This week’s Energy Spectrum overview | 30 April 2018

In this week’s Energy Perspective, we explore how for storage the preference to move to the behind-the-meter proposition is increasing as the initial interest in grid-scale assets wavers.

We argue that there are many good reasons for this trend, including the fact that it allows organisations to maximise revenues by taking advantage of off-peak charging and peak discharging rates as well as opportunities to avoid network and other costs.

But, as with any storage, the behind-the-meter option also presents many challenges. These include dealing with revenue-sharing arrangements for different stakeholders in a project, the fact that offerings from storage providers in the market are not straightforward and, once a business model has been identified, the need to integrate it with existing supplier arrangements for the customer.

On top of this, we outline the challenges we anticipate are yet to come – primarily maintaining revenue streams in future years given probable future regulatory reforms.

In this week’s Policy section, we examine the news that the Competition and Markets Authority (CMA) has said that the proposed merger between SSE and npower could result in higher prices for some billpayers due to reduced competition. As a result, the CMA has called for the two companies to provide measures to address its concerns.

We argue that given the size of the proposed new supplier, these concerns were inevitable, but equally that it is extremely unlikely that the companies will not have been prepared for such an outcome. 

The section also looks into recent Social Market Foundation proposals to reduce and eliminate what it describes as the “iniquitous and unfair” energy poverty premium faced by low-income consumers.

In this week’s Regulation section, we delve into Ofgem’s final two working papers on the government’s default tariff cap. They set out Ofgem’s view on the environmental and social obligations placed on suppliers, and how the costs of the schemes could be treated under the cap.

We also discuss proposals by National Grid and the National Transmission System Charging Methodology Forum to develop changes to the structure of gas transmission charging to comply with EU Tariff network code requirements and to better fulfil stakeholder objectives. The work has been ongoing following a review by Ofgem of the current gas charging arrangements.

We argue that the task to complete supporting analysis and coherently marshal the materials for Ofgem’s consideration looks challenging given the last-minute rush to get options on the table in what has become a very important work-stream.

In our Industry Structure section this week, we look at Iberdrola’s strong Q1 profit rise alongside comments made by city analyst Bernstein questioning the company’s ability to continue its growth.

The section also reviews our latest Index of Domestic Energy Supply Costs and examines the mixed impact that updated third party charges have had on supplier costs. Overall, we see a growing proportion of supplier costs come from third party charges and therefore expect the trend of suppliers increasing their standard variable tariff (SVT) rates seen across March and April to continue, even as pressure on wholesale costs abates.

In this week’s Nutwood section, industry expert and Cornwall Insight Associate Simon Skillings explores the role of policy and regulatory risk in the energy industry. As the traditional “linear” energy system inevitably succumbs to a more complex patchwork of decentralised energy trading, he asks what this shift means for the future of policy and regulation.

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 enquiries@cornwall-insight.com or call 01603 959883.

Related thinking

Low carbon generation

Our Renewables Pipeline Tracker: In with the new – scoping projects and progression through planning stages

Our latest Renewables Pipeline Tracker was published on 11 June, and this blog provides a summary of some of the recent developments in our coverage of the pipeline for new build and repowering renewables assets in GB. What’s new? Seabed leasing rounds, scoping projects and CfD announcements Since our previous...

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...

Energy storage and flexibility

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 n.palmer@cornwall-insight.com. 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...

Commercial and market outlook

April showers bring DUoS for every half hour

Almost two years ago, Ofgem approved DCP268 DUoS Charging Using HH Settlement Data, which will move existing non-Half Hourly (NHH) settled demand customers onto time-based Half Hourly (HH) Distribution Use of System (DUoS) unit rate charges. With the modification to be implemented in the DCUSA on 1 April, we revisit...

Announcement

Introducing Energy Spectrum Europe

Cornwall Insight is pleased to announce the launch of Energy Spectrum Europe. This new addition to the Energy Spectrum stable will provide the authoritative, independent insight and analysis of energy markets for which its peers covering Great Britain, Ireland and Australia are rightly renowned. Every month Energy Spectrum Europe will...

This site is registered on wpml.org as a development site.