2022’s most exciting ‘Charts of the Week’

Some of our team have looked back throughout 2022 and picked their most exciting ‘Chart of the Week’.​

Their choices include exploring green tariffs, wholesale gas prices, CfD allocation round 4 and the MHHS Implementation Levy. 

As we move to an energy mix that is dominated by non-synchronous, intermittent generation, flexibility is going to play an increasing role on the system. The Electricity System Operator’s (ESO’S) new suite of frequency response markets Dynamic Containment (DC) , Dynamic Regulation (DR) and Dynamic Moderation (DM) are gaining traction and being used to help restore second-by-second changes in frequency.

The ‘Chart of the Week’ I have chosen for 2022 celebrates two years since DC launched and the increase in capacity participating in the service. The chart outlines that the ESO’s DC Low (DCL) product has become the most lucrative balancing service, with gross annual revenue averaging £119/kW/year, and that average monthly procurement is up 87% on its first twelve months of operation. There have also been a number of changes to DC too as the ESO continues to align its ancillary services with the introduction of EFA block procurement and a four-day forecast for DC service requirement.

DC is becoming a staple in the ESO’s suite of balancing products, and as DM and DR continue to be utilised, they will provide necessary revenue streams for flexibility providers, however, it is likely that the record high prices seen for DC will not continue long-term as the market matures and saturates. We will continue to track flexibility revenue streams across the ESO’s full suite of balancing services in 2023 as new services come online.

Much of the energy industry’s attention in 2022 has focused quite rightly on energy supply markets and consumer protection amid surging and volatile wholesale markets. Unfortunately, the outlook has been broadly gloomy, although the speed at which the industry has responded to challenges by suggesting and implementing solutions should be celebrated.

The ‘Chart of the Week’ I have chosen for 2022 instead comes from our research into the electric vehicles (EV) market, which has continued to grow. This chart celebrated ‘World EV Day’ in September and features our track of EV charging prices against fossil fuel alternatives (petrol and diesel). The chart represents some good news for a subset of electricity customers, with charge point operators (CPOs) delaying the increase in electricity wholesale prices faced by their users. However, it also highlights the challenges for industry, with the cost of petrol and diesel continuing to remain competitive against rapid and ultra-rapid public EV charging.

We have since tracked further responses from CPOs to increasing costs, with some now introducing time-of-use charges on their networks. Further innovation is to be expected in 2023, which we will continue to track and analyse through our regular reports, forums and industry events.

Cornwall Insight has been attentively following the Review of Electricity Market Arrangements (REMA) since it was announced back in April 2022. REMA could well be the most far-reaching reform of the energy market design since the privatisation, and its impact is very likely to be felt all across the sector. There are many options on the table and loads of potential permutations, so it is obviously too early to have an idea of what the final outcome will be. In recent months we have conducted a couple of polls among the audience of our webinars to understand emerging views on some aspects of REMA, as illustrated by this chart.

2022 has been a fascinating year for anyone with an interest in renewable subsidies. As this ‘Chart of the Week’ shows, two apparently similar subsidy auctions – the Contracts for Difference (CfD) in GB and the Renewables Energy Subsidy Scheme (RESS) in the Republic of Ireland respectively – delivered very different results. Risk allocation between generators and consumers is at the fore of the divergence, with the risks to which Irish generators are exposed driving prices higher.

But the main reason I have chosen this as my “Chart of the Year” is that it describes a prelude to an even more fascinating 2023 with the first Offshore RESS (ORESS) auction in Ireland and the next iteration of both CfD (AR5) and RESS (RESS-3) all taking place. Ongoing changes to the parameters of all three auctions will keep bidders on their toes – notably changes to the treatment of curtailment in RESS, and offshore wind competing with onshore wind and solar for the first time in the CfD. And all against a backdrop of ongoing challenges in global supply chains and high inflation making bidders’ lives all the more challenging when setting their strike price bids.

Throughout all of this, Cornwall Insight will continue to provide thorough and independent analysis and will seek to support bidders to achieve successful auction outcomes.

It’s great to see that this ‘Chart of the Week’ on Balancing Services Use of System (BSUoS) charges was one of the most popular charts in the year. BSUoS charges have attracted a lot of attention over the past 12-months as costs have seen a sharp increase due to the unprecedented rise in gas and electricity prices. BSUoS has remained elevated in the months since the publication of this Chart of the Week and continues to be a dominant driver of non-commodity energy costs.

BSUoS also continues to be impacted by industry reform. We highlighted in June that the implementation of CMP308: Removal of BSUoS Charges from Generation will see BSUoS charges collected solely from final demand users from April 2023, resulting in costs almost doubling on a £/MWh basis. More recently, on 15 December 2022, Ofgem published its decision on CMP361 & CMP362: Introduction of an Ex Ante Fixed BSUoS Tariff & Consequential Definition Updates. This will see further reform take effect from April 2023 by introducing a fixed volumetric BSUoS tariff with the aim of removing volatility and uncertainty in costs. In light these changes, BSUoS will undoubtedly remain a subject of interest in 2023.