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Post-Brexit: Calls for close UK-EU ties on climate and energy

Failure to collaborate with the EU post-Brexit on energy and climate policy could raise energy costs for the UK, hitting consumers and unnecessarily complicating UK carbon emissions reductions. That’s according to the Green Alliance, which is calling on the UK government to continue to co-operate with the EU on energy and climate post-Brexit, claiming that it is “strongly in the national interest, particularly in relation to the growing low carbon economy.”

The independent think tank says that this sector already represents two to three percent of the UK’s GDP, and over 55 percent of trade in low carbon technology is with the EU.

Negotiating Brexit, from think tank Green Alliance, highlights Brexit risks and proposes establishing a “Paris co-operation track,” using the Paris Agreement on climate change, an international mechanism ratified independently by both the EU and the UK, as the basis for future collaboration with the EU on climate and energy.

According to the Green Alliance, the five main areas at risk are:

• Electricity interconnection with the EU which meets seven per cent of UK’s electricity needs and keeps consumer energy bills down. National Grid’s “two degrees” scenario for UK electricity sees interconnectors providing 17 percent of UK peak demand by 2023. A doubling of existing interconnection could save up to £1 billion a year in reduced wholesale prices by 2020, but leaving the EU’s internal energy market would put this at risk.

• Northern Ireland’s energy integration with the Republic of Ireland. If the UK leaves the internal energy market, it will disrupt the £6 billion (US$7.87 billion) Irish energy market.

• Favorable finance terms from the European Investment Bank. Current loans from the EIB are worth £8 billion (US$10.5 billion), more than double the finance previously available from the Green Investment Bank for UK energy infrastructure over the past five years. This favorable finance has underpinned the success of the UK offshore wind and electric vehicle sectors.

• Maintaining product standards and, in particular, vehicle standards which UK car manufacturers must comply with, as they export 80 percent of their vehicles, half of EU consumers. Divergence in a vehicle and other product standards would undermine UK exporters and risks turning the UK into a dumping ground for inefficient and shoddy products that aren’t fit to be sold in the EU.

• Delivering the carbon budgets where 55 percent of required emissions reductions to 2030 are expected to be delivered through EU-derived legislation with risks to effective transposition and future compliance and governance.

The study identifies several actions for the UK including to reconsider the hard line on the role of the European Court of Justice (ECJ), which governs the shared energy and climate rules across the EU and countries in the wider Energy Community.

“The UK’s concerns about the ECJ should not lead us to forego the benefits of high levels of cooperation: greater energy security and faster and cheaper decarbonization. Several options are available to address potential concerns over the role of the ECJ,” says the Green Alliance.

It suggests that an “association agreement” with the EU is a potential alternative, which would minimize the ECJ’s role and could achieve the necessary outcomes.

It also wants to retain access to the internal energy market for electricity and gas to maintain barrier-free trade. The internal energy market and its rules and principles have served British interests well, according to the think tank, and Britain should negotiate continued participation in the market and the technical bodies proposing the rules.

The Green Alliance also urges the UK to stay aligned with EU product standards and environmental principles as a significant divergence from these could undermine UK competitiveness and the ability to trade in low carbon goods and services, as well as weakening health and environmental safeguards.

“Sustained cooperation will mean that the UK can continue to stand with the EU at the forefront of international leadership on climate. It will also maximize the benefits of low carbon trade with Europe and support the shared vision of long term energy security. Not least, it will secure clean and cheap energy for UK consumers,” says Chaitanya Kumar, Green Alliance’s senior policy adviser on low carbon energy, and author of the analysis.

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Is there enough electricity? National Grid reacts to fossil-fuel vehicle ban

National Grid has welcomed the plan to make electric or zero-emission cars and vans account for all new sales from 2040, but said the government and industry now faced big decisions on how the extra power was provided and demand for it was managed.

The grid recently warned that, by 2030, electric cars could require 3.5-8GW of additional capacity, on top of the current peak demand of 60GW.

By comparison, the nuclear power station being built at Hinkley Point in Somerset will add 3.2GW of capacity to the system.

By the middle of the century, when it is assumed almost all cars will be electric, that extra peak demand could be up to 18GW.

The lowest estimates of extra demand assume that drivers charge their cars at off-peak times. Smart meters and time-of-day tariffs could incentivise owners to charge when wind and solar power are plentiful and electricity is cheaper.

Energy networks could also manage demand via automatic time-shift charging, whereby a car plugged in at home at 6pm is not actually charged until the early hours of the morning, when demand is low.

Ministers have already urged drivers to think carefully and avoid placing extra pressure on the grid.

James Court, head of policy at the Renewable Energy Association, a trade group, said: “We need smart vehicle charging and price-reflective tariffs if the future electric fleet is to be a huge benefit and not a hindrance to our grid.”

Regardless of how sensibly the extra demand is spread across the day, electric cars will require investment in new power generation.

