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UTILITY Week 8th April 2016

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UTILITY WEEK | 8TH - 14TH APRIL 2016 | 9 This week Networks: continue funding innovation Submissions to Ofgem consultation say there is still a need for funding in a 'key period of change' Energy networks have unani- mously called on Ofgem to con- tinue funding innovation, saying ending the support now would be "premature". In a submission to an Ofgem consultation reviewing the ben- efits of the Network Innovation Competition (NIC) and Network Innovation Allowance (NIA), the Energy Networks Association (ENA) said there is still opportunity to deliver "further value and savings to the customer". SSE said that against the backdrop of the smart meter rollout and climate change, there is an "unquestionable need" for funding to help networks continue to keep pace with this "key period of change". Other energy networks said funding should continue as appetite for it is still high, while EA Technology, a partner in the My Electric Avenue project, said innova- tion is "not yet fully integrated into business plans" and should continue to be incentivised until it is. National Grid Electricity Transmission also expressed concern about cutting off funding for electricity transmis- sion when support in this area is "still relatively new". However, Centrica, parent company of big six energy supplier British Gas, said Ofgem should consider whether funding would be better spent "subsidising new technol- ogy and propositions to be delivered by innovative third parties and procured by DNOs on a commercial basis". Ofgem will conduct an in-depth review of the NIC and NIA this summer, and will report back by the end of the year. LD (See analysis, p10) GAS Massara: 'capacity market not working' The government will be forced to come up with another mecha- nism to get new gas power sta- tions built because the capacity market "isn't working", accord- ing to former RWE Npower chief executive Paul Massara. "The trouble is nobody wants to build new gas right now because they can't see enough spikes in the price to warrant building new gas without some sort of incentive," said Massara, speaking at an event in London. He said excessive market intervention was one of the main barriers to more gas being built, adding that the unintended con- sequences of government policy were "absolutely rife in the energy sector at the moment". Massara highlighted subsidies for renewables, which he said had le gas plants able to run only in "shoulder periods" for four to six hours a day. "My prediction is that the government will have to come up with some mechanism beyond the capacity market to encourage new gas builds," he said. Reprieve for coal, p19 ENERGY Ofgem: code change down to companies Ofgem has defended new powers to develop and modify industry codes, which it is set to receive under the current Energy Bill, claiming they have been neces- sitated by companies dragging their feet on programmes such as the introduction of half-hourly charging for business customers. The regulator is set to be handed the new powers under the bill, currently in pre- legislative scrutiny, at the recom- mendation of the Competition and Markets Authority. Ofgem will be able to directly modify industry codes to drive through significant change such as half-hourly charging for domestic customers and next- day switching. WATER 'Firms should own flood defence assets' The government must take a "radical approach" to flood defence strategy, transferring flood defence asset ownership to water companies, according to investment bank Investec. Analysts at the firm said measures to boost flood funding announced in the Budget 2016 are "piecemeal and reactionary". The measures – including an increase in insurance premium tax of 0.5 per cent and a new national insurance scheme (Flood Re) designed to reduce the cost of insurance – will do "little to incentivise the right level and type of investment to manage flood risks", they said. Blue sky thinking: too soon to end support Political Agenda Mathew Beech "Energy costs have contributed to Tata's losses" Oen, the debate around energy costs focuses on "hardworking households". There has been a significant shi this week on the back of Tata Steel's announcement that it will sell its entire UK operation. Tata's issue is the huge loss its UK arm is making. The Port Talbot plant is losing £1 million a day, while in the past five years its UK steel-making operation has lost £2 billion. A large part of this problem literally comes from China, and Javid was singing from the same hymn sheet as Rudd, saying the government wants to address the high energy costs. "Help with energy costs has been one of the steel industry's key asks and, having extended last year the compensation we are paying out, I want to see progress on exempting them altogether." This leaves one question: with EIIs set to gain further exemptions from policy costs, will the additional burden fall on domestic consumers? the cheap steel being dumped into the European market, undercutting that manufactured in Britain. However, energy costs – which energy secretary Amber Rudd has been pushing to see fall – have contributed to the losses faced by Tata and energy intensive indus- tries (EIIs) more widely. Responding to the steel crisis – which threatens 15,000 jobs at Tata – Decc has set out plans to exempt EIIs from the policy costs of the Renewables Obligation and the feed-in tariff. The move will be worth £400 million to the UK steel industry by 2020 and would come into force in 2017. Business secretary Sajid Policy & Regulation

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