Welcome to our monthly Energy Update, bringing you links to the major developments relevant to the industry.
A bumper edition this month as BEIS and Ofgem have been busy! We cover the latest CCUS and hydrogen developments, multi-purpose interconnectors, the FSO consultation response plus a new consultation on local systems operators, the British Energy Security Strategy, the nuclear RAB model and more.
CCUS business model consultations launched by BEIS
The Department for Business, Energy & Industrial Strategy (BEIS) has published two recent consultations on carbon capture, usage and storage (CCUS) seeking views on
- the industrial carbon capture (ICC) business model; and
- the dispatchable power agreement (DPA) business model.
The ICC business model consultation covers the proposed terms and conditions and the ICC front end agreement whilst the DPA business model consultation outlines its key design aspects, including the draft contract, a front end agreement and the gain share mechanism. The deadline to submit a response for both consultations is 10 June 2022.
BEIS, 22 April 2022
The CCUS roadmap outlines joint government and industry commitments to the deployment of CCUS in the UK and sets out the approach to delivering 4 CCUS low carbon industrial clusters, capturing 20-30 MtCO2 per year across the economy by 2030,
BEIS, 8 April 2022
BEIS has published the outcome to its consultation which sought views on three proposed amendments to the CfD regulations to facilitate power carbon capture, usage and storage (CCUS). The government response sets out the proposed amendments to the Contracts for Difference regulations and related policy rationale, that will be incorporated in a new Statutory Instrument, The Contracts for Difference (Miscellaneous Amendments) Regulations 2022. BEIS is aiming for the proposed SI to be put before Parliament in 2022.
BEIS, 29 March 2022
BEIS has published a consultation seeking views on the technical aspects of the Energy Bills Support Scheme in order to test its design to ensure that support is provided as widely as possible in a simple and cost-effective way, and that the recovery mechanism is clear and efficient. BEIS seeks comments on:
- the processes needed to provide the funding to energy suppliers;
- the mechanisms by which the reduction is passed on to consumers’ bills; and
- the recovery mechanisms.
Responses can be submitted until 23 May 2022.
BEIS, 11 April 2022
- Energy Networks
BEIS responds to consultation on multi-purpose interconnectors proposals
BEIS has published its response to the consultation on proposals for multi-purpose interconnectors which forms part of the Offshore Transmission Network Review (OTNR).
There are two separate government responses to this consultation:
- the first is to the Multi-Purpose Interconnectors (MPI section); and
- the second will address the Enduring Regime section and will be published later in 2022.
The Government has determined that aspects of the existing licensing and legal framework are unlikely to be suitable for an enduring solution for MPIs and will therefore require modification. To enable legal and regulatory clarity for the enduring regime, the Government is considering how to introduce a new licensable activity into the Electricity Act 1989 for the operation of an MPI and whether an associated definition of an MPI asset is necessary. Legislation will be introduced when Parliamentary time allows.
The Government supports:
- the amendments made by Ofgem to the licence conditions for both the interconnector-led and OFTO-led approaches outlined in their consultation; and
- Ofgem’s intention to enable early opportunities MPIs under a pilot cap and floor scheme.
BEIS, 25 April 2022
Ofgem publishes consultation on minded-to decisions on anticipatory investment and on interim framework for MPI
Ofgem has published, as part of the Offshore Transmission Network Review (OTNR) two consultations:
Both consultations close on 9 June 2022.
Ofgem, 14 April 2022
Look out for Insights from Addleshaw Goddard on these developments shortly.
- Energy Regulation
Ofgem has begun a review into the effectiveness of institutional and governance arrangements at a sub-national level to support delivery of net zero at least cost, and the case for alternative approaches. This call for input seeks views from stakeholders on the following:
- the energy system functions needed at a sub-national level to facilitate the transition to net zero at least cost and the criteria we consider need to be met for effective delivery of these functions;
- the suitability of current and planned institutional and governance arrangements in place for delivery of these functions; and
- the opportunities and risks of change, and potential options for alternative arrangements.
Ofgem, 26 April 2022
Ofgem has announced it has approved Connection and Use of Systems Code (CUSC) modification proposal 308 (CMP308) which will change the way that the Balancing Services Use of System (BSUoS) charges are collected from electricity network users. This will mean moving the charging of BSUoS from generation and demand to "Final Demand" only.
Ofgem, 25 April 2022
Ofgem has launched a called for input on a draft version of the ECO4 Interim Delivery guidance. Ofgem are particularly seeking comments on the overall tone of the document and whether it could be more user friendly. Consultation ends: 23 May 2022.
Ofgem, 22 April 2022
Addressing electricity supplier payment default under the Renewables Obligation (RO) scheme: consultation outcome
BEIS has summarised the responses it has received following its consultation on the options for addressing electricity supplier payment default under the Renewables Obligation (RO) support scheme in England and Wales. BEIS found that there were a wide range of differing views on how best to address supplier payment default and although some responses indicated a preference for addressing supplier payment default through a legislative requirement for more frequent settlement, some concerns were raised that such a move would have a negative effect on some suppliers. As a result, BEIS did not think that legislating now for more frequent settlement is the right approach. Instead, BEIS will come back to industry later in the year to further develop policy thinking around the RO. In the meantime, BEIS and OFGEM will continue to pursue a number of other short and long-term interventions, as detailed in the response.