The energy analyst Wood Mackenzie estimates that if one in three cars sold in 2035 is fully electric, the vehicles would collectively account for 3% of the UK’s total electricity demand. Building 400,000 charging points for them all would cost £30bn, the group has said.

National Grid said the extra power would be generated from gas, windfarms, imports and nuclear reactors – not from coal, which is scheduled to disappear from the UK’s power mix by 2025 at the latest.

And the switch to electric vehicles could even provide an eventual boost to the grid.

The government recently announced £20m of funding to support research on vehicle-to-grid technology, where the grid could call on the power stored in the cars’ batteries to help cope with fluctuations from intermittent wind and solar farms.

Since you’re here …

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industry Household batteries will be key to UK’s new energy strategy

Batteries and renewable power sources are on the verge of bringing about an “epochal transformation” of the UK that could make energy clean, abundant and very cheap, according to a cabinet minister.

As the government unveiled plans for a more flexible energy system and £246m of funding for battery research, Greg Clark told the Guardian that a smarter grid would “radically” bring down bills.

“Energy, for the last 100 years, for good reasons, we’ve rationed the consumption of [because] it’s been very expensive and environmentally-damaging to consume fossil fuels. [But] given the possibilities we are on the cusp of at the moment, we might move to a world where energy is clean and abundant,” said the business secretary.

Storing intermittent renewable power in batteries so it was ready when the grid needed it would bring down costs for everyone, including vulnerable and low income energy consumers, he said.

“If only we can capture it [power from the sun and wind] then we can go from energy being a worrying cost to people, to being, if not free, then very cheap,” Clark said, speaking in Birmingham on Monday as he put energy at the centre of the government’s industrial strategy.

But the variable nature of wind and solar power generation means that local energy networks and the National Grid need more flexibility to cope with those fluctuations.

Batteries, and the ability for energy firms to automatically reduce electricity demand from willing businesses and households, are at the heart of a plan published by government and Ofgem.

Ofgem said using technology to flatten out peak demand and avoiding the cost for reinforcements to energy networks would save consumers £17bn-£40bn by 2050. The regulator said that the 29 changes to energy regulation announced on Monday, which will come in over the next 18 months, would also encourage new, tech-savvy entrants into the energy market.

Andrew Burgess, an associate partner at Ofgem, pointed to emerging smart appliances that could automatically turn down electricity use at peak times, and make it possible for companies to aggregate the solar power from householders’ rooftops and sell it to local power grids when needed.

The changes should also make it easier for companies to aggregate and trade services from people who have fitted solar panels or batteries at home – selling households’ electricity to power grids at times of need.

“For individual consumers, I think the opportunities are for businesses coming in, for the Amazons and Netflixes of the world coming into a traditional sector and offering different ways for consumers to engage,” Burgess said.

The smart grid plans came as ministers launched the Faraday Challenge, pledging £246m of funding for battery research, £45m of which will be used to create a national battery institute,which will be a virtual grouping of universities across the UK.

“Its work will quite literally power the automotive and energy revolution, where the UK is already leading the world,” said Clark.

He added that the national battery centre would be a fitting way to mark the 150th anniversary of the death of Michael Faraday, the scientist who undertook groundbreaking work on electricity.

The energy industry, carmarkers and green groups welcomed the push on smart grids and batteries. Phil Sheppard, National Grid’s head of network strategy, which already runs schemes where businesses are paid to turn down electricity consumption when demand peaks, said: “Today’s report provides clear direction on how we move to a secure, low carbon, flexible energy system, using efficiency and innovation to help keep costs down for bill payers.”

WWF said the moves would accelerate the rollout of renewables and electric cars. Gareth Redmond-King, the group’s head of energy, said: “Battery storage is a clear game-changer in our ability to produce clean power from renewables.”

Nissan, which makes the batteries for its leaf electric car in Sunderland, said the government plans, combined with having more cars plugged into the grid, would have “a fundamental impact on the shift from fossil fuels to renewables”.

But some industry watchers said that while the changes were necessary, they risked creating a two-tier energy system of haves and have-nots, if adequate protections were not put in place.

Jon Ferris of Utilitywise said: “Today’s announcements will be transformational for the energy sector, but are not a panacea for the challenges of maximising energy productivity and accommodating increasing renewable generation.

“Some domestic consumers may save money, but there is a risk that only consumers able to afford new appliances, solar photovoltaics and storage will benefit.”

However, Clark was adamant that the plans would reduce rather than increase inequality in the energy market.

“[There] should not be a class of people who are excluded from these possibilities on the way to a big, abundant future,” he said, adding he would make it clear to energy suppliers that they had an obligation to help vulnerable customers access new technology.

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UK green gas ‘could boost decarbonisation goals’

Decarbonising the UK’s gas networks could play an important role in achieving the targets set out in the Paris Agreement.

That’s according to a new report from Imperial College London’s Sustainable Gas Institute (SGI), which says the existing natural gas system will need to be replaced with a greener solution if the UK is to effectively decarbonise.

