Net Zero Defined

So, what exactly is net zero? Essentially, this is a goal of creating the perfect balance between greenhouse gas emissions and the amount removed from the atmosphere. Society would never be able to eliminate greenhouse gas emissions, but when the amount added is no more than the amount removed, the impact will be minimized. The UK has a legally binding target of being net zero by 2050 and we were the first major economy to set this target (most counties have since followed suit).

Why 2050?

2050 was a target established by scientists and experts from around the world. It was agreed that reaching net zero by 2050 is the best change that society has to tackle climate change and global warming before it is too late. It is hoped that this would prevent global temperatures from exceeding a 1.5 degrees Celsius rise by 2100, which would be deemed to be “catastrophic”. 2050 is also deemed the earliest realistic timeframe that net zero could be achieved, which shows that it is an ambitious yet incredibly important target.

Energy Efficiency is Key

Reaching net zero will be challenging because so many industries produce harmful emissions, and it is too complex and/or expensive to cut emissions altogether. It is said that energy efficiency can contribute up to 40% of the reductions in emissions needed to reach the net zero by 2050 target, so there is a huge push for businesses and individuals to improve energy efficiency. This means that there will be a lot of work for solar panel and air source heat pump installation in the coming years as decarbonizing homes and properties will play a major role in reaching the target. Additionally, this will also help people to reduce their energy bills, which is something that many are looking to do right now.

Net zero is a hugely important target that the entire world needs to work towards. It is clear that now is the time for urgent action and positive steps need to be taken in order to achieve this ambitious target by 2050. There have been positive steps taken in recent times, but a lot more needs to be done and every individual and business needs to play their part in reducing emissions, improving energy efficiency, and leading a more sustainable lifestyle.

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The general picture

In many cases, terraced houses are more energy efficient than semi-detached or detached houses. Most obviously, there are less external walls for the heat to escape through – especially in back-to-back houses. This also means you can benefit from any heat escaping from your neighbour’s homes.

On top of this, location can dictate how energy-efficient your home is. Homes located in rural areas tend to have lower energy efficiency ratings than those in towns, with band D being the most common rating for cities and towns, compared to band E being the most common band in hamlets and villages.

Improving efficiency during the winter

When it comes to improving the energy efficiency of your home, there are a number of things you can do.

• Draught-proof your home – Covering gaps in your home can do wonders for retaining any heat and preventing it from escaping. The Energy Saving Trust has helpful tips, from draught-proofing your chimney to installing letterbox brushes and putting draught excluders at the bottom of your doors.
• Install double glazing to windows – Double glazed windows create an additional barrier for the heat to escape through, on top of helping with sound reduction and security.
• Install roof installation – Even with the advantage of sharing terraced walls, much of the heat from your home can escape through your roof, so ensuring you have roof insulation in place is key.
• Fill gaps in floorboards – Not only does this prevent the build up of dust in the gaps of your floorboards, but it also helps to prevent more heat escaping from your home. Add a big, thick carpet on top to go one step further.

Keeping terraces cool in the summer

While terraces can be great for heat retention with the right adjustments in place, they can be notoriously tricky to cool down during the summer compared to other housing types. This is down to the fact that there is less room for any heat to escape.

As much as we may not want to spend money, certain investments can help us save in the long-term. We’re talking energy-efficient windows and wall insulation, both of which are just as handy at keeping hot air out in the summer as they are trapping the heat in the winter. Other more cost-efficient hacks include closing the windows and drawing the curtains to keep it cooler inside, or taking a cold shower before bed to help you sleep.

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The role of the Environment and Sustainability (E&S) Manager exists to provide expert advice and support to the business on environmental regulatory affairs, environmental sustainability management practices and planning / development consent order applications. The role holder will work closely with the UK HSSEQ Management Systems Development, Implementation and Improvement Manager to ensure that excellent systems, polices, procedures and processes are developed, implemented and operated to a standard which facilitates and assures effective environmental risk management and safeguards regulatory compliance.

For more information on this opportunity please contact Mehtab Sabir at Imperial Professionals via mehtab@imperialprofessionals.co.uk , or call the Darlington Office on 01325 467476

About Sembcorp Energy UK

Sembcorp Energy UK (SEUK), a wholly-owned subsidiary of Sembcorp Industries, is a leading provider of sustainable solutions supporting the UK’s transition to Net Zero. With a 968MW portfolio of energy generation and battery storage in operation, our expertise helps major energy users and suppliers improve their efficiency, profitability, and sustainability, while supporting the growth of renewables and strengthening the UK’s electricity system.

For more information on Sembcorp Energy UK visit www.sembcorpenergy.co.uk | LinkedIn | Twitter

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Electric & Hybrid

Many motorists are making the switch to an electric or hybrid right now to reduce their costs and environmental impact. Electric and hybrid cars do not require specific tyres, but you might want to consider a change as these vehicles tend to be heavier and a lot quieter. This means that it is worth looking into tyres with a higher load index and noise reduction.

Every motorist needs to know how to maintain their tyres as well as find suitable replacements when the time comes. The advice in this post should prove to be useful and help you to know when the time is to change your car tyres and find tyres that are a good match for your specific car and the conditions that you will be driving in.

Replacing & Maintenance

The legal minimum for tread depth in the UK is 1.6 mm and it is recommended that you test regularly and change when you have less than 3mm. You should also inspect the tyres for bulges or lumps that could suggest structural damage and check the pressure regularly. Keep in mind that the front and back tyres wear at different rates, so it is a smart idea to rotate them and then replace the whole set when the time comes. You can buy tyres online for your car and then change them yourself or get it done at a local garage.

Size

It is important to be aware that not all tyres are standard size and it is important that you find the right size for your specific vehicle. You can find these dimensions in the owner’s manual or on the sidewall of the existing tyres. The numbers on the tyres indicate tyre width, aspect ratio, radial construction, rim diameter, load index and speed rating in that order.

Summer or Winter?

