Welcome to our monthly Energy Update, bringing you all the key energy and water developments this month in one place.
Energy security seems to be the theme this month, with various inquiries into energysupplier robustness; the next stage in the nuclear RAB model; a carbon storage licensinground; hydrogen support in Scotland and Wales; and energy efficiency measures being justsome of the developments we have noted.
The North Sea Transition Authority (NSTA) has launched the UK's first-ever carbon storagelicensing round with 13 areas available. The areas being offered for licensing include off thecoast of Aberdeen, Teesside, Liverpool and Lincolnshire in the Southern North Sea, CentralNorth Sea, Northern North Sea, and East Irish Sea and are made up of a mixture of salineaquifers and depleted oil and gas field storage opportunities. The application window isopen for 90 days, closing on 13 September 2022, and will be evaluated by the NSTA ontechnical and financial criteria. It is expected that any new licences will be awarded in early2023.
North Sea Transition Authority, 14 June 2022
A Scottish Government consultation seeks views on the development of a coal extractionpolicy in Scotland, to help ensure the Scottish Government delivers a robust, fully-evidenced policy position in line with energy needs, statutory requirements, and climatechange ambitions. Consultation ends: 2 August 2022.
Scottish Government, 21 June 2022
- Contracts for Difference
The Contracts for Difference (Miscellaneous Amendments) Regulations 2022 (SI 2022/691)make amendments to the Contracts for Difference (Definition of Eligible Generator) Regulations 2014 (SI 2014/2010) and the Contracts for Difference (Allocation) Regulations2014 (SI 2014/2011) to enable the award of the dispatchable power agreement (DPA),which supports the carbon capture, usage and storage business model. The Order cameinto force on 21 June 2022.
Ofgem has set out its decision on amending the Contracts for Difference (CfD) allowance tobetter reflect costs and benefits faced by suppliers following its April 2022 consultation.Ofgem have decided to remove the £0/MWh floor from the CfD price cap allowance byreplacing the Low Carbon Contracts Company's (LCCC) published Interim Levy Rate (ILR)in its methodology with an expected levy payment, calculated using LCCC CfD paymentsforecasts and energy demand. Ofgem also decided not to introduce a reconciliation of theCfD allowance against outturn costs.
Ofgem, 23 June 2022
- Energy Efficiency / Real Estate
The Scottish Government has announced that new energy standards will apply to newlybuilt non-domestic buildings and form part of plans to reduce emissions across Scotland’sbuilding stock by more than two thirds by 2030. The new energy standards form part of theBuilding (Scotland) Amendment Regulations 2022 (SSI 2022/136) and will be introducedfrom December 2022. The new standards include improved performance targets to reduceemissions from new homes, introduce a new energy target for new buildings, focus onreducing energy demand by improving insulation to reduce heating needs and makechanges to facilitate low-carbon heating solutions.
Scottish Government, 15 June 2022
The Scottish Government has published its response to the Zero Emissions Taskforce(ZEST) report. It commits to establishing shared governance between the social housingsector, its representatives, and the Scottish Government to drive delivery of the ZESTreport recommendations. The Scottish Government also recognises the need to acceleratethe review of the second Energy Efficiency Standard for Social Housing (EESSH2) toensure alignment with net zero in order to create long-term clarity for the sector. This will bebrought forward to commence in 2022 for completion in 2023.
Scottish Government, 14 June 2022
Approved methodologies for expressing energy performance of buildings published
The Department for Levelling Up, Housing and Communities has published two notices ofapproval setting out the calculation methodologies for expressing and calculating theenergy performance of buildings.
- a notice of approval of the methodologies for expressing the energy performance ofbuildings in England and Wales; and
- a notice of approval of the methodologies for calculating the energy performance ofnew buildings in England.
Department for Levelling Up, Housing and Communities, 8 June 2022
A Department for Business, Energy and Industrial Strategy (BEIS) has published its response to its consultation on the proposed approach to deliver heat network zoning inEngland and to identify areas where heat networks are the most appropriate solution fordecarbonising heating. The Government states it intends to proceed with the key elements of the proposed framework including developing a nationwide methodology for identifyingand designating areas as heat network zones, within which heat networks are the lowestcost solution for decarbonising heat. BEIS will consult further on detailed policydevelopments ahead of introducing secondary legislation.
BEIS, 16 June 2022
BEIS has published its response to the consultation on recovering costs of heat networksregulation. Based on the responses the Government has decided in forthcoming legislationto progress with Option C. Option C requires that Ofgem’s and Citizens Advice’s totalongoing costs of regulating the heat networks, gas, and electricity markets to be evenlyspread across heat network, gas, and electricity consumer bills.
BEIS, 16 June 2022
A Scottish Government publication focusing on the actions required to develop a qualityassurance scheme that meets the needs of people and communities in Scotland. It looks atthe standards, skills and certifications required for installers on Scottish Governmentschemes, proposed ways to tackle scams or mis-selling and how to improve publicengagement.
