Utility Week

8 | 14TH - 20TH DECEMBER 2018 | UTILITY WEEK Policy & Regulation This week Government: Ofgem should regulate heat BEIS agrees with CMA there are 'good reasons' for Ofgem to take on regulation of district heating Ofgem's remit should be extended to cover the regulation of heat networks, the government has said. Around 14,000 district heating systems currently serve nearly half a million customers, equating to about 2.4 per cent of the UK heat market. The Clean Growth Strategy has set a target that by 2050, this proportion should grow to meet nearly a fih of the UK's heating needs. In Denmark, 60 per cent of all households are served by heat networks, a proportion that rises to 98 per cent in the capital Copenhagen. However a Competition and Markets Authority (CMA) investigation earlier this year found that lack of regula- tion for heat networks means their customers enjoy less protection than those using other energy services. A paper issued by the Department for Business, Energy and Industrial Strategy (BEIS) on 7 December accepts the CMA's view that there are "good reasons" for Ofgem to take on regulation of district heating. It says: "Ofgem has extensive relevant experience to draw on from regulating the companies which run the gas and electricity networks. "We and Ofgem recognise that a regulatory frame- work for heat networks is likely to be distinct from other regulated utility markets to account for the unique char- acteristics of the heat networks sector and that Ofgem would need to extend their expertise accordingly." The BEIS paper points to the advantages of having a single regulator for all energy consumers, but says a final decision will only be made once the government has a better understanding of how the potential regulatory framework is shaping up. DB ELECTRICITY T-1 capacity auction to be held in summer The government is "working closely" with the European Commission to get the capacity market reinstated as soon as possible and is planning to hold a T-1 auction in summer 2019. The Department for Business, Energy and Industrial Strategy (BEIS) said any agreements awarded will be dependent on the outcome of a formal investi- gation into the scheme. The capacity market was suspended last month following a major ruling by the European Court of Justice. Siding with the claimant in the case, Tempus Energy, the court found the European Com- mission had failed to properly establish the compatibility of the mechanism with state aid rules when granting approval in 2014. Judges said this was demon- strated by the decision not to hold a formal investigation into the scheme, despite concerns being raised it discriminated against demand-side response. The government was forced to halt payments under existing contracts and postpone indefi- nitely the T-1 and T-4 auctions scheduled for early 2019. In an update on its plans, BEIS said the court had not found the scheme to be in breach of state aid guidelines: "As such, we are exploring together with the commission the most rapid and effective path to conduct the formal investigation into the scheme in a way that meets all process requirements referred to in the judgment. "The commission envisages issuing an opening decision to open the formal investigation in early 2019. Subsequently, third parties will be able to submit comments on the decision." According to the notice, if the capacity market is reapproved, "the results of all auctions to date would stand, and further auctions could be held". BEIS said it will consult shortly on the regulatory changes needed to allow for the auction. ENERGY Local planning 'can minimise costs' Local energy planning will be key to minimising the costs of decarbonisation, according to a new study commissioned by the Energy Technologies Institute. In a series of reports setting out its findings, the Energy Systems Catapult says no single approach to decarbonisation can be applied nationally, with each local area requiring a unique mix of solutions. Drawing on evidence from pilots in Newcastle, Bridgend and Bury, the study concludes local energy planning conducted on a whole-system basis could limit the impact of decarbonising heat on total system costs to an additional 15 per cent by 2050. Accordingly, the Catapult has designed a planning framework to assist local authorities, energy networks and stakeholders. Danes lead: network heat in 98pc of Copenhagen Rachel Reeves has urged the gov- ernment to provide greater clarity about its plans for civil nuclear power if the UK leaves the EU without a withdrawal deal. The chair of the House of Commons Business, Energy and Industrial Strategy committee has written to Richard Harrington, who is responsible for the nuclear industry in his portfolio as minis- ter for business and industry, for ELECTRICITY Reeves calls for clarity for nuclear in a 'no deal' Brexit scenario more details about the govern- ment's post-Brexit plans. In the letter, Reeves acknowl- edges indications of progress on the civil nuclear relationship between the EU and the UK regarding issues such as safe- guards and trading arrangements. The government passed a bill last year outlining plans to create a new safeguarding regime for nuclear material and labour once the UK has to leave its existing arrangements under the Euratom treaty. The letter seeks more detail on the plans the government is making to ensure the civil nuclear sector can continue to function aer next March if parliament has been unable to secure a broader separation agreement. She also asks Harrington whether the UK has received any signals from Euratom about whether it will be possible to maintain the "close association" the government has said it wants with the EU-wide nuclear co-operation arrangement. Reeves said: "The govern- ment needs to spell out what it is doing to ensure that nuclear power stations continue to function from 29 March 2019."

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