Vehicles in the UK come with summer tyres fitted as standard, but you might want to consider switching to winter if you spend a lot of time behind the wheel and/or you live somewhere where the conditions can make driving trickier in the winter. Winter tyres are more supple allowing them to grip the road better in cold conditions and feature thousands of tiny grooves that disperse water to prevent aquaplaning. They also have a deeper tread pattern that can intensify the grip on ice and snow.

The post How to Maintain & Choose the Right Tyres appeared first on theenergyst.com.

Wall Insulation

The single biggest intervention to improve the energy efficiency of a home is to ensure its exterior walls are correctly insulated. According to the Energy Saving Trust, up to a third of a home’s heat can be lost via the walls, meaning that the right insulation can slash energy bills by hundreds annually.

The industry standard for effective home insulation is cavity wall insulation, where insulating foam is injected into the hollow space between the two leaves of the wall, improving its thermal insulation properties. For homes built before the 1920s, though, this is likely not possible; the vast majority of homes that predate the 1920s were built using solid-wall techniques. For solid-walled homes, a more expensive cladding measure is required to improve energy efficiency.

Draught Proofing

Not all heat is lost via radiation in the home, though. Ventilation can have the effect of ‘wicking away’ heat if not correctly controlled, where unmitigated cracks and spaces created by a home’s natural ‘settling’ over time create channels for air movement and heat loss.

Draught proofing measures are simple and easy to administer. Silicone sealant can be used to reseal windows and door jambs, preventing air flow and subsequent heat loss. Aftermarket measures can also be taken, in the form of draught excluders and fittings for openings like letterboxes.

Loft Insulation

Heat convection causes heat to rise in homes and is responsible for the phenomenon of upper rooms feeling warmer than rooms on lower floors. This phenomenon can also cause heat to dissipate through the roof of the building, resulting in wasteful energy consumption to compensate for the deficit.

Loft insulation can be laid across the floor of loft space to prevent heat from radiating through the ceilings of upper floors. This functionally ‘traps’ heat in your home, in concert with an air barrier formed through insulation of the roof itself.

Pipe Insulation

While less effective than major insulation interventions such as loft and cavity wall insulation, a significant amount of energy can be wasted through radiation from the home’s central heating pipes. Foam pipe insulation can mitigate heat loss and improve the effectiveness of central heating systems.

There are also other ways of using insulation to directly improve a home’s heating efficiency – particularly for homes with older, conventional boiler systems that utilise a hot water tank. An insulating sleeve can be placed around the tank and its distribution pipes, to reduce the energy used to keep the tank heated over time.

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Please find the recording of this webinar below.

The post Webinar recording – keynote Net zero – what do businesses need to do, when and how? appeared first on theenergyst.com.

Please find the recording of the Keynote webinar on the 14th July 2021 below:

The post Keynote | Decarbonising industry and commerce – what are your ‘no regret’ first steps on getting serious about net zero? appeared first on theenergyst.com.

2021 is being hailed as a significant year for sustainability in the UK, as it prepares to host COP26 in November.

Following the publication of the government’s ‘Ten Point Plan for a Green Industrial Revolution’, the National Infrastructure Strategy and the much-anticipated Energy White Paper,  momentum is growing to turn this ambition into action.

So, what do businesses need to prepare for, and what are the top actions they can take now?

In an exclusive webinar, npower Business Solutions welcomes:

• Adam Bell, Head of Energy Strategy at the Department for Business, Energy and Industrial Strategy, who will provide us an overview of the key policies and strategies businesses need to know about

• Robert Buckley, Head of Relationship Development at Cornwall Insight, who will look at the key factors that could influence the business energy market in 2021

• Paul French, Director of I&C Solutions at npower Business Solutions, who will outline the top actions businesses should be taking now.

To register, click here

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Newcastle City Council has recently transformed its data centre operations, consolidating its main IT systems into a single data hall, with upgraded power and cooling infrastructure and new management software by Schneider Electric. In the process, it has improved resilience and uptime, simplified the management of all its infrastructure equipment, and made part of its data centre available to other organisations, which helps to offset the costs of its operations.

Newcastle City Council employs over 5,000 people providing local-government services to citizens throughout the city. Its data centre hosts numerous applications, including those supporting council tax collection, social services, library services, education and road traffic management. It also has links with the IT systems of other essential public-service bodies such as the NHS and Police. Given the vital nature of these services, the Council’s IT systems must run reliably around the clock and any downtime will have a significant effect on the local populace.

The Council’s IT systems had grown steadily over the years to support the evolution of its e-Government approach with the automation and digitisation of many of its activities. But the situation had evolved to the point where the data centre layout had become haphazard and disorganised, many infrastructure elements were nearing their end of life and in need of regular maintenance, and management of the infrastructure was labour intensive and time consuming.

As part of a refurbishment of its Civic Centre, Newcastle City Council consolidated its data centre into a single room with a raised modular floor. Following a competitive tender, the Council chose EcoStruxure for Data Centers, Schneider Electric’s IOT-enabled, open and interoperable system architecture for the new facility. The data centre was designed and built by Schneider Elite Partner, Advanced Power Technology (APT).

As a public body Newcastle City Council are always looking for cost and energy efficiencies. Schneider Electric and APT were able to design and deliver an overall data centre solution that meets their needs and their expectations.

Learn how the new data centre facility enabled them to meet their service commitments to all stakeholders while minimising the carbon impact of delivering IT services.

Read the case study HERE!

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Jo Butlin, MD of consultancy EnergyBridge, says Npower’s demise is symptomatic of a failing market. Government and Ofgem must act fast – before the wheels come off entirely.

As the tragic news of 4,500 job losses from Npower reverberates around the UK, there is finally a real sense of shock and concern on the direction of the energy retail market, as the human impact of market changes comes into focus. This news just adds to existing red flags which highlight real concerns about the sustainability of the market going forward.

The ‘Big Six’ are no more

While Labour has announced its plan to renationalise the so called Big Six, Friday’s announcement comes shortly after the announcement that SSE is selling its customer portfolio to Ovo, leaving us with at most with a Big Four of the original Big Six. There have been rumours for a long time that we’d see one or more of the Big Six exit the retail market, so it should be no real surprise. It is entirely rational for shareholders and business leaders to look to exit a market which fundamentally has low visibility of future value.