Scottish Government, 7 June 2022
The Scottish Government has announced the launch of new funding to drive innovationwithin the hydrogen sector and accelerate its production and storage. The £10 millionHydrogen Innovation Scheme will provide capital support over the next four years and aimsto unlock additional private investment in the technology, and enable new companies toenter the sector.
Scottish Government, 27 June 2022
In response to a written question asking if a comparative assessment of the cost of movingexcess renewable energy between Scotland and other parts of UK will be undertaken by(a) reinforcing electricity grid infrastructure, (b) converting electricity to hydrogen andblending into the national gas transmission system and (c) converting electricity tohydrogen and injecting into a dedicated 100% hydrogen pipeline, BEIS has stated that: theGovernment intends for hydrogen to provide flexible low carbon generation capacity in theUK's future power system and is currently reviewing hydrogen network and storagerequirements, with a consultation planned for later this year.
UK Parliament, 27 June 2022
The Welsh Government has published its response following its April 2021 consultation ondeveloping a pathway for developing the hydrogen energy sector in Wales. In its summary of responses, the Welsh Government states it remains convinced thathydrogen will have an important role to play in meeting net zero, and that Wales is well-placed to be at the forefront of this developing sector. It will therefore continue to supportthe hydrogen energy sector in Wales by: providing seed funding and other support tohydrogen energy projects; seek opportunities for public sector bodies to help create anchordemands for renewable hydrogen; and explore opportunities to leverage public fundingagainst private sector investment.
Welsh Government, 17 June 2022
A Scottish Government publication provides a update to its recommendations into theresponse to Storm Arwen, which caused significant disruption in November 2021. It setsout progress made against the recommendations that were made in a report published in January 2022.
Scottish Government, 27 June 2022
BEIS has set out a range of actions to improve the resilience of Great Britain's electricitynetworks for future extreme weather events. This follows a comprehensive governmentreview into the industry response to Storm Arwen in November 2021 and will ensure betteroutcomes for consumers by setting deadlines for operators to take action.
BEIS & Ofgem, 9 June 2022
- Net Zero
RenewableUK has published a report which sets out a series of measures, includingmarket and regulatory reform to ensure that the UK has a fully decarbonised electricitysystem by 2035 and meets its net zero emissions target by 2050.
RenewableUK, 22 June 2022
BEIS has published its response to its October 2021 consultation on the regulatoryframework for fusion energy. Having considered the responses received, the Governmentintends to proceed with its plans for developing a regulatory framework and confirms thatfuture fusion energy facilities will be regulated under the legal framework already in placefor fusion.
BEIS, 20 June 2022
BEIS has published documents which show progress towards implementing the RegulatedAsset Balance (RAB) funding model, which will give nuclear projects the financial supportthey need and attract private investment.
BEIS, 14 June 2022
Low Carbon Contracts Company designated as revenue collection counterparty fornuclear Regulated Asset Base (RAB) model
BEIS has announced that the Secretary of State has given notice to the Low CarbonContracts Company Ltd (LCCC) designating the company as a revenue collectioncounterparty for revenue collection contracts for the purposes of the nuclear RAB Model.
BEIS, 9 June 2022
- Oil and Gas
BEIS has published a speech given by the Secretary of State for Business, Energy andIndustrial Strategy, Kwasi Kwarteng, at the Chatham House Second Century LondonConference. Kwarteng considered the gas crisis and Britain’s vulnerabilities and confirmedthat by the end of 2022, that the UK will not import any Russian fossil fuels. As aconsequence, it will be necessary to reduce exposure to volatile gas markets and look tomove off gas in the long term.
BEIS, 23 June 2022
HMRC has published a consultation which sought views on draft legislation for the Energy(Oil and Gas) Profits Levy ahead of publication of the Bill. On 26 May 2022, the Government announced a new 25% surcharge on the extraordinary profits the oil and gassector is making in order to raise around £5 billion over the next year, which will go towardssupporting people with the cost of living support measures. The draft legislation includes asunset clause for the Energy Profits Levy, will be effective at the end of December 2025.Consultation ended: 28 June 2022.
HM Revenue & Customs, 21 June 2022
A Scottish Government consultation is seeking views and evidence on the development ofan onshore conventional oil and gas policy in Scotland in order to ensure that the ScottishGovernment delivers a robust, fully-evidenced policy position in line with energy needs,statutory requirements, and climate change ambitions. Consultation ends: 2 August 2022.
Scottish Government, 21 June 2022
An Ofgem consultation is seeking views on extending the Market Stabilisation Charge (MSC) to 31 March 2023 and on technical changes to the algebra of the MSC to reflect theproposed revised priced cap methodology. In addition, Ofgem are seeking views onextending SLC 22B (Requirements to make all tariffs available to new and existingcustomers), which implements a ban on acquisition-only tariffs (“BAT”), to the samedate. Consultation ends: 18 July 2022.
