This week’s Energy Spectrum overview

Energy Perspective

This week’s Energy Perspective explores BEIS’s latest Energy and Emissions Projections (EEP) published in January 2018, uncovering what the forecasts can tell us about the shifting official view of the energy systems of the future.

We focus on the changes since the last EEP’s publication. We highlight how projections for new gas generation needed by 2035 have been cut by more than half. Elsewhere, we look set for a landmark moment as low-carbon sources of electricity leapfrog gas as the UK’s largest source of power as soon as 2020 with efficiency gains driving higher output from delivered capacity. Battery storage is also projected to rise albeit with the trajectory now weighted more to the second half of the 2020s. In aggregate energy terms, the figures do identify a gap to the overall CO2 cuts necessary to hit the fifth carbon budget, but the impact is mitigated somewhat through projected demand reductions. BEIS have promised further detail during 2018, and the earlier publication of these projections are a welcome start.

Policy

Last week saw the T-1 2018-19 Capacity Market Auction deliver a lowest ever Capacity Market clearing price of £6.00/kW/year – in line with our own forecast’s expectations. We look at the results of the auction in our policy section, such as the make-up of the 5.8GW of Capacity Market Units (CMUs) handed Capacity Agreements. We set this against the context of capacity already procured for this year I the 2014 T-4 auction. Attentions now turn to this week’sT-4 auction, where opinions are much more spread on the likely price outcome.

We also deliver a breakdown of the EU Energy and Environment Sub-Committee’s report, Brexit: Energy Security. The report warned of significant implications for the UK in energy supply, consumer costs and decarbonisation once leaving the bloc. It cited potential loss of investment stimulus, the impact on interconnection growth and access to specialist skills., It recommended that the government seek continued membership of the Internal Energy Market. The Brexit negotiations will continue to unfold. Logic dictates building on current arrangements, but politics may drive different outcomes – something the report itself notes.

Regulation

In our regulation section, we look at Ofgem’s appointment of Green Star Energy as the Supplier of Last Resort (SoLR) for the defunct Future Energy’s customers. Green Star Energy will offer Future Energy’s customers the same price as they had been paying before, both on fixed and variable tariffs, while also honouring outstanding credit balances to current and former customers. The whole process appears to have been both competitive and smooth, but the regulator has come under renewed pressure to look at financial assessments of new suppliers once again, having promised to originally consider this in February 2017.

Industry & Markets

In late-January, carbon prices hit six-year highs in the EU Emissions Trading System (ETS), something we examine in our industry structure segment. The upwards move reflected speculation about the possible tightening of supply with the introduction of the Market Stability Reserve in January 2019.  We do not expect carbon prices to rise significantly in Phase 3 of the EU ETS owed to the surplus remaining so large. For further commentary on carbon price movements and other commodities, contact Tim Dixon at t.dixon@cornwall-insight.com for a trial of our weekly Energy Market Bulletin.

Nutwood

In this week’s Nutwood, Perry Sioshansi, Founder and President of Menlo Energy, looks into nuclear’s future prospects. In an article that first appeared in EEnergy Informer, of which Perry is the Editor and Publisher, Perry finds that while nuclear one had a promising future, this has been squandered. Perry concludes the world is gradually pivoting towards renewables and the future belongs to “fire-free electricity”.

To find out more about the Energy Spectrum service or to request a free trial contact us at enquiries@cornwall-insight.com.

Related thinking

Energy storage and flexibility

“Co-location, co-location, co-location”: Benefits and challenges

Key take-aways of the launch event   By Jamie Maule, Dr Matthew Chadwick & Nick Fothergill (Partner – Weightmans LLP) As part of the UK’s transition to net zero, the electricity generation mix needs to evolve, with increasing amounts of renewable capacity required to meet net zero commitments. To maximise...

Energy Market Design

How does REMA impact energy generation, flexibility and consumers?

The Review of Electricity Market Arrangements (REMA) is the largest review programme of GB electricity market arrangements for a generation. It comes at a time when European energy markets are suffering extreme turmoil. Depending on the outcome there could be significant implications for generators, flexibility providers, and, indirectly, consumers. REMA...

Energy Market Design

REMA: electricity market design choices

Electricity markets will serve as the foundation for the future GB energy system.  This article examines some of the market design decisions that will be considered by the Review of Electricity Market Arrangements (REMA). Market design goals At its most simple, a well-functioning market will attract enough potential “buyers” and...

Low carbon generation

Energy System Reform: Ofgem shares plans for Britain’s energy system

Against the backdrop of record high and volatile energy prices, Ofgem set out on 8 July its view on key aspects of the GB energy system where it considers significant reform is required to deliver a resilient, low cost, low carbon energy sector. Recent developments in the energy market, such...

Commercial and market outlook

Capacity, reform, and unlawful strategies: 5 things that happened yesterday

Capacity, reform, and unlawful strategies: yesterday was a busy day for energy geekery. The developments encapsulate the shorter and longer term challenges and uncertainties present in the energy market presently: Read the full article here

Energy storage and flexibility

Five key trends from the flexible asset PPA market

On 20 May, we published our sixth edition of our Flexible Asset PPA Market report. This is our biannual survey and analysis of the Power Purchase Agreement (PPA) market for flexible assets in GB, seeking to understand the market size, active offtakers and optimisers in the space, latest market trends,...

E-mobility and low carbon

Key take-aways from the Low-carbon hydrogen roundtable

Recent announcements from the UK Government have made it clear that the role for low-carbon hydrogen in the UK energy system is set to increase rapidly across the next decade. There was significant focus on low-carbon hydrogen in the Energy Security Strategy, including the doubling of the hydrogen capacity target...

Announcement

2021/22 Australian energy insights report

Analytics on key current developments in the Australian energy industry are available Cornwall Insight Australia has released a compilation of Australian energy insights, charts, and analyses. The report includes the topics of energy storage and flexibility, generation (all technologies), power prices, low carbon generation, FCAS, policy and regulation, and transmission...