Weekly News Review - 21st April 2023
UK ministers review bidding process for funding new renewable energy projects
The government has this week announced a review of the Contracts for Difference (CfD) scheme, the mechanism used to support new low carbon electricity generation projects in the UK. Currently CfDs are awarded to generators based on a bid price which guarantees a fixed price for electricity generated over a 15 year period. The competitive nature of the scheme has helped to reduce the cost to develop technologies such as offshore wind and solar.
However, the government is now seeking evidence and views about reviewing applications not just on their ability to deliver low-cost renewable energy deployment, but also based on how much a renewable energy project contributes to the wider health of the renewable energy industry.
These reforms could see applicants considering overall costs alongside other ‘non price factors’ – such as supply chain sustainability, addressing skills gaps, innovation and enabling system and grid flexibility and operability – when submitting their bids, which could help drive investment in the sector, grow the economy and boost the country’s energy security.
Minister of State for Energy Security and Net Zero Graham Stuart said: “Our flagship Contracts for Difference scheme has been hugely successful in supporting British low-carbon electricity generation, while also driving down costs for the benefit of consumers.”
“But we want to go further to ensure we maximise the scheme’s potential to improve energy security and ensure renewable energy developers can make the necessary investment in supply chains and innovation, which will ultimately make for a stronger sector and help our economy to grow.”
“This potential reform to the scheme to introduce non-price factors presents a solution to grow the renewable energy supply chain as we accelerate our energy transition plans to power more of Britain from Britain.”
National Grid confident of meeting gas and electricity demand this summer
National Grid have this week released its Summer Outlook Reports for gas and electricity which outlines how it intends to meet demand this summer. The UK’s National Gas Transmission (NGT) company has confirmed there is sufficient supply to meet GB demand over the next few months. They expect gas demand will be primarily met by supplies from UKCS and Norway with the balance being secured from LNG.
They also expect to see sustained flows of gas into Europe this summer following the Russian invasion of Ukraine and subsequent reduction in gas imports from Russia. The National Transmission System (NTS) could again be used as a transit for gas flows going into Europe, however demand for GB exports is forecast to be around 5.5 bcm which is less than half last year’s figure of 12.16 bcm.
European gas storage is currently around 56%, which is double this time last year (27%). This is due to a milder winter and many EU countries setting demand reduction targets to mitigate against the absence of Russian gas. There is again an obligation for European gas storage to be 90% full by the start of November. The healthy EU storage levels mean that less GB exports are expected this summer although the exact level remains uncertain.
The UK’s Electricity System Operator (ESO) also expect there to be sufficient available supply to meet demand at all times this summer and will be able to support exports to neighbouring European countries if needed. The ESO are confident they can use existing tools to manage system operability this summer. Periods of low demand typically represent the more challenging operational events during summer.
The ESO forecast that balancing costs could be around 30% lower than last summer due to lower wholesale prices and activities they have implemented. These include: reducing the existing minimum inertia requirement under the Frequency Risk and Control Report policy, delivery of the Voltage Mersey and Stability Phase 1 pathfinders, and the Constraint Management Intertrip Service.
Lords amendment to energy bill may stop new coalmines in England
It will soon not be possible to open a new coalmine in England following an amendment to the energy bill currently going through the House of Lords. There is a chance that the amendment may still be reversed in the House of Commons but this would require the government to table another amendment and attract enough support to remove it.
The amendment was tabled by the Liberal Democrats and narrowly won the vote by 197 to 194. It reads: “Within six months of the day on which this act is passed, the secretary of state must by regulations prohibit the opening of new coalmines and the licensing of new coalmines by the Coal Authority or its successors.”
Lord Teverson, the Liberal Democrat spokesperson for energy in the House of Lords, said: “This is a fantastic win for the Liberal Democrats, with the passage of our amendment stopping this Conservative government from opening new coalmines which tear the UK’s environmental credentials into shreds. Now we need MPs from all parties to come together to represent the views of the public who want cheaper energy produced by green, clean projects.”
“At COP26 in Glasgow, only a year and a half ago, the government proudly announced that it was leading an international effort to end the use of coal. We must hold them to this when the energy bill reaches the House of Commons.”
There was also a vote in the House of Lords to include a climate mandate for energy regulator Ofgem. Policy director at Greenpeace UK, Dr Doug Parr, said: “Creating a climate mandate for Ofgem really is essential for delivering a cheaper, cleaner, more secure energy system. Too many cheap renewable projects are being held back by the snail’s pace of connection to the relevant networks, flowing from the outdated rules that govern what can and can’t be done.”
“Should the government wisely choose to accept the changes the Lords have made, the grid and other network companies will be pushed to unlock the full potential of renewable energy. If the Lords have seen this opportunity today, then their vote offers the government a chance to wake up and see the same.”
Recent News
Want to talk about how this weeks news affects you?
Get in Touch Today
If you wanted to talk about any of the news items we have shared this week and how it could affect you and your organisation, then get in touch with our teams today.