Ofgem, 28 June 2022
Offshore Transmission Owner End of Tender Revenue Stream - Consultationconcerning policy development
Ofgem has issued a consultation looking at items relating to the Offshore TransmissionOwner (OFTO) End of Tender Revenue Stream (EoTRS), such as the principles ofcompetition, performance incentives and OFTO value. Ofgem expects to make a decisionin autumn 2022 setting out details of the OFTO extension process. Consultation ends: 22August 2022.
Ofgem, 22 June 2022
The National Audit Office (NAO) has published a report into the energy supplier market,setting out the facts regarding the recent exit of energy suppliers and evaluates Ofgem’sand the BEIS' roles in the events leading to the exits and how well they handled them.
NAO, 22 June 2022
Ofgem has published a consultation seeking comments on a proposal to enshrine inlicence a requirement for licensed energy suppliers to have sufficient control over thematerial economic and operational assets to run its business, and to have sufficient controlover assets used to meet its obligations under the Financial Responsibility Principle.Consultation ends: 19 July 2022.
Ofgem, 20 June 2022
Ofgem has launched a second consultation building on its first consultation published inNovember 2021 on the proposed administration for the Energy Company Obligation(ECO4). It seeks views on Ofgem's proposed administration of new policies as outlined inthe BEIS consultation response and included in the ECO4 Order, as well as someadministrative improvements. Consultation ends: 18 July 2022.
Ofgem, 13 June 2022
The Public Accounts Committee is accepting evidence as part of its inquiry into theregulation of energy suppliers. The Committee intends to question senior executives at BEIS and Ofgem and is seeking evidence on: the issues that have led to the exit ofsuppliers from the energy market; the costs and wider impacts for customers and taxpayersof suppliers exiting the market; how BEIS and Ofgem have handled the supplier failures and the lessons that Government needs to learn for the future of the energy suppliermarket. Consultation ends: 4 July 2022.
UK Parliament, 9 June 2022
- Smart Meters
Consultation response to maximising non-domestic smart meter consumerbenefits, improving the data offer and enabling innovation
BEIS has published its response to its July 2021 consultation on proposals to help non-domestic smart meter customers save energy and manage costs through the use of datafrom their smart meters. The Government states that it aims to lay licence changes beforeParliament in June 2002 and will proceed with measures to improve the smart meter dataoffer for non-domestic consumers.
BEIS, 1 June 2022
- Trade & Investment
BEIS has announced that the UK has reached a landmark agreement to modernise theterms of the Energy Charter Treaty (ECT). The ECT provides the framework forinternational trade and investment on energy matters but was drafted and first published in1994, when fossil fuels dominated power generation. The modernised agreement which isdue to be signed in November 2022 supports the UK's Energy Security Strategy byestablishing new protection for taxpayers and private sector investors, and reduces the riskof potential costly legal challenges on the road to net zero by 2050.
BEIS, 24 June 2022
The Office for Environmental Protection (OEP) has announced that it is to carry out aninvestigation into the roles of Ofwat, the Environment Agency and the Department forEnvironment, Food and Rural Affairs Secretary of State in the regulation of combined seweroverflows (CSOs). The aims of the investigation are to determine whether these authoritieshave failed to comply with their respective duties in relation to the regulation, including themonitoring and enforcement, of water companies' own duties to manage sewage, and toclarify the respective duties. If there are found to be failures, the OEP's objective will be toimprove regulation, leading to long term improvement in water quality.
Office for Environmental Protection, 27 June 2022
In March 2022, Ofwat wrote to wastewater companies asking them to set out how theywere going to act to start tackling storm overflow issues and improve river quality as apriority to deliver an immediate reduction in harm and to rebuild customer trust. Thispublication sets out its response to these plans and highlights immediate commitments andareas for improvement, taking account of PR24 and OFWAT's ongoing wastewatertreatment works investigation.
Ofwat, 23 June 2022
Ofwat has published two documents relating to multi-sector reservoir systems:
- a CEPA report jointly commissioned by RAPID, Anglian Water, Northumbrian Waterand Yorkshire Water to consider the legal and commercial models that could facilitatethe delivery of multi-sector reservoir systems; and
- a document on the work on the delivery of multi-sector reservoir systems carried out onbehalf of RAPID, Anglian Water, Northumbrian Water, Yorkshire Water and WaterResources East.
Ofwat, 20 June 2022
An Ofwat document setting out its decision outlining changes to its Wholesale Retail Codewith respect to clarifications to default and termination provisions as set out in clauses10.1.4 of the Code's business terms. The implementation date is 2 August 2022.
Ofwat, 15 June 2022