Welcome to our monthly Energy Update, bringing you links to the major developments relevant to the industry.
A real bumper edition this month! Highlights include: the Energy Profits Levy; Ofgem energy price cap consultations; our summary of the latest offshore transmission developments; the Access SCR final decision; funding for floating offshore wind manufacture; and much, much more.
BEIS has published a collection of documents regarding its Carbon Capture, Usage and Storage (CCUS) innovation 2.0 competition. They include details of successful projects for Call 1 of the competition and a notice regarding phase 2.
BEIS, 31 May 2022
This statutory instrument implements the Boiler Upgrade Scheme (BUS) which will support the installation of heat pumps and in limited circumstances, biomass boilers in domestic and small non-domestic buildings in England and Wales. In force: 23 May 2022.
The Chancellor of the Exchequer, Rishi Sunak MP, has announced a new package of measures to help with the rising cost of living. The energy bills discount due to come in from October is being doubled from £200 to £400, while the requirement to pay it back will be scrapped. A new temporary Energy Profits Levy on oil and gas firms will also raise around £5 billion over the next year.
HM Treasury, 26 May 2022
- Contracts for Difference
The Department for Business, Energy & Industrial Strategy (BEIS) has published its response to the consultation on further amendments to the Contracts for Difference (CfD) scheme in relation to supply chain plans. BEIS confirmed that the Government will be implementing a series of amendments to the CfD scheme ahead of Allocation Round 5.
BEIS, 3 May 2022
The Business, Energy and Industrial Strategy Committee has launched a new inquiry into the Government proposals to decarbonise the UK's power supply sector. It will scrutinise proposals unveiled in the Government's Energy Security strategy and will further examine the relationship between these proposals and other policy objectives such as those in the Energy White Paper and the Net Zero Strategy.
House of Commons Business, Energy and Industrial Strategy Committee, 20 May 2022
- Energy Efficiency
This Order creates a duty on a local authority to prepare and publish a local heat and energy efficiency strategy and a local heat and energy efficiency delivery plan. The first such strategy and delivery plan must be published on or before 31 December 2023 and subsequent updated strategies and delivery plans are then to be published at least every 5 years. In force: 21 May 2022.
The Scottish Government has announced new funding to help public bodies unlock and realise further investment in measures to improve energy efficiency and install low and zero carbon heat systems in buildings.
Scottish Government, 17 May 2022
- Energy Security
A letter from the Secretary of State for BEIS to the CEO of National Grid Electricity System Operator, requesting that options are explored for bolstering energy security over winter 2022 to 2023. The letter states that National Grid ESO should work with industry to explore and seek to deliver frameworks to support the operations of additional non-gas-fired capacity over the coming winter that would otherwise not be available.
BEIS, 27 May 2022
- Energy Supplier Regulation
Ofgem has stated it will be expanding its market compliance review programme with four more assessments that will focus on suppliers’ financial robustness and risk management. These will start in August 2022.
Ofgem, 24 May 2022
Ofgem has published two consultations on the Price Cap. The first consultation relates to proposed changes to the Price Cap wholesale methodology including the Price Cap index, the length of the notice period and the inclusion of backwardation. The second asks whether suppliers are incurring additional wholesale costs as a result of wholesale price volatility and whether a wholesale cost adjustment in the price cap is needed. The consultations close on 14 June 2022.
Ofgem, 16 May 2022
Ofgem has published a report written by economics and finance consultancy Oxera, that considers the root causes of the recent supplier failures and specifically, into how regulation of the industry played a part. It looks at: Ofgem's approach to the regulation of the energy supply market; the root causes and costs of supplier failure; and an assessment of Ofgem's role in the recent supplier failure. Recommendations include developing a "living" framework for how consumer interest is measured and defined; and developing a framework for how effective competition is defined and measured.
Ofgem, 6 May 2022
- Gas Regulation
Ofgem has announced it has approved a modification to the Uniform Network Cose (UNC) which will see the introduction of the concept of a ‘derogation framework’, which already exists in some electricity industry codes. This will allow Net Zero innovation trials to take place.
Ofgem, 30 May 2022
BEIS has published details of round 12 of the Heat Networks Delivery Unit (HNDU) which will run from 23 May 2022 until midday on 30 December 2022. Guidance on the HNDU application process has also been published.
BEIS, 16 May 2022
BEIS has published its response to the consultation on introducing a market-based mechanism to support investment and innovation in transforming the consumer proposition for heat pumps. Having considered the responses, the Government intends to proceed with developing plans to introduce the market-based mechanism and bring forward legislation in the forthcoming Energy Security Bill.
Department for Business, Energy & Industrial Strategy, 11 May 2022
BEIS has announced the winners of the Low Carbon Hydrogen Supply 2 (HySupply 2) competition Phases 1 and 2. The aim of the Competition is to identify, support and then develop credible innovative hydrogen supply or enabling technologies to bring about a step change in their development.
BEIS, 19 May 2022
BEIS has issued a notice providing guidance and Questions and Answers regarding strand 1 and strand 2 of the Net Zero Hydrogen Fund (NZHF).
BEIS, 18 May 2022
- Network Charges
Ofgem has published its final decision and direction on the Access and Forward-Looking Charges Significant Code Review (Access SCR), covering two areas of the original scope; the distribution connection charging boundary and the definition and choice of access rights.
