There is scant evidence that dividend payments are crowding out long-term investment in either the regulated or competitive utilities market, while regulators have been lax in policing capital structures of the regulated network companies. In our Energy Perspective piece this week Cornwall Insight Associate Peter Atherton rebuts the argument that high dividend payments have come at the cost of lower investment. Suggestions for reform include the potential to start with a dividend target and set the Return on Equity/ capital structure accordingly in order to offer shareholders a fair return.
The proposals for a Smart Export Guarantee are a welcome shift in policy, but uncertainties remain over metering and communications that mean there is a case for a transitional step after the closure of the Feed-in Tariff. In this week’s Policy section we explore the BEIS plans to create a market for small-scale renewables exports, placing a new obligation on large suppliers to provide a purchase tariff.
The appointment of OVO Energy as Supplier of Last Resort (SOLR) for Economy Energy’s customers firmly establishes the latter as the largest challenger brand in the domestic retail market. In the Regulation section we chart the history of compliance action against Economy Energy, and note the unique aspects of this most recent SOLR, including the waiving of rights to claim costs from the industry levy.
Solar would secure only incremental value from participation in the Capacity Market, while higher rewards can be captured for wind, National Grid’s proposed de-rating factors has revealed. In Industry Structure, we argue that the incremental approach to assessing the value of capacity fails to recognise the full contribution made by wind, especially projects that come to market either after or outside subsidy schemes.
The initial impacts of P305 cash-out reform has, two months in, seen cash-out price volatility increase and greater occurrences of price peaks and troughs. Cornwall Insight Wholesale Analyst Lee Drummee concludes that with this one of the main aims of the changes, it could be said that they have so far had the desired effect. However, whether the trends observed are purely down to the P305 changes is a moot point.