This week’s Energy Spectrum overview | 30 April 2018

In this week’s Energy Perspective, we explore how for storage the preference to move to the behind-the-meter proposition is increasing as the initial interest in grid-scale assets wavers.

We argue that there are many good reasons for this trend, including the fact that it allows organisations to maximise revenues by taking advantage of off-peak charging and peak discharging rates as well as opportunities to avoid network and other costs.

But, as with any storage, the behind-the-meter option also presents many challenges. These include dealing with revenue-sharing arrangements for different stakeholders in a project, the fact that offerings from storage providers in the market are not straightforward and, once a business model has been identified, the need to integrate it with existing supplier arrangements for the customer.

On top of this, we outline the challenges we anticipate are yet to come – primarily maintaining revenue streams in future years given probable future regulatory reforms.

In this week’s Policy section, we examine the news that the Competition and Markets Authority (CMA) has said that the proposed merger between SSE and npower could result in higher prices for some billpayers due to reduced competition. As a result, the CMA has called for the two companies to provide measures to address its concerns.

We argue that given the size of the proposed new supplier, these concerns were inevitable, but equally that it is extremely unlikely that the companies will not have been prepared for such an outcome. 

The section also looks into recent Social Market Foundation proposals to reduce and eliminate what it describes as the “iniquitous and unfair” energy poverty premium faced by low-income consumers.

In this week’s Regulation section, we delve into Ofgem’s final two working papers on the government’s default tariff cap. They set out Ofgem’s view on the environmental and social obligations placed on suppliers, and how the costs of the schemes could be treated under the cap.

We also discuss proposals by National Grid and the National Transmission System Charging Methodology Forum to develop changes to the structure of gas transmission charging to comply with EU Tariff network code requirements and to better fulfil stakeholder objectives. The work has been ongoing following a review by Ofgem of the current gas charging arrangements.

We argue that the task to complete supporting analysis and coherently marshal the materials for Ofgem’s consideration looks challenging given the last-minute rush to get options on the table in what has become a very important work-stream.

In our Industry Structure section this week, we look at Iberdrola’s strong Q1 profit rise alongside comments made by city analyst Bernstein questioning the company’s ability to continue its growth.

The section also reviews our latest Index of Domestic Energy Supply Costs and examines the mixed impact that updated third party charges have had on supplier costs. Overall, we see a growing proportion of supplier costs come from third party charges and therefore expect the trend of suppliers increasing their standard variable tariff (SVT) rates seen across March and April to continue, even as pressure on wholesale costs abates.

In this week’s Nutwood section, industry expert and Cornwall Insight Associate Simon Skillings explores the role of policy and regulatory risk in the energy industry. As the traditional “linear” energy system inevitably succumbs to a more complex patchwork of decentralised energy trading, he asks what this shift means for the future of policy and regulation.

What is the Energy Spectrum service?

Our Energy Spectrum service comprises two publications designed to ensure you stay ahead of the game.

  • The Daily Bulletin – providing you with up-to-date information, collating the most important political, regulatory and industry developments from the previous 24 hours
  • Energy Spectrum – offers the latest news and expert comment and is seen as an essential source of analysis and insight on developments in the British energy markets

Sign up to a free trial

To subscribe or to request a free four-week trial of the service, email Stephen Pointing at or call 01603 959883.

Related thinking

Home supply and services

Reforming Energy Bills: What’s on the Table?

There has been much speculation in the energy industry over what reforms to household energy bills could potentially be introduced, particularly with Ofgem due to announce its Q3 (July – September) 2024 Default Tariff Cap figures on Friday (24th). With so many areas under review, we’ve put together an overview...

Low carbon generation

Latest developments in the TPI space

We recently published our 2023 Annual TPI report which provides an independent review and analysis of the market for TPIs, and the services provided by them. The report also looks at the current challenges and opportunities for TPIs, such as regulatory changes, competition with suppliers, and diversification of services. 2023...

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...