Although this role could be taken over by electricity storage, the SGI suggests green gas storage would likely prove a better option.

They believe this would have the advantage of repurposing the valuable assets such as gas pipes that are already in place and would match up with the preferences of consumers, who generally like using gas appliances.

The group adds technical issues need to be explored before the costs of such a system conversion could be accurately calculated but claims low carbon gas can be relatively easily and inexpensively stored.

This gives it the benefit of increased flexibility over electric alternatives which the SGI says are more technically challenging.

The researchers estimate biomethane might cost around 8.1 pence per kilowatt hour (p/kWh) on average, with hydrogen predicted to cost slightly more at an average of 9.3p/kWh.

To compare this to current energy systems, in 2015 the equivalent EU price for electricity was 17p/kWh and the average EU natural gas retail price was 5.4 p/kWh.

Dr Paul Balcombe, a Co-Author in the SGI, said: “The timeframe for the potential conversion of the gas network could be in the late 2020s.

“Decarbonised gas will be most useful to domestic consumers in urban environments with dense populations who have limited amounts of space to use other low carbon options.”

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UK electricity and gas networks making ‘unjustified’ profits

Companies that run Britain’s electricity and gas networks, including National Grid, are making “eye-watering” profits at the expense of households, according to a well-known consumer group.

Citizens Advice believes £7.5bn in “unjustified” profits should be returned to consumers who pay for network costs via their electricity and gas bills, although its figures have been contested by the energy industry and regulator.

Ownership of electricity and gas networks came under the spotlight in the run-up to June’s general election, after the Labour party said in its manifesto it would bring both national and regional grid infrastructure to back into public ownership over time. Electricity sector privatisation began in 1990 and the gas industry was privatised in 1986.

Energy network companies — which own and operate the cables and wires that help deliver electricity and gas to homes and businesses — are in effect monopolies that are regulated by Ofgem.

Ofgem evaluates what their costs, including the cost of capital to finance investments, might be over an eight-year “price control” period.

Citizens Advice claims many of the regulator’s calculations for the most recent price control went “considerably in networks’ financial favour”. It believes assumptions Ofgem made about factors such as the future path of interest rates and returns on government bonds were too generous, as was the regulator’s assessment of the risk associated with operating a network company. 

These “generous” assumptions will lead to network companies making average profit margins of 19 per cent and an average return of 10 per cent for their investors at the expense of consumers, Citizens Advice claims in a report published on Wednesday, which recommends a shorter price control period to allow for more accurate forecasting.

“Decisions made by Ofgem have allowed gas and electricity network companies to make sky-high profits that we’ve found are not justified by their performance,” said Gillian Guy, chief executive of Citizens Advice.

Ofgem defended its regulatory regime, saying it helped to cut costs, improve reliability and customer satisfaction. 

“Ofgem has already cut costs to consumers by 6 per cent in the current price control and secured a rebate of over £4.5bn from network companies and is engaging with the industry to deliver further savings,” said Dermot Nolan, chief executive of the energy regulator.

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Mr Nolan insisted the next price controls would be “tougher for investors”. The current price controls for the gas and electricity transmission networks, plus gas distribution, run until 2021 and until 2023 for local electricity distribution networks. 

“While we don’t agree with its modelling and the figures it has produced, the Citizens Advice report raises some important issues about network regulation which will be addressed in the next control,” Mr Nolan said.

The Energy Networks Association, a trade body, refuted the claims of Citizens Advice, insisting that costs had fallen by 17 per cent in real terms since privatisation. The current regulatory framework was established after a public consultation, it said, adding that today’s report repeated several old claims that had previously been rejected by the Competition and Markets Authority.

“Our energy networks are among the most reliable and lowest cost in the world and their performance has never been better. In the next six years energy network companies are forecasted to deliver £45bn of investment in the UK economy,” a spokesman for the networks association added.

National Grid said that since 2013 it had generated savings of £460m for bill payers. “National Grid makes up just 3-5 per cent of the average bill, which pays for the transmission networks that transport energy across the country and our ability to balance the system second-by second. But even though it is only a small proportion we are always looking for new ways to reduce costs further,” it said.

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Centrica starts building new back-up gas plant

Construction has started on Centrica’s new back-up power plant at Peterborough power station.

The 50MW gas-fired facility is expected to play a key role in supporting local peaks in demand, producing enough electricity to power around 50,000 homes.

It will operate as a ‘peaking plant’, able to go from a cold start to full power in less than two minutes.

The new plant will include five reciprocating engines that will typically be used on weekdays to meet periods of high demand or provide back-up power when needed.

The project is part of Centrica’s £180 million investment programme into new flexible power facilities across the UK.

David Theakstone, Generation Manager at Peterborough power station said: “This fast response plant will help to meet local energy demand, while supporting the changing way electricity is generated.”

A team of up to 95 people will be on site during construction, which is expected to take around 15 months.

Last month Centrica announced it will be closing its Rough gas storage facility.