Five things we learnt from Energy Spectrum 668

With five of the Big Six having published their segmental accounts – breakdowns of financial performance and costs across generation and supply business areas – it is readily apparent that, in general, margins are on a downward trend. In this week’s Energy Perspective, we suggest that, while some suppliers were losing money supplying some fuels in 2016, but still – for the Big Six at least – able to post record domestic energy supply profits, the picture just two years later is much bleaker. Further, the somewhat frank language laid out in parent company reports doesn’t leave much room for optimism, with all citing the price cap and competition squeezing profits.

The UK’s latest and third Contracts for Difference allocation round (AR3) opened on 29 May and, with a limited budget for the round, competition between projects is likely to be fierce, especially from offshore wind providers. We look more closely at AR3 in this week’s Policy section.

On 24 May, Ofgem published its sector specific methodology decision for the RIIO-2 price controls starting in 2021. In this week’s Regulation section, we state that while there is a lot of new thinking around driving innovation, responses to vulnerability, and stimulating environmental measures, the immediate media focus has been on how far allowances will be reduced against current controls and the estimated £6bn saving. We will be looking into Ofgem’s position in more detail soon.

A UK Energy Research Council briefing paper on the flexibility of Britain’s gas networks offers an interesting perspective on a new area that will need to be considered given the looming issue of heat decarbonisation and the repurposing of the gas networks. We look more closely in this week’s Industry Structure section.

In this week’s Nutwood, our analyst Joe Camish discusses several notable unplanned outages on the NEMO Link interconnector during May. There are, he suggests, some important learnings for market participants.

Related thinking

Regulation and policy

What’s going on with REGOs?

Renewable Energy Guarantees of Origin, more commonly referred to as REGOs, are certificates issued to accredited renewable generators for every MWh of electricity they produce over a year period. The initial intentions of these certificates were to provide suppliers a means to prove the level of renewable generation they received...

Home supply and services

Ofgem strives to improve consumer experiences across both the domestic and non-domestic sectors

Over the last week, a number of anticipated publications were issued by Ofgem that hold the potential to make a significant change to the requirements on both domestic and non-domestic suppliers. The findings of Ofgem’s non-domestic market review were revealed, alongside a policy consultation on the options available to address...

Energy storage and flexibility

Waiting to connect: the problems and solutions for network connection queues (Part 2)

Network connection queues continue to be a notable topic of interest as many generators face significant delays to project development – an issue that is directly conflicting with net zero ambitions and recent focuses on strengthening domestic energy supplies. In Part 1 of our two-part series on connection queues we...

Home supply and services

Addressing consumer harms in the non-domestic market

In recent months, Ofgem has shone a light on areas across both the domestic and non-domestic market where suppliers could improve their practices for customers and go beyond what they are obligated to do in the licence conditions. In a time of significant and extended volatility, the regulator has brought...

Energy storage and flexibility

Waiting to connect: the problems and solutions for network connection queues

The number of grid applications has risen significantly in recent years, resulting in increased pressure on the electricity networks to facilitate new connections. In its Energy Security Strategy, the UK government set out ambitions for 95% of electricity to be sourced from low carbon generation by 2030, and for the...

Energy Market Design

Are prices going to rise in Contracts for Difference Allocation Round 5?

A number of factors may be about to put an end to the trend for falling energy prices in the Contracts For Difference (CfD) scheme. The CfD scheme has provided strong subsidy support whilst also providing consumers robust levels of protection. High investor confidence and steady reductions in capital costs...

Business supply and services

What happened in 2022 in the energy market?

The GB energy market never stands still and 2022 was no different. In this infographic, we look back at some key happenings from the past year in different segments of the GB energy market.  Click the image below to see our snapshot.

E-mobility and low carbon

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.  It’s My Birthday – Two years of Dynamic Containment Picked by Tom Faulkner, Head of...