Ofgem, 3 May 2022
The Welsh Affairs Committee has launched an inquiry looking at Nuclear energy in Wales. It will consider Wales’ role in the UK Government’s nuclear ambitions, the economic impact of a new nuclear power station at Wylfa and the development of nuclear technologies, such as small modular reactors. Evidence can be submitted until 12 August 2022.
UK Parliament, 26 May 2022
BEIS has published a joint strategy between government, civil nuclear industry and the regulator, setting out how the UK’s civil nuclear sector aims to manage and mitigate evolving cyber risks over the next 5 years.
BEIS, 13 May 2022
BEIS has opened a £120m Future Nuclear Enabling Fund (FNEF) designed to support and accelerate new nuclear technologies whilst also stimulating competition in the industry.
BEIS, 13 May 2022
- Offshore Transmission Networks
UK Offshore Transmission Network Review (OTNR) – latest developments
BEIS and the GB energy regulator Ofgem are looking at the GB offshore transmission network: the power cables that connect the GB electricity grid to the Continent and also connect offshore wind farms to the onshore GB electricity grid. At the moment, the regulatory framework draws a distinction between the two. This runs the risk of the North Sea and Irish sea becoming a spider's web of cables and the foreshore getting crowded with substations, as each wind farm has its own connection to the mainland.
The solution is "multi-purpose interconnectors" (MPIs) that connect wind farms to each other and to the GB and Continental mainland in a "daisy chain" pattern. But at the moment, the legal framework makes this difficult. BEIS and Ofgem launched the OTNR in 2020 to look at the barriers the offshore transmission regime presents to further significant deployment of offshore wind.
The latest developments are:
- A response from BEIS to a consultation on proposals for an enduring regime and multi-purpose interconnectors (looking at the longer term, after 2030);
- A consultation from Ofgem on an interim regime for MPIs in the near term; and
- A consultation from Ofgem on anticipatory investment in MPIs, looking at who pays for infrastructure that is built in anticipation of later wind projects connecting to it.
We have summarised each development in a separate Insight. The two Ofgem consultations close on 9 June so you still have a few days to respond.
Ofgem has published a minded-to decision to apply a ‘very late competition - generator build’ model to non-radial offshore transmission in scope of the Pathway to 2030 (PT2030) workstream of the Offshore Transmission Network Review (OTNR) and a consultation on the consequential arrangements that may be required to implement the ‘very late competition - generator build’ model, for non-radial offshore transmission. The consultation runs until 15 July 2022.
Ofgem, 20 May 2022
- Oil & Gas
The Chancellor of the Exchequer, Rishi Sunak MP, has made a statement in the House of Commons announcing a new package of measures in response to the rising cost of living. As part of the statement, the Chancellor announced a temporary new Energy Profits Levy with an investment allowance built in. The new Levy will be charged on oil and gas company profits at a rate of 25% and is expected to raise around £5 billion in its first 12 months, which will go towards easing the burden on families. It will be temporary, and if oil and gas prices return to historically more normal levels, it will then be phased out.
HM Treasury, 26 May 2022
The North Sea Transition Authority (NSTA) has published its corporate plan which outlines its priority areas for 2022–2027. Its budget for 2022/23 is £38.9m.
NSTA, 13 May 2022
BEIS has published a letter from the Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng calling on the oil and gas industry to reinvest profits in the North Sea, clean energy technologies and accelerate and maximise domestic oil and gas production.
BEIS, 1 May 2022
- Queen's Speech
On 10 May 2022, HRH Prince Charles, on behalf of Her Majesty the Queen set out the Government’s priorities and proposed policies for the next parliamentary session. The speech included the introduction of an Energy Security Bill and the UK Infrastructure Bank Bill.
Prime Minister's Office, 10 Downing Street and HRH The Prince of Wales, Prince Charles, 10 May 2022
BEIS has published a request for information to better understand opportunities available to support the deployment of floating offshore wind in the UK. Consultation ends: 15 July 2022.
BEIS, 20 May 2022
BEIS has opened expressions of interest for the £160m Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS) which aims to expand floating offshore wind capability around the UK by supporting manufacturers and giving private investors' confidence to back the growing sector. BEIS also announced the appointment of Tim Pick as the UK’s first Offshore Wind Champion.
BEIS, 20 May 2022
The Crown Estate has published its tenth annual Offshore Wind Report providing insight into the UK’s offshore wind sector during 2021.
Crown Estate, 18 May 2022
- Smart Meters
A BEIS notice providing details of the Smart Meter System (SMS)-based Internet of Things (IoT) Monitoring Solution Competition, which aims to determine the technical and commercial feasibility of SMS-based IoT sensor devices.
BEIS, 23 May 2022
BEIS has published the Government's response to its consultation on proposals to mitigate the impact of smart meter customers switching suppliers ("churn") on energy suppliers' minimum installation requirements for the second year of the new 4-year smart metering policy framework. The Government has confirmed, the formula used to set supplier minimum installation requirements in Year 2 of the Targets Framework (2023) will be modified to mitigate the impact of smart meter customers switching supplier and that it will consider whether any level of churn adjustment is required in the third (2024) and fourth (2025) rollout years as part of a mid-point review.
BEIS, 23 May 2022
An Environment Agency document provides an overview of five emerging regional water resources plans which were launched in January 2022, showing common themes and expectations for future drafts.
Environment Agency, 24 May 2022
Ofwat have set out guidelines for water companies on how to support residential customers in England and Wales to pay bills, access help and repay debts.
Ofwat, 25 May 2022