Utility Week

Utility Week 18th October 2013

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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Markets & Trading This week National Grid and Energinet to begin feasibility work on UK-Denmark power interconnector UK and Denmark start interconnector study National Grid and its Danish counterpart, Energinet, have agreed to start feasibility work on a UK-Denmark power interconnector. National Grid executive direcInterconnector would maximise wind's potential tor Nick Winser said: "Closer integration of the markets can bring benefits to the UK in helping to balance our network." National Grid has described the interconnection as "one of the best solutions for handling the issue of intermittency [of wind power]". The subsea cable will have a maximum two-way capacity of about 1.4GW. "The interconnector could unlock significant economic benefits for both countries in helping to maximise the potential of both offshore and onshore wind, add to security of supply and enable a competitive market," said National Grid and Energinet in a joint statement. But Winser warned that regulatory considerations as well as commercial and technical matters meant the project was not a done deal. "Much needs to be done to secure a regulatory framework that will make the interconnector a commercially feasible project," he said. The Danish connection could present a significantly greater number of options for dealing with security of supply issues arising from high levels of intermittent renewable generation by hooking the UK into the wider northern European networks. Denmark has electricity interconnectors with Norway, Sweden and Germany, and is building new ones to Norway and Germany. Britain has power interconnectors with Ireland, France and the Netherlands, and is pondering links with Norway, Belgium and Iceland. Electricity Citi: utilities must move with the times The total available market for European utilities is likely to halve in the next two decades as demand drops and distributed generation takes over. That is the conclusion of research from investment bank Citi. Electricity consumption could decline by more than 20 per cent across Europe, while decentralised generation could grow to about a third of the market, it said. Energy Darwinism, a report into shifting power generation trends globally, warned that utilities risked becoming statefunded asset businesses unless they moved with the times. New investment in conventional generation would be "hard to justify" in developed markets, it said, as uncertainty increased over how much it would be needed to back up renewables. However, it noted that up to 95GW of conventional capacity would close in the coming decade and there were concrete plans to replace only a third of that. To avoid building new power plants that would not be used, it said utilities needed to focus on smart grids, downstream services, grid expansion and storage. "Companies face a choice of evolving themselves within this new energy framework or gradually regressing to become effectively state-funded, rate-ofreturn asset-based businesses," the report said. Energy 'Threat' to Europe's security of supply European nations face blackouts because of instability in gas and electricity markets, according to a report by consultancy Capgemini. The 15th European Energy Markets Observatory report highlighted the toxic combination of the prolonged economic crisis, deregulation and sustainability targets, which it said had led to very disturbed markets. "The present situation poses a clear threat to Europe's security of supply," said Colette Lewiner, Capgemini's energy and utilities worldwide expert. "Gas plants are closing quickly. Buffers, such as gas stored for the winter in underground reservoirs, are significantly lower than in previous years. In the short term these factors mean that a very cold winter could lead to serious supply and grid balancing problems." The report called for reform of the Emissions Trading System or introduction of a Europe-wide carbon floor price; the creation of a European capacity market; an overhauled retail market to finance smart grids; and a slowing of the pace of subsidised renewables growth. Open market Stephen Fitzpatrick Energy companies must put the customer at the heart of their business. When we launched Ovo in 2009, we had a combined energy industry experience of three years. All we had to go on was our personal dealings as dissatisfied customers. To us, it was obvious what we wanted to build – an offer that was simple, fair and transparent. We thought that if we could make energy easier to understand, remove the complexities and be totally honest, we could "We all have our role to play in rebuilding trust" bring the customers' trust back to the industry. However, customers are still confused and it's not surprising why! They are getting one message from government, another from the media, another from the regulator and yet another from us, the energy company. When the going gets tough, 28 | 18th - 24th October 2013 | UTILITY WEEK energy companies, regulators and the government are all quick to blame each other. The truth is that we are all responsible for fixing the market and all have our role to play in rebuilding trust in this vital industry. Energy is a very complex business. But it need not be. If everybody focused on delivering what customers want reliable ( energy and good value for money), the whole market could be made much simpler. The only way we will regain trust and build a fairer, more transparent open market, is to all start looking at things from the customers' point of view; after all, they are the ones footing the bill. It's time for regulators and politicians to make our industry simple and transparent. Stephen Fitzpatrick, founder, Ovo Energy

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