The challenger brands are the new heroes. Or are they?

The four biggest, Shell, Ovo, Bulb and Octopus have all been positioned by the media as the new heroes, growing rapidly and taking market share off the Big Six.

But let’s get real. Though these businesses may be more efficient in their ongoing systems and operations than the legacy players, supply margins are equally skinny for them and critically they also need to fund their investment costs as they grow their businesses. All four made substantial losses in their last financial year and three of the four have net liabilities on their balance sheets. With Bulb’s latest accounts due on 31/12/19 and Octopus’ accounts due 31/1/20, the industry will be watching closely to see how the businesses are faring. We all wish them well, but it will be a miracle to be able to produce uplifting results without a lot of spin.

The minnows are struggling to keep their heads above water

The employment market is shrinking

While the Npower losses have hit the headlines, there are few businesses in the market who have not laid off staff or stopped recruitment. The sector is shrinking and knowledge and expertise is being lost. Whilst, a rational response to the market being squeezed, this loss of expertise is a real issue given the complexity of the industry. It is easy to talk about compensatory innovation and system development, but you still need the people who really know how it all works to spec and deliver the improvements.

Market intervention is killing the market

The last few days has seen the media turn on the Price Cap as the trigger for Npower’s demise. That is too simple an argument, but the principle of material intervention in effective market operation has to be questioned. It is relatively simple to model a theoretical ‘efficient’ retail supplier and set a price cap based on this model. But the model ignores operational and commercial reality associated with growing or re-engineering a business in a market shifting at a pace never seen before. Material investment in product innovation and development are what suppliers really want to be focused on, but can’t when they are in a cash constrained mode of survival. The price cap is designed for the historical market model focused on supply – that is not the model where sustainable retail businesses will operate going forward.

Opportunity is there but unattainable

The frustration is that there has never been a more exciting time in this market. The combined opportunities provided by technology development, carbon reduction and the emerging world of prosumers are huge. But existing businesses can’t focus on these opportunities when under the financial pressure they are currently faced with….and new models cannot emerge at pace whilst we operate under the existing regulatory regime.

So where to next?

Some of the answer may depend on the results of the 12 December. But whatever the election outcome, there is an urgent need for government and Ofgem to look at the fundamentals; take some of the pressure off the suppliers, whilst there are still some in the market; accelerate the removal of regulatory barriers to allow a rapid shift to the offering of innovative products; and let the market operate as a market without artificial constraints.

Equally the media rhetoric has to change. Suppliers are genuinely not public enemy number one. They are staffed with normal people, nearly all of whom are working hard to deliver excellent service to their customers. Excitement in the industry comes from the ambition to deliver better low carbon and innovative products and services to customers not from making excess money from them. The media has been a large influencer in driving policy and sentiment to where it has got to and needs to take some accountability.

If we don’t see real change, and quickly, sustainability of the competitive market could become a real issue – and if the wheels come off there will be very little time to put them back on.

This piece was first published at energybridge.co.uk

Related stories:

Eon wields the knife at Npower

£100m tab for failed energy suppliers

Big cracks emerging in energy retail

Why is energy regulation so glacially slow?

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Net zero emissions can be achieved, says EnergyPro’s Steve Fawkes, but requires one crucial attribute.

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Richard Palmer of grid rights consultancy Roadnight Taylor unpacks the Smart Export Guarantee – and its implications for those investing in new renewable power schemes.

The Department for Business, Energy and Industrial Strategy (BEIS) introduced the Feed-In Tariff (FiT) scheme in 2010 to encourage business and domestic investment in small-scale renewable energy generation.

Since its launch, the FiT reduced significantly, in line with the capital cost of installations. But it was so successful, particularly in encouraging solar PV deployment, that BEIS decided to close it from 31 March 2019. They deemed the scheme had achieved its goal and, with the reduction in technology and operational costs, renewables could now be deployed without market support.

There was widespread industry concern that, in the absence of the FiT, most new small-scale generators would not receive any income for the electricity they would be exporting to the network. So, after industry consultation, BEIS introduced the Smart Export Guarantee (SEG).

What the SEG is…

The SEG ensures that eligible small-scale, clean electricity generators will, under law, receive a route to market and payments from electricity suppliers for each unit of electricity they export to the grid (i.e. everything they don’t use). It takes effect from 1 January 2020.

Whilst the SEG is likely to be of interest primarily to domestic scale solar projects, the SEG arrangements will apply to AD, hydro, micro CHP (with an electrical capacity of up to 50kW), onshore wind and solar exporters with up to 5MW capacity.

The SEG will apply to anyone installing a new renewable scheme or adding supplementary renewables to an existing FiT eligible scheme, subject to new eligibility requirements.

See the ‘Smart Export Guarantee in brief’ section below for more details on eligibility.

Schemes receiving the FiT can opt out of receiving export payments under the FiT scheme and sign up for an SEG tariff instead.

What the SEG isn’t…

1) Not a price guarantee

The FiT included an index-linked government incentive, payable over a 20 or 25-year period. As well as payments for all electricity generated, even if it was used on-site, there was a healthy, guaranteed floor price for energy exported. For example, a 49.5kW PV installation accredited in Q1 2014 would be receiving 14.15p/kWh today for every unit of generation and a guaranteed 5.38p/kWh floor price for export.

The industry hoped the SEG would give the market equivalent support to smaller-scale schemes, or a guaranteed floor price for exported electricity – but it doesn’t. The only guarantee is that the tariff must be greater than zero pence (0p/kWh) at all times of export. This is to avoid the impact of periods of negative pricing in the market. As such, the SEG offers a guaranteed access to market for new low carbon generation but not a guaranteed price for export.

It does not guarantee any contract length either, which would have given small-scale generators a level of certainty.

2) Not smart – just yet

When talking about ‘smart’ it generally means deploying smart meters and automatic meter reading (AMR) meters to measure half-hourly use, and introducing smart pricing tariffs for time-of-use import and export.

