the clock change. This will place pressure on power margins and could lead to spikes in electricity prices, should supplies struggle to meet the higher demand.

 

Energy demand will jump but the downward trend continues

Current forecasts indicate the peak demand for the week following the clock change will be 9% higher than the previous week. Consumption is set to increase by nearly 4GW to more than 45GW overall as an earlier sunset (around 4:30pm) increases lighting requirements during the traditionally higher post-work demand period. If so, this would be the highest percentage change on record, with the 3.8GW rise nearly three times larger than the demand bump seen in 2015 or 2014.

However, the ongoing trend in reduced energy consumption has continued, meaning that demand is rising from a far lower base. Expected demand before this month’s clock change is 6GW lower than the most recent peak in 2015.

Furthermore, the expected post-clock change peak is the lowest on record.

 

Weekday Peak Demand for October

Demand – Week before Clock Change (GW)Demand – Week After Clock Change (GW)Difference (GW)Increase (%)

2018*

41.445.23.89%

2017

42.8

46.4

3.6

8%

2016

44.3

46.9

2.6

6%

2015

47.4

48.7

1.3

3%

201445.947.21.3

3%

201346.348.21.9

4%

*Forecasted figures

 

Improvements in energy efficiency have been reducing electricity use for the last 10 years. A large part of the reduction in peak demand has been the use of new smart technology, resulting in more efficient appliances that are able to do more with less. A switch away from incandescent light bulbs is also a contributing factor, particularly during the winter months, when lighting demand plays a far increased role in consumption.

 

Aside from a well-documented cold snap in February and March (remember the Beast from the East?) peak demand during 2018 has been largely below that of previous years, continuing a consistent year-on-year reduction in consumption overall.

 

React to changes in real-time with smart building controls

How can you ensure time-consuming but critical processes affected by the clock change are carried out efficiently?

IoT controls can help you alter site settings remotely, so you’re in full control when the clocks change. There’s no need to make arduous manual changes – with IoT, you can make the necessary changes at the touch of a button.

With our Building Energy Management solution, we’re introducing the next generation of smart building controls. Our innovative solution brings together the required technologies to integrate all your critical energy systems. This enables your business to access real-time insights on key energy and building systems via single, remotely-managed platform.

To find out more about our IoT-enabled Building Energy Management controls call us on 01527 511 757 or download our brochure.

 

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