Utility Week

UTILITY Week 2nd September 2016

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Finance & Investment This week Grid liable for £18m Drax black start costs Conditions at Drax were predictable, so National Grid won't be able to recover 'unforeseen' costs National Grid will be liable to pay £17.7 million towards the cost of a black start contract signed with Drax, aer Ofgem denied its request to recover its costs in full. The system operator will be allowed to recoup the full cost of the contract it signed with SSE for its Fiddler's Ferry plant. National Grid said it was forced to take on the contracts following the announcements in February that SSE would probably close three of the four units at Fiddler's Ferry, and that Drax may mothball some of its coal-fired units. It then applied to Ofgem for an increase in its spend- ing target for balancing services under the "income adjusting event" process. The mechanism is designed to cover "unforeseen events beyond its control", and National Grid argued that both announcements were unforeseeable. However, Ofgem disagreed with respect to Drax on the basis that the company had made only a "statement of an intention to consider mothballing". It did not lead to a consultation, as it did in the case of Fiddler's Ferry. The regulator said the potential mothballing of units was also foreseeable as the "deterioration in market conditions for coal units" was well known. In particular, it noted the submission it received from National Grid in December for the black start mid- scheme review, which raised the possibility that Drax may not run its coal-fired units at all over the summer due to declining profitability. TG ENERGY Npower overhaul 'bearing fruit' RWE has said the restructuring of its British supply business Npower is "already bearing fruit" despite reporting a drop in profit in the first half of 2016. The group's Ebitda for the six months to June fell by 5.5 per cent on the same period last year to €3 billion (£2.6 billion). Oper- ating profit fell 7.2 per cent €1.9 billion and revenues declined by 3.8 per cent to €23.9 billion. RWE pinned the falls on "significant unexpected losses" from its trading business in the second quarter. This was offset by a strong performance from its conventional generation busi- ness, which "posted a significant rise in its operating result" due to its "ongoing efficiency- enhancement programme" and property sales. ENERGY Warm weather and customer numbers