BEIS is leaving the design of SEG-compliant export tariffs up to the individual suppliers, who are encouraged to provide time-of-use ‘smart’ tariffs but it’s not compulsory.

There are two SEG compliant export tariffs available already from Octopus Energy; a Fixed and an Agile tariff. The former is a single rate that gives revenue certainty, whereas the latter tariff is a very smart tariff that matches the half-hourly prices for export with day-ahead wholesale rates.

There are also other offers available targeting the small-scale generation market – such as Eon’s Solar Reward, currently offering 5.24p/kWh, which is based on an assumed 50 per cent exported to the grid. This is not a ‘smart’ solution but it does provide market access.

More suppliers will announce their tariffs over the coming months, and it is expected that tariffs will become smarter over time, particularly with energy storage playing a greater role in the future of the UK energy system.

The SEG success will be entirely dependent on the attractiveness of the prices and tariffs offered. BEIS will review and monitor, via an annual report from Ofgem, whether the market is delivering an effective range of options.

What does the SEG mean for new investment in renewables?

Those who installed a renewables scheme before the FiT closure on 1 April 2019 would have considered three different revenues and savings opportunities before making their investment:

1. The FiT subsidy – for every unit of electricity produced on-site, the generator received an applicable p/kWh dependent on the timing of the accreditation and other factors
2. An export payment – for every unit of electricity not used on site and exported to the grid, the generator received a floor price from their supplier. For installations at or below 30kW this is based on 50 per cent of the total generation from solar and other renewables and 75 per cent of total generated for hydro being deemed to be exported. For larger schemes, an export meter recording half-hourly data is required.
3. Energy bill savings – cost savings achieved when generated electricity is consumed onsite, therefore reducing (offsetting) electricity imports through the site’s meter.

For many, the relatively reliable FiT subsidy and export payments stacked up well, providing index-linked investment returns from renewables. This made sense.

However, the SEG provides a far less attractive option and investors need to change their approach and mindset when considering renewables. This is shown in the table below.

Table 1 – Level of importance for return on investment

The three lines to consider before investing in renewables generation have now changed:

1. The FiT subsidy – now removed.
2. An export payment – now market reflective prices are offered and it is only guaranteed that there is a route to market.
3. Energy bill savings – cost savings made from offsetting electricity imports.

It is not enough to make an investment in renewables just for the sake of the SEG export payment alone. The energy savings from offsetting the electricity used on site against the energy produced by the scheme is now the key point to consider.

This means any new scheme must be sized for the site’s energy demand with any surplus exported to the grid minimised. While this has always been important, the removal of the FiT makes this the key driver. An oversized scheme, and any export revenue from that, is not going to make the investment worthwhile.

The supply bill is the primary consideration

The SEG is arguably a secondary consideration, or even a distraction, to the primary consideration – a business’s retail supply bill. For every half hour a business must consider the use, the price and the corresponding cost to enable investment returns in low carbon generation and energy storage.

Therefore, how policy changes may affect electricity prices paid by end customers becomes an important part of modelling cash flows for new projects. For example, concern surrounds the current targeted charging review (TCR), the Electricity Network Access and Forward Looking Charges Significant Code Review. The outcome of these could potentially damage the value of flexible, low carbon generation and storage solutions.

Electricity market inflation driven by market and regulatory risk for both commodity (wholesale) and non-commodity (transmission, distribution, levies and taxes) will determine the real value of these investments in a post-subsidy era and must be examined more closely by any investor.

In summary

Many operators with existing installations opted out of the FiT export base price and instead achieved higher export prices through Power Purchase Agreements (PPAs). This will still be a good option for those schemes of a suitable scale.

But for small-scale operators on the SEG alone, the lack of a guaranteed price or contract length is a risk due to exposure to falling electricity wholesale markets and the potential lack of competition, leading to an under-valued export price.

There will still be opportunities to significantly reduce electricity bills through small-scale renewable projects. But there needs to be a change in mindset across the industry. There is no one-size FiTs all anymore! It’s vital to undertake a professional strategic review of a business’s energy demands and tailor the solution to fit.

I look in more detail of how investors should approach new renewable schemes under the new scheme in Smart Export Guarantee Part 2: What to do now if investing in renewables.

Smart Export Guarantee in brief

• What schemes are eligible? The SEG is for new generators of clean energy. It is most relevant for those not already benefitting from the Feed-in Tariff (FiT) scheme, unless you are adding additional generation to an existing FiT registered scheme in which case the new element won’t quality for FiT but could qualify for the SEG.
• What technologies are eligible? Technologies up to a capacity of 5MW including solar PV, onshore wind, anaerobic digestion, hydro and micro-combined heat and power (with an electrical capacity of 50kW or less) are eligible to receive payment for exported electricity under the SEG.
• Is storage eligible? Storage will be eligible to receive export payments, although suppliers will be allowed to exclude ‘brown’ electricity from those payments and require the generator to put metering in place that isolates ‘green’ exports.
• Metering arrangements: The exported power must be metered on a half-hourly basis and the meter must be registered for settlement under the Balancing and Settlement Code. This applies even if the tariff is not half-hourly (the SEG is flexible and doesn’t necessarily require half-hourly readings).
• Safety and MCS: Suppliers must be satisfied that export installations are suitably safe. This could mean exporters must show evidence that the installation is certified to the Microgeneration Certification Scheme (MCS), or equivalent, standards.
• AD feedstock: Suppliers must be satisfied that anaerobic digestion installations meet sustainability criteria and feedstock requirements as verified by Ofgem. There is no requirement for other schemes to meet any sustainability or energy efficiency standard.
• No guarantee: There is no specified minimum export floor price and suppliers can set their own rate. The only guarantee is that the export tariff must always be greater than zero pence.
• Suppliers affected: Licensed suppliers with 150,000 or more domestic customers must provide at least one export tariff. Other suppliers can join voluntarily.
• Start date: the law was passed on 10 June 2019 and energy suppliers affected must offer at least one tariff by 01 January 2020.

