This week’s Energy Spectrum overview | 14 May 2018

In this week’s Energy Perspective, we consider the current options for appealing industry code changes, following the Competition and Markets Authority (CMA) issuing its final determination on the allocation of costs in relation to the EDF Energy/SSE appeal on an electricity transmission charging rule change (CMP261), relating to alleged breach of the upper limit of generator transmission charges set by the European Commission.

We argue that the current system is skewed in favour of those able to afford to go through the process – the large incumbent players. Acknowledging that there inevitably costs to any appeals process, we consider what changes should be made to ensure a fast, effective and affordable system that is accessible to all market participants.

In this week’s Policy section, we examine calls from the CMA for heat networks to be regulated as it published initial findings from its heat networks market study.

The findings reveal that some customers pay more for their heat through heat networks than alternative fuel sources and that consumers don’t receive the same levels of protection as gas and electricity customers. The CMA has set out measures to address these issues, focusing on the creation of a statutory regime governing the regulation of heat networks.

We agree that the case for regulation is compelling and illustrates a continuing need for consumer protection in a world where more consumers are supplied off the public networks.

The section also covers the BEIS and Welsh Affairs joint committee hearing to scrutinise the Swansea Bay Tidal Lagoon project decision-making process, an evidence session on the UK’s progress in developing the market and infrastructure for electric vehicles and a European Commission memorandum detailing the impact on the Internal Energy Market if a ratified withdrawal agreement is not reached before Brexit.

In this week’s Regulation section, we gather together a diverse range of industry responses following the closure of Ofgem’s RIIO-2 framework consultation on the next round of price controls. The responses come from a range of stakeholders including Elexon, National Energy Action and Citizens Advice and highlight that, given the competing demands, there is a long way to go to strike the right balance and ensure the RIIO-2 framework is appropriate.

We also discuss Ofgem’s response to the recent BEIS consultations on the future of the Energy Company Obligation and the Warm Home Discount and argue that, with much to take on board, BEIS will have its work cut out to ensure that the plans are robust and industry has enough time to prepare before commencement of the next phases of the schemes.

In our Industry Structure section this week, we review E.ON’s Q1 2018 results, which show a strong start to the year. 

The company revealed a 41% increase in net earnings compared with the same period in 2017. The UK picture is less promising as E.ON expects annual earnings to be lower due to restructuring expenses and the intervention of the CMA. We argue that this reflects the considerable change and uncertainty for many suppliers in terms of regulatory policy.

The section also previews a forthcoming Cornwall Insight and Pixie Energy hosted event in Central London on 19 June focused around innovation at the grid’s edge. We believe this is an evolving and vital part of the electric power sector, which will have far-reaching implications for our future energy system.

In this week’s Nutwood section Cornwall Insight’s Head of Research, Ed Reed, reports on Lux Nova’s Local Energy Projects: From Concept to Reality (and Beyond) half-day seminar, which brought together almost 100 local energy specialists to share both experiences and frustrations. The session covered grid innovation developments, local balancing initiatives, corporate PPAs and examples of local energy innovation schemes from around the UK.

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