This week’s Energy Spectrum overview | 8 May 2018

In this week’s Energy Perspective, we examine the progress in setting the broader energy price cap. The challenge now, we argue, transfers to Ofgem and the industry in implementing it. Ofgem has been seeking views on different ways the various elements of the price cap might be calculated through a series of working papers and we discuss the thinking that has emerged so far and the challenges ahead.

In this week’s Policy section, we look into new estimates from financial think tank Carbon Tracker that predict a steep rise in EU Emissions Trading System (EU ETS) prices if the European Commission ultimately legislates to align the bloc’s current emissions targets with the goals of the Paris Agreement. We argue that after years of negligible effect on power station economics, the EU ETS price increase could finally provide the necessary price signal on a pan-European basis.

The section also examines the BEIS Public Attitude Tracker statistics, which reveal a new peak in the level of public support for renewables.

In this week’s Regulation section, we review the news that there will be no mid-period review from Ofgem on the RIIO-ED1 price control after it was found that if a full review was undertaken it could damage investor confidence. The move was criticised by Citizens Advice as a “missed opportunity” for the regulator to rectify handing companies “billions in unjustified profits”. However we argue that on balance Ofgem made the right decision to maintain regulatory confidence.

We also discuss Ofgem’s recently opened consultation on fully implementing the Competition and Markets Authority’s recommendation to fully remove the whole-of-market requirement from the Confidence Code and the outcomes of the Regulatory Policy Institute’s annual conference.

In our Industry Structure section this week, we discuss the implications of the sale of Flow Energy to Co-operative Energy after a majority of shareholders voted to accept a purchase offer.

The section also reviews new recommendations from the Energy Technologies Institute to reduce the costs of new nuclear power generation in the UK, which the Nuclear Industry Association says shows that new nuclear “need not be expensive”. We argue that while the report identifies areas throughout the new nuclear design and build process where project costs can be reduced, it is worth noting that four of the eight prioritised actions fall within the political and regulatory context category.

In this week’s Nutwood section Cornwall Insight Associate Peter Atherton looks at the future of Iberdrola after the company reported strong Q1 2018 results.  He examines the Iberdrola’s performance and long-term strategy alongside the diminishing importance of the UK to company.

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

Related thinking

Regulation and policy

Our response to the Spring Budget

Once again, a UK budget has seen some significant energy policy announcements that will stir up conversation and opinion across the country. It also shows how reining in energy prices is seen as key to restraining inflation. The pre-budget announcement to maintain the Energy Price Guarantee (EPG) at £2,500 had...

Home supply and services

Our response to the publication of the REMA consultation summary

On 7th March the government published the summary of responses received from its Review of Electricity Market Arrangements (REMA) consultation. The responses received showed the industry has expressed strong support (92% agreement) for energy market reform that prioritises decarbonisation, security of supply, and cost-effectiveness. Respondents also agreed that the current...

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

Our response to the announcement of the April price cap

The predictions for the Default Tariff Cap in this piece are out of date, please click here to find our latest forecasts and commentary on the cap. Following the announcement by Ofgem that April’s Default Tariff Cap (price cap) will fall to an average £3,280 per year, nearly a £1,000 drop for...

Home supply and services

Our final forecast for the April price cap

The predictions for the Default Tariff Cap in this piece are out of date, please click here to find our latest forecasts and commentary on the cap. We have released the final prediction for the April Default Tariff Cap (price cap) following the closure of the observation window1, on 17 February. 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...