Considering investment in renewables? Read part two of SEG considerations here.

Related stories:

Speculative connections bids: everybody loses

Solar and storage must bow to grid king

Fit replacement: Suppliers to be mandated to buy export power

FiTs axed

National Grid predicts significant solar growth for decades to come

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Richard Sansom, head of business development at Swindon Borough Council-owned

The last 12 months has seen some hugely significant environmental commitments made by central and local government in the UK.

At a national level, sales of new petrol and diesel cars will be banned by 2040 in England, Wales and Northern Ireland, and the UK has become the only G7 country to make a legal commitment to net zero emissions by 2050. Locally, councils across the country have demonstrated strong leadership with over 100 so far declaring a climate emergency. Many of these have an ambitious target to achieve carbon neutrality as early as 2030.

At the same time there has been a gradual re-emergence of large-scale solar PV opportunities, following the abrupt slowdown after subsidies for new projects finally ended in 2018.

The good news for local authorities committing to reduce their carbon emissions is that subsidy-free solar is now becoming commercially viable in the UK.

This is due to a number of factors on both the supply and demand side. Installation costs for ground-mounted solar have fallen considerably, with EPC costs now as low as £500,000 /megawatt compared to £900,000/mw only a few years ago. The advent of co-location of solar with battery storage also offers greater optionality with the opportunity to tap into additional revenue streams. These include arbitrage (storing energy when it is abundant, and therefore cheaper, and discharging it when demand is greater and the cost is higher); grid-balancing services (smoothing out the peaks and troughs which occur naturally in power demand); and the capacity market (which provides insurance against the possibility of future blackouts).

Demand for solar power purchase agreements (PPAs) – the contract between generator and buyer – has grown sharply, with around 40 PPA providers active in the UK and a competitive market for short-term PPAs. The corporate PPA market for longer term contracts of up to 15 years is also promising, mainly driven by RE100 commitments – the firms committed to using 100% renewable power – and the desire for multinationals to fix a significant portion of their wholesale electricity costs over the long term as a hedge against future price volatility. The nascent market for synthetic PPAs – a purely financial instrument – also offers the opportunity for generators to sell power via a utility to a number of organisations of varying size through a Contracts for Difference arrangement, the government’s incentive scheme for energy generators which guarantees a fixed price.

Local authorities are very well placed to benefit from investing in solar PV and take a further leadership role in line with their climate change commitments. These commitments have been made against the backdrop of austerity with greatly reduced revenues from central government to fund public services. Investment in a new solar farm, whether on the council’s own land or elsewhere, can be a big step towards achieving carbon neutrality by installing additional renewable generation in the UK, as well as earning a long-term cash revenue stream that could fund frontline services.

Public sector organisations are also in a good position to take a longer-term view than corporates and have strong creditworthiness, often cited as the most important characteristic of any PPA offtaker or purchaser. Local authorities can borrow at favourable rates through the Public Works Loan Board to invest. They own significant land assets in the UK, with sites that are not suitable for new housing which may be good for solar development. Councils can also make ideal bedfellows for community investment, sharing the benefits from solar PV incomes with their residents. For example Chapel Farm solar park, owned by Swindon BC and developed by Public Power Solutions, a wholly owned subsidiary of the council, delivered the first renewable energy community Individual Savings Account (ISA) attracting local investment of £2.4m, alongside a £3m capital commitment from the council.

One structure that sits well within the current subsidy-free solar landscape is where a local authority invests in a new solar farm and ‘sleeves’ the power back to themselves. As with a corporate PPA, the local authority benefits from price certainty on their wholesale electricity costs while also demonstrating a genuine commitment to green electricity through additional solar generation, rather than an offset through an existing asset via REGO certification. This has been achieved successfully by West Sussex CC working with their framework provider LASER energy and NPower as supplier.

We would therefore urge any local authority to look closely at their land assets for potential solar development. PPS is actively working with a number of councils to this end as we look to expand on the 170 MW of subsidised solar farms we have developed in recent years.

Some sites which may have been discounted at the time of subsidies may now be worth a second look, as capacity and cost of local grid connections may have changed since the initial investigation. Where there is no suitable site within a council’s own geographic area, there may be opportunities to lease or buy land outside of their boundaries, as evidenced by Warrington BC’s recent investment in two sites situated in York and Hull.

The fundamentals that make a commercially viable solar site – a good grid connection, favourable planning conditions and leasing arrangements – are even more acute in the subsidy-free market. However, in the right circumstances new solar farms offer excellent commercial opportunities and can be an exciting option for local authorities aiming to achieve carbon neutrality and close the revenue gap by maximising the value of their land assets.

Related stories

Swindon powers waste plant via solar private wire

Swindon Council seeks developers for 50MW battery storage project

Swindon Council plans 50MW battery storage scheme

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Franck Latrémolière thinks Amazon would make a decent fist of energy supply at scale and might become the catalyst for wholesale systemic change.

Combining Npower with the residential supply business of SSE will create a business which will have lots of customers, including many apathetic (also known as profitable) ones, but no particular competitive advantage.

This new business could be a takeover target for a bold new entrant into consumer-focused electricity and gas supply that wants to have an immediate start at full scale (rather than merely dip a toe in the water).

I say that this bold new entrant is Amazon, and that applying the Amazon business model to energy supply will be good for Amazon, good for customers, and good for the energy industry and its regulation.

Let me unpack these claims.

The main value of SSE + Npower is as a takeover target

Even if you like apes with superpowers, you have to admit that whichever brands the new business ends up keeping will not be particularly impressive. And presumably the SSE name and whatever goodwill goes with the SSE arenas stays with SSE plc. I can see no serious competitive advantage of the new business in the marketing area.

The new business will not have the benefit of vertical integration. Vertical integration is useful by providing financial hedging and stability to a supply business which is otherwise very exposed to movements in market prices and levies. And presumably SSE will load the new business with as much debt as practicable, leaving it financially fragile if it is on its own competing against Centrica, EDF and Big Oil.

