This week’s Energy Spectrum overview | 16 April 2018

In this week’s Energy Perspective, we review the BEIS consultation on the next phase of the Energy Company Obligation (ECO3).

We argue that although at first glance proposals for ECO3 give the impression that it is business as usual, there are some key changes taking place going into this next phase, which focuses on reducing fuel poverty rather than explicitly on cutting energy usage and carbon emissions.

Critical to success of ECO3, we believe, will be building on the tentative steps being made to engage local authorities (LAs). Suppliers can now work with LAs to deliver 10% of their current ECO Affordable Warmth target, with this set to increase in ECO3, and their skills will be needed for the scheme to successfully include harder-to-find and harder-to-treat properties.  

We also examine factors including how suppliers could deliver between up to 20% of their obligation through innovation options, ongoing difficulties relating to rules for small suppliers and the possibility of the Scottish government using new powers provided by the Scotland Act 2016 to introduce separate rules.

In this week’s Policy section, we cover the news that BEIS is to launch a £320mn heat networks project this autum.

The Heat Networks Investment Project will offer grants and loans to both the public and private sectors in England and Wales for the development of heat networks that serve at least two buildings. BEIS believes that heat networks could meet up to 24% of heat demand in industrial and public-sector buildings by 2050.

The section also includes an update on the BEIS Committee EV inquiry, with electricity networks stating that they are well equipped to manage a faster than expected EV uptake.

In this week’s Regulation section, we discuss how Ofgem is considering whether or not to centralise functions currently performed by supplier agents as part of its work on market-wide half-hourly settlement. We argue that although the settlement functions of supplier agents are ripe for reform, Ofgem should explore all potential options rather than focus only on centralised solutions.

We also review the Energy Networks Association’s (ENA) newly launched gas and electricity Network Innovation Strategies, which highlight opportunities for network operators to innovate for security, affordability and sustainability. ENA believes priorities should be improving demand and generation forecasting, optimising cross-section coordination between DNOs, TOs and the SO, maximising cyber security and data protection, and improving the understanding of evolving customer needs. The challenge now, we argue, is moving increasingly towards action.

In our Industry Structure section this week, we examine the news that several major suppliers are set to increase their tariffs. We believe that further price rises will occur as suppliers pass through rising policy cost.

We also consider the shifting supply picture presented in National Grid’s Summer Outlook, which anticipates demand will be lower this summer than in 2017 due to rising distribution connected generation and lower underlying demand.

This week’s Nutwood section includes two points of view from Cornwall Insight’s experts.  

In the first, Peter Atherton argues that although SSE shares have appeared to be “in the doldrums” in recent years, it has actually “weathered the storms blowing through the sector” reasonably well. However, previous safe bets such as networks are taking on new risks of their own.

In the second, Craig Lowrey examines changes in the political and economic landscape since the 2016 agreement between the members of OPEC and Russia, and points to a potential tipping point in oil markets.
What is the Energy Spectrum service?

  • Our Energy Spectrum service comprises two publications designed to ensure you stay ahead of the game.
  • The Daily Bulletin – providing you with up-to-date information, collating the most important political, regulatory and industry developments from the previous 24 hours
    Energy Spectrum – offers the latest news and expert comment and is seen as an essential source of analysis and insight on developments in the British energy markets
    Sign up to a free trial

To subscribe or to request a free four-week trial of the service, email Stephen Pointing at or call 01603 959883.

Related thinking

Heat networks

Reallocating electricity policy costs to incentivise low carbon heating technologies

Funding the cost of decarbonising the power system has mainly been through the consumers' electricity bills. In fact, in 2020-21 these costs amounted to a whopping £10bn. But is this method of raising revenue for decarbonisation still fit for purpose when faced with the need to decarbonise the nation's heat?...

Regulation and policy

How will consumers take to Market-wide Half Hourly Settlement?

Ofgem published its decision to implement the move to Market-wide Half Hourly Settlement (MHHS) on 20 April. This confirms plans to move to new settlement arrangements over a four and a half year time period, with the Elexon-led Design Working Group’s Target Operating Model to be used as the blueprint. Meters...

Regulation and policy

Ofgem raises modifications ahead of RCC and new switching arrangements

The latest edition of our Faster Switching Service Report due to be issued this week includes the latest developments in Ofgem’s Switching Programme and the associated Retail Energy Code (REC). Launched in November 2019, the Retail Code Consolidation (RCC) Significant Code Review (SCR) set out Ofgem’s intention to amalgamate the...

Regulation and policy

Calm before the storm? 2021 energy supplier compliance developments

The latest update to our Energy Supplier Compliance Portal went live on 4 May and includes changes to the compliance landscape during February to April 2021. While the previous quarter’s update reflected new principles resulting from Ofgem’s Supplier Licensing Review (SLR) and protections for prepayment meter customers facing self-disconnection, Q121...

Regulation and policy

Electricity transmission charging reform – overtaken by changing priorities?

Charging for the transmission network is never out of the development process for long. From major reviews, such as that initiated under Project Transmit in 2010, to significant reforms such as removing the triad benefit from distributed generation in 2018, and a host of smaller developments, change seems the only...

Low carbon generation

How nuclear energy can help the UK reach its net zero goals

This article was originally written in Energy Spectrum on 21 March 2021. To find out more about a subscription to Energy Spectrum, please contact Nick on There are several challenges to reaching net zero, where its proponents believe nuclear could add value. Some of tomorrow’s main issues concern: How to provide low...

Heat networks

Heat pumps and peak power demand in North-West Europe in 2030

In March Cornwall Insight launched its new Energy Spectrum Europe publication in collaboration with the Institute of Energy Economics at the University of Cologne (EWI). Below is an extract of our Energy Perspective article from our latest issue, written by Nils Namockel from EWI.  Heat pumps powered by green electricity...

Low carbon generation

Up north and down south – trends for generator TNUoS charging

The topic of generator Transmission Network Use of System (TNUoS) is becoming a subject of increasing interest for stakeholders as regulation, policy, and the generation mix create potential volatility for future charging trends. The significant costs posed through TNUoS are an important consideration for generators, with high variability between regions...