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.
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