The new business does not seem likely to have the engineering or financial capability to be a serious player in being a microgrid provider, energy services company, or wider facility manager, if these ways of doing business turn out to work: these capabilities stay with SSE plc.

My reading of SSE’s announcement is that SSE plc had decided to retreat to the comfortable arms of regulated RPI-indexed cash-flows (regulated transmission, regulated distribution and subsidised generation), and that absorbing Npower was merely an incidental feature of a plan focused on getting rid of the residential supply business. Presumably they tried to flog the business on its own, could not find a buyer willing to pay what they wanted, and then they had the (good) idea of packaging that business together with the equally hard-to-shift Npower.

Amazon has a viable business model to apply to energy supply

My analysis of Amazon’s business model is influenced by Ben Thompson’s excellent articles on stratechery.com, in particular Amazon’s New Customer.

Here is how I foresee the customer experience after the Amazon takeover of SSE + Npower.

Existing customers will be offered free Amazon Prime for six months or a year (or the remaining period of their contract if longer).

The offer to new customers, and to existing customers at the end of the transitional period, will be a choice between an unattractive standard npower variable rate (presumably the Government’s price cap if that happens) and an Amazon Prime Energy subscription (or maybe it would be called Alexa Energy).

Like amazon.co.uk, Amazon Prime Energy would be a platform, not a monolithic supplier. There would be a choice within Amazon Prime Energy between energy supplied by Amazon, energy supplied by others and fulfilled by Amazon (meaning that Amazon would remain the meter registrant but would have a arrangement for the other supplier to provide it with wholesale energy and pay its distribution charges and levies), and energy supplied by other suppliers directly (but with Amazon processing the payment and retaining access to the customer and to consumption data).

The Amazon Prime Energy subscription would be conditional on Amazon Prime membership and probably conditional on monthly meter readings (using either an official smart meter if they ever work, or something like a meter camera or pulse sensor operating as a peripheral to a free Echo Dot). A few days before each monthly renewal date, Amazon would select the best suppliers for electricity and gas for the next month, and notify the customer by email or through Alexa. The customer could override that choice. If the customer rejected the suggested subscription and did not purchase a supply from another Amazon electricity or gas merchant (or switch to a non-Amazon supplier), they would be shunted on the unattractive npower standard variable rate.

If there is demand for that feature, Amazon could easily let customer restrict their supplier choice by factors other than price (for example allowing customers to choose suppliers that can certify that their power is backed by renewable generation or by generation in a particular region).

Naturally any home automation systems that are visible to Alexa would be integrated with energy supply arrangements insofar as that would make sense (which might not be as much as some smart automation enthusiasts seem to believe).

Amazon Prime Energy would not offer any commission to any price comparison websites or other brokers. All suppliers would be welcome to sell on the Amazon Prime Energy platform provided that they offer the same rates as for direct sales, that they comply with Amazon’s rules on data provision and handling customer complaints, and that they pay Amazon’s payment processing fees. I would expect several of the mid-tier suppliers like ScottishPower, Eon or Shell to find Amazon a good way of selling their services.

Amazon would treat its own supply businesses on an equal footing as third-party suppliers using its platform. This might well mean that the npower and SSE supply businesses shrink and whither away, if they cannot develop any competitive advantage. On my analysis of Amazon’s strategic objectives, that would not matter.

In addition to full-service suppliers using Amazon Prime Energy as a route to customer, the Amazon Prime Energy platform would enable a wide variety of new “fulfilled by Amazon” entry routes for suppliers. It is not inconceivable that medium-size generators might find that they make a better living by selling their energy to customers through Amazon than by either setting up their own supply operation or by selling their power to an established supplier.

The radical nature of an Amazon take-over would have been to take a business whose traditional source of profit has been the exploitation of apathetic customers, throw that away, and convert the rest of the business into a modularised Amazon Energy Services business which would allow any willing supplier to serve Amazon’s customers. Financially, the business would migrate from collecting a large profit from a dwindling band of apathetic customers, to collecting a smaller profit from a larger customer base who would have chosen to trust Amazon as an intermediary.

This would be good for Amazon

Creating Amazon Energy Services along the lines outlined above would contribute to Amazon’s strategy to control as many areas of consumer spending as possible. It would play to Amazon’s strengths as a cloud provider to businesses and and as a brand trusted by customers.

To deliver that vision, buying a substantial existing business to act both as a starting point for the infrastructure and as a reference customer for Amazon Energy Services seems essential.

Is starting this in the UK a good idea? It certainly has advantages:

• The UK is already a major Amazon Prime market.
• The UK has an overcomplicated energy industry (making Amazon’s entry assistance for small suppliers particularly valuable, and also reducing the risk that systems built for the UK prove too simplistic for other territories).
• SSE + npower is a superb opportunity: a large retail-only incumbent business that probably does not have too much of a nationalised monopoly culture to overcome.

This would be good for customers

The developments imagined above would be good for customers who want to treat energy supply as similar to food or petrol shopping: a routine purchase which can be made almost on autopilot from a supplier who is trusted to charge a reasonable price (because of competitive constraints).

The current market model for energy supply is to treat it like broadband or car insurance: annual (or less frequent) renewal through a broker or price comparison website. This is an inappropriate model for several reasons:

• Consumption affects costs and prices: energy bills are not flat monthly fees like insurance or broadband. (Energy bills often masquerade as flat monthly amounts, but this is a fiction which is blown apart when the monthly payment gets reviewed to catch-up with actual consumption.)
• Market and policy movements are frequent and significant, so it does not make much sense to lock prices for a year. Price rigidity in the presence of cost fluctuations is a barrier to entry in supply (or the cause of exit for those suppliers who had ignored the barrier to entry).
• There are no differences in actual service quality or scope between energy suppliers. In insurance or telecoms, there are real differences in services or coverage, which might justify annual reviews or broker help. For energy supply (on licensed distribution networks: the situation is different on private grids) the only non-price dimensions are things like competence and honesty.

With Amazon Prime Energy, it will finally be normal to pay for home energy each month on the basis of consumption and competitive market prices. It is a partially controllable and partially predictable regular household expense like grocery shopping or filling up the car.