BEIS, 20 April 2022
BEIS and Ofgem have published the consultation response to its consultation on the future role, organisational design and phased implementation of a Future System Operator. The response includes a the commitment to proceed with the creation of an expert, impartial Future System Operator (FSO) to strengthen the resilience of Great Britain’s energy system. The Future System Operator (FSO), to be launched once legislation is passed and timelines have been discussed with key parties, will look at the Great Britain’s energy system as a whole, integrating existing networks with emerging technologies such as hydrogen.
BEIS & Ofgem 6 April 2022
The Government have decided to implement its preferred option for code governance reform, following its July 2021 consultation on proposals for energy code reform. BEIS concluded that Ofgem will be given new strategic functions for codes and work alongside one or more licensed code managers.
There is no firm timescale for the transition to the new code governance framework, but if legislation is enacted at the earliest opportunity, Ofgem’s new strategic functions might be established around 2023. The majority of the functions would not ‘go live’ in relation to a specific code until after the initial code manager has been appointed. Any necessary changes to licences, codes and contracts would then follow, including the implementation of code consolidation.
BEIS, 6 April 2022
- Energy Security
The Government has published the British Energy Security Strategy, a document which sets out how Great Britain will accelerate the deployment of wind, new nuclear, solar and hydrogen and supporting the production of domestic oil and gas in the near term. Plans include: a new ambition of up to 50GW of offshore wind power by 2030, a licensing round for new North Sea oil and gas projects planned to launch in autumn, a new taskforce providing bespoke support to new developments and a Heat Pump Investment Accelerator Competition worth up to £30 million.
BEIS, Prime Minister's Office, 10 Downing Street, Scottish Office, Welsh Office, 6 April 2022
The Scottish Government has published analysis to identify and characterise potential zones for heat networks in Scotland. It provides further detail on the analysis criteria, assessment methodology, limitations, definitions and the interpretation of the outputs.
Scottish Government, 13 April 2022
BEIS has published the response to its consultation which sought views on possible legislative changes to enable the delivery of a hydrogen grid conversion trial. Having reviewed the responses and undertaken a review of the relevant legislation, the Government intends to proceed with the proposed legislative amendments required to facilitate hydrogen heating grid conversion trials, alongside measures to strengthen consumer protection for those in the trial area.
BEIS, 11 April 2022
This roadmap summarises the Government policies designed to support the development of a thriving UK low-carbon hydrogen economy.
BEIS, 8 April 2022
BEIS has published guidance and a calculator tool for hydrogen producers to use on greenhouse gas emissions reporting and sustainability criteria under the UK Low Carbon Hydrogen Standard.
BEIS, 8 April 2022
BEIS has published the outcome to its consultation which sought views on the design of the Net Zero Hydrogen Fund (NZHF). Based on feedback and further policy development work, BEIS have made some modifications to the fund’s design to maximise its impact and has proposed to split the grant allocation into 4 strands. The competition briefs for Strand 1 (projects seeking DEVEX) and strand 2 (projects seeking NZHF capex co-funding alone) were published by UKRI on 19 April 2022. The first wave of funding for these strands will open on 25 April 2022. The application window for strand 1 will close on 22 June and strand 2 will close on 6 July 2022.
BEIS has also issued a consultation on the proposed joint business model and Net Zero Hydrogen Fund allocation process for electrolytic projects which runs until 6 May 2022.
BEIS, 8 April 2022
BEIS has published its response to the consultation on the design for a low carbon hydrogen business model. The Government confirms its intention to proceed with a contractual, producer-focused business model, applicable to a range of hydrogen production pathways and able to facilitate hydrogen use in a broad range of sectors. BEIS aims to finalise the hydrogen business model in 2022, and to allocate the first support contracts for projects reaching final investment decisions from 2023.
BEIS, 8 April 2022
An Act to make provision for the implementation of a regulated asset base model for nuclear energy generation projects; for revenue collection for the purposes of that model; for a special administration regime for licensees subject to that model; and about the circumstances in which bodies corporate are not associated with site operators for the purposes of programmes relating to funding the decommissioning of nuclear sites.
A BEIS publication sets out the procedure and criteria for a nuclear project to be designated under the nuclear regulated asset base (RAB) model. It contains some of the factors the Secretary of State is likely to take into account when assessing the maturity of the projects of prospective nuclear companies, and whether designating a company for the purposes of the RAB model is likely to result in value for money for consumers and taxpayers.
BEIS, 11 April 2022
- Renewable Energy
The Secretary of State for Business, Energy and Industrial Strategy has granted the development consent for the East Anglia ONE North and East Anglia TWO Offshore Windfarms, located 36km from Lowestoft and 42km from Southwold in East Suffolk.
The related legislation is as follows:
The East Anglia ONE North Offshore Wind Farm Order 2022 (SI 2022/432). The wind farm could consist of up to 67 turbines, generators and associated infrastructure, with an installed capacity of up to 800MW; and
The East Anglia TWO Offshore Wind Farm Order 2022 (SI 2022/433). The wind farm could consist of up to 75 turbines, generators and associated infrastructure, with an installed capacity of up to 900MW.
The Orders came into force on 22 April 2022.
Planning Inspectorate / Legislation.gov.uk, 31 March 2022
Following its discussion paper in November 2021, Ofwat has published its final guidance on what water companies should include in their long-term delivery strategies, as part of their submission for PR24.
Ofwat, 6 April 2022