Weekly News Review - 29th September 2023
Rosebank oil field given go-ahead by regulator
The proposed Rosebank offshore oil and gas development in Scotland has been approved by the regulator. Rosebank is the UK’s largest untapped oil field and is located 80 miles west of Shetland. The project is a joint venture between Equinor and Ithaca Energy and is estimated to provide up to 300 million barrels of oil. According to Equinor’s estimates, the project represents a direct investment of over £8 billion and will support up to 1,600 jobs during construction.
A spokesperson for the oil and gas regulator, the North Sea Transition Authority (NSTA), said: “We have today approved the Rosebank Field Development Plan (FDP) which allows the owners to proceed with their project. The FDP is awarded in accordance with our published guidance and taking net zero considerations into account throughout the project’s lifecycle.”
Gilad Myerson, executive chairman of Ithaca Energy, said: “Rosebank stands as the largest undeveloped field in the UK, and with the receipt of development consent from the NSTA, we are now poised to embark on a journey that will not only provide critically important domestic energy but also ignite substantial economic impact.”
However, the decision has been met with criticism from environmental groups with the project estimated to produce over 150 million tonnes of CO2 over its lifetime, which is equivalent to more than half of the UK’s remaining carbon budget. There is also anger that Equinor will receive £3.75 billion in tax relief for developing the project and concerns that the oil produced by Rosebank would not be used in the UK.
Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit, said: “A week after a swathe of net zero U-turns and a few days after abandoning the expert Energy Efficiency Taskforce, the prime minister has shown that he’d rather give tax breaks to oil companies than lower energy bills. Taxpayers will fork out around £4bn to the developers of the oil field, money that could have insulated millions of homes with many set to be colder and poorer this winter.”
“To make matters worse, Rosebank oil will mostly be exported and then sold back to us at whatever price the oil companies can get. So it won’t help one bit with energy independence or gas bills, despite the government’s rhetoric. New renewables could help, but Treasury rules meant that no new wind power was secured at the latest renewable auction.”
Moray East wind farm accused of using loopholes to pull in £647m
The Moray East offshore wind farm in Scotland has reportedly generated £647 million by exploiting loopholes in government schemes. The 950MW wind farm began generating electricity in June 2021 but decided to defer their Contract for Difference (CfD) start date due to the rise in wholesale prices.
In 2017, Moray East was awarded a CfD which set the price of power generated at £57.50/MWh. However, following the energy crisis in 2021 and the Russian invasion of Ukraine in 2022 wholesale electricity prices remained significantly higher than the CfD strike price. This allowed Moray East to receive an additional £462 million which would otherwise have been paid back to consumers.
The wind farm also received an additional £184 million in constraint payments during periods of low demand which has resulted in an average income of £234/MWh. This is significantly higher than the £57.50/MWh strike price agreed in the CfD auction and is also higher than the £168/MWh average price of gas-fired generators.
The analysis from the Renewable Energy Foundation (REF) think-tank found that the wind farm received over £1.1 billion between June 2021 and July 2023. They estimate that if Moray East had implemented its CfD and delivered electricity at the contracted price, it would have only received £350 million.
Dr John Constable, the REF’s director, said: “The UK’s approach to renewables has resulted in unjustifiably high costs to consumers, but the multitude and complexity of the revenue streams available to generators has concealed this fact. Government needs to be honest with the public.”
A spokesman for the Department for Energy Security said: “It is not in the spirit of the scheme for generators to delay their start date to increase revenue. We have made changes to the scheme to ensure this is not possible for projects from round five and beyond.”
Blackouts less likely this winter says National Grid
National Grid’s electricity system operator (ESO) has said the risk of blackouts in Great Britain will be lower this winter. This is a result of European gas storage levels remaining high and an increase in French nuclear power imports. The ESO said that Britain is in a stronger position than 12 months ago when countries across Europe were desperately trying to find alternatives to Russian gas.
The ESO have forecast a margin this winter of 7.4% in its “base case” scenario, which means that supply is expected to exceed demand by 4.4GW. This is an improvement on the 6.3% margin last winter and is largely due to an increase in available capacity as demand is forecast to remain at a similar level.
The increase in French nuclear generation means that more power can be imported over the 4GW of interconnectors between the two countries. There is also the new Viking Link interconnector currently under construction between the UK and Denmark which will add 1.4GW of capacity when completed later this year. However, the ESO will have to cope with less back-up coal generation this winter as only one unit is still active, whereas five were available last year.
Despite the higher forecast margin National Grid are still likely to issue “capacity margin notices” over winter when supply margins become tight. The ESO are also expected to continue the Demand Flexibility Service (DFS) which offers incentives to businesses and households to reduce their consumption during periods of system stress.
On Thursday, the ESO said: “The broad European energy situation has improved since last year. The market has responded, bolstering European gas storage and supplies and the French nuclear fleet capacity is back to pre-pandemic levels.”
Craig Dyke, the ESO’s head of national control, said of the blackout risk: “Compared to last year it is almost going back to around where it was before last winter. So the risks that we talked about last year, the probability of them occurring, are much, much lower.”
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