If I am right that many customers would love Amazon Prime Energy, then it might start looking like a monopoly. But even in the unlikely event that Amazon might be tempted to exploit that position, the risk of monopoly abuse by Amazon would likely be mitigated by competition from Centrica and EDF Energy. At the wholesale level, Amazon Energy Services might not have any competitors, but it would be constrained by the fact that energy suppliers could always self-supply the services they get from Amazon Energy Services.

This would be good for the energy industry

The emergence of Amazon Energy Services will have a beneficial impact on the energy industry, particularly if the “fulfilled by Amazon” concept outlined above succeeds. Creating new ways for generators to get closer to customers would facilitate entry and competition in generation.

Perhaps paradoxically, the potential monopoly position of Amazon Energy Services in providing services to generators/suppliers could also have beneficial impacts. This is because it would be a counterweight to the other centralising monopoly influences in the industry.

Imagine a future world where half of the supply points are within the Amazon system, but Amazon only has a modest share of the supply market (and makes most of its energy sector profits from Amazon Energy Services rather than from supply). That Amazon business would have a strong interest in minimising the non-energy levies that it must collect from its customers on behalf of other monopolists, and to maximise the share of the value which is competed for within its system. It would be in some ways similar to the role that large suppliers (at least British Gas) sometimes play in holding networks to account, but with more power and without the risk of strategic biases to promote the particular interests of a large supply business.

Let me be a little more specific. I see a trend in the electricity sector to shift costs away from wholesale prices and towards levies and network charges. My argument (hope) is that Amazon Energy Services will be a powerful force to prevent unnecessary shifts of value from competitive energy markets to monopolistic ancillary services markets.

For example, the growth in photovoltaic generation may mean that other forms of generation need to ramp up quickly around dusk, especially in seasons where this coincides with the beginning of the evening peak. There is an economic cost associated with this ramping: it might involve operating flexible power stations that have higher fuel costs, and/or “wasting” (constraining off) some late afternoon solar generation to reduce the ramping rate required, and/or using storage (which is then not available to provide response services or arbitrage), and/or imposing a suboptimal schedule on some flexible demand.

A lot of people in the industry today seem to think that a system operator will procure these ramping or ramping mitigation services, and recover the costs through a system operation charge. But ramping costs could also be seen as just energy costs: specifically the value of energy in the hour before dusk is particularly low, and the price of energy in the hour after dusk is particularly high, simply because the most efficient generators cannot produce post-dusk power without producing some pre-dusk power whilst ramping up.

Unfortunately, the centralised and decentralised approaches cannot coexist here. If even a modest amount of ramping is procured as an ancillary services, then this will reduce the natural market price response. As the ancillary service cost is likely to be smeared on a wider charging base than the difference in net demand between before and after dusk, this will mean that the decentralised ramping (without a system operator instruction) will not be profitable, and therefore centralised provision of ramping will have displaced decentralised ramping.

The current political economy favours the centralising approach:

• System operators like to grow their empires and to decide who does what by procuring ramping.
• Flexible generators or demand aggregators like the idea of getting a decent slug of revenue from a long ramping contract with a creditworthy system operator as counterparty.
• Information technology vendors (even those that talk the decentralisation talk) want to build central platforms for innovative services, not just let normal energy prices fluctuations deal with the issue.
• Suppliers who pay ramping levies are too busy competing with each other to care, and many of them might appreciate the cost stability given by a levy compared to volatile energy market prices.
• Energy exchanges might favour decentralisation but their voice is hardly heard.

With a powerful Amazon Energy Services on the scene, the political economy could shift.

If the ancillary services approach is used, Amazon Energy Services would be paying the ramping cost levy and recharging it to its customers (energy suppliers). Flexible generators and aggregators would be collecting ramping payments direct from the system operator, without Amazon involvement. Smaller businesses might be disadvantaged by ancillary services procurement complexity and communications requirements. One of the competitive advantages of Amazon Prime Energy suppliers compared to traditional suppliers, monthly price adjustment, would be less valuable.

By contrast, under the decentralised energy market approach, there would be an opportunity for Amazon to offer intermediation so that all revenues of small generators are earned within the Amazon system, and the competitive advantage of monthly price variations would be more valuable.

And should matters come to litigation, Amazon Energy Services could potentially build a strong argument that it should not be paying the full ramping cost levy insofar as it can prove that the ramping rate of the net demand of Amazon Energy Services registered entry and exit points is proportionally significant lower than the amount of ramping procured by the system operator: the self-balancing Amazon system should not be paying for the failure of other suppliers and generators to mitigate their net ramping.

Can all this happen in practice?

There are a few details to be ironed out to make all this happen.

SSE and Npower need permission from the CMA to establish the joint business. Arguably, a bit of concentration should not be a problem in a market with several large active and diverse competitors, plus a growing competitive fringe. There is currently some opposition to the merger, which is perhaps understandable given the incumbency exploitation business model adopted by the parties to date, but that should not survive rigorous analysis.

Then there is the question of price. Presumably clever merchant bankers have already tried and failed to broker a direct deal with SSE. It is easy to imagine that the current owners of the supply businesses feel obliged to base their view of a fair price on projected profits from continued exploitation of apathetic customers, whereas buyers (including Amazon) are not interested in that.

SSE’s demerger strategy solves this problem: the new business will have a short independent life auctioning itself, and whatever valuation results from that process will be accepted by shareholders as fair. But this means that Amazon has to wait until 2019 to launch an offer.

Waiting until 2019 might carry some risk for Amazon, but that does not seem terminal. And perhaps by 2019 there will be more clarity about the best way of getting monthly meter readings (in particular, whether the government’s smart meter programme has failed).

Plug

I would like a job looking after regulatory matters for Amazon Energy Services, because I would increase profits by promoting competition and preventing undue centralisation.

Franck Latrémolière is an economics consultant, partner of Reckon LLP and editor of the dcmf.co.uk website. This article was originally posted on LinkedIn.

Agree or disagree with this opinion piece? Use the comments section below to share your views.

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The post Opinion: Amazon would be a good buyer for SSE + Npower appeared first on theenergyst.com.

Economist and consultant Franck Latrémolière thinks Ofgem will lose the legal challenge it now faces over cuts to embedded benefits.

On 20 June 2017 Ofgem directed implementation of WACM4 of CMP264 and CMP265. This would change the Transmission Network Use of System charging methodology to phase out the major part of the benefit that most distributed generators receive if they generate power during triad periods. The change would affect charges from 1 April 2018, with the phasing out period ending on 31 March 2020.

A group of distributed generators is seeking a judicial review of Ofgem’s decision.

Whilst justice is, in principle, public, the courts are not pro-active in promoting hearing dates or access to records. The parties in this case have not shared much. I do not know what stage the process has reached, or what the arguments are on both sides. Can readers help?

Pending information, here is some speculation:

Ofgem may explain its decision by explaining that triad charges had grown out of proportion with any measure of the cost of transmitting power to meet peak-time demand from distribution systems, and therefore that giving Triad benefit to generators who offset that peak-time demand is overpaying these generators.

Ofgem may say that its decision would tend to restore a competitive playing field between distributed generation and generation that is connected to the transmission system or is too large to be exempted from paying transmission charges directly, in that after the cuts all these forms of generation would only receive benefits from offsetting local demand that are commensurate with the cost of transporting electricity to meet local demand.

In the context of a judicial review, such Ofgem claims are likely to be accepted by the court without much in-depth examination. They are probably true anyway.

What might the arguments be from the other side?

Some distributed generators might be tempted to vent their displeasure about the way in which the cut in Triad benefit would damage their business and make them regret bidding into the Capacity Market. They had an expectation that they would earn money from Triad benefit. They might threaten to throw their toys out of the pram, claiming that dashing their expectations will increase the return on capital that people require to play in the UK energy sector.

But their lawyers will probably convince them that a whinge about political risk does not win a judicial review; and that the expectation that was dashed was not a “legitimate expectation” on which they can hang a winning claim, because:

• They were not given that expectation by Ofgem or Government.
• Such an expectation would not be legitimate because (on Ofgem’s evidence) it would amount to an expectation of being paid over the odds.

So what is the real basis for seeking judicial review?

I think that it will turn on the allegation that investors who have backed distributed generation projects had a legitimate expectation that they would not be punished for using licensed electricity distribution networks to distribute their output to customers.

By choosing to use licensed electricity distribution networks, these developers naturally accepted that there would be a charge. Currently that charge is primarily in the form of demand distribution use of system charges: other ways of delivering power such as on-site power generation, private electricity wires, or using engines to produce mechanical power without going through an electricity conversion, would all have resulted in lower electricity distribution charges to meet the same final demand.

Of course, distributed generation developers would not have had a legitimate expectation that the charges for using licensed electricity distribution networks would never change. But they do have a legitimate expectation that these charges would be explicit, transparent and they would be able to validate and challenge their cost-reflectivity. This is that legitimate expectation that Ofgem is proposing to breach by changing the transmission charging regime in order to punish users of licensed distribution systems.

Seen from the transmission system, there is no difference between distributed generation and behind-the-meter generation: they both offset GSP load. A transmission charge that discriminates between these two scenarios is a backdoor way of punishing users of licensed distribution systems, without any cost basis, and without even going through the proper governance process for distribution charges.

Investors in distributed generation had a legitimate expectation that, in a civilised country, backdoor punishment of this kind would not receive regulatory approval.

In order to weaken arguments based on undue discrimination between front-of-meter and behind-the-meter generation, Ofgem might argue that their ongoing targeted charging review will remove that discrimination by forcing everyone to pay transmission charges on the basis of a measure of gross demand, not net import. Sounds powerful? But it would not be.

First, what the complaint would be about is a legitimate expectation that distributed generation would not be punished through transmission charges for using licensed distribution systems. That is not the same as jealousy about on-site generation not being punished too.

Second, it is hard to imagine a post-review world in which everybody would be punished equally. Ofgem does not propose to charge domestic demand on a gross basis, and it would find it difficult to charge a large municipal CHP microgrid scheme for a transmission system that it does not use. Ofgem cannot punish customers who disconnect from the system and run entirely on their own power sources and storage. Ofgem cannot punish the port that opts to build diesel cranes, instead of electric cranes powered by a biomass power station.

Ofgem might be tempted to re-emphasise the point that their change reduces discrimination between distributed and transmission-connected (or very large distributed) generation. And to note that exemptible distributed generation would still receive favourable treatment compared to transmission-connected generation, by avoiding transmission charges for export capacity and balancing services use of system charges.

That would not help. Can you excuse introducing one form of undue discrimination by reducing another? Even if you could, the pretence of symmetry would not be relevant: distributed generators had a legitimate expectation that they would not be punished for using licensed distribution systems, whereas transmission-connected generators had no basis for any legitimate expectation that the existing unfair arrangements would be rebalanced in their favour between 2018 and 2020.

I predict an Ofgem defeat.

And because I am an eternal optimist, I predict that post-defeat Ofgem will redirect its targeted charging review so that it identifies the valuable services provided by the electricity system, and develops reasonable charges for these services, instead of the old approach of smearing all costs on demand and then firefighting the inevitable adverse consequences like excessive Triad benefits.

Franck Latrémolière is an economist and consultant who finds electricity network charges interesting. He runs the dcmf.co.uk website.

Related articles:

Ofgem confirms it faces judicial review over Triad cuts

UK Power Reserve chief ‘100 per cent certain’ Ofgem faces judicial review over Triad cuts

Mitie DSR chief: Nothing can replace lost Triad revenue

Ofgem confirms deep cuts to Triad rates

Ofgem publishes research data behind proposed Triad cuts

Half of small generators could give up capacity market contracts due to Triad cuts

Ofgem outlines deep cuts to Triad payments

Ofgem consults on major networks charging review

We need to talk about Triad

National Grid confirms Triad dates

Is Triad past its peak?

Ofgem: Energy flexibility will become more valuable than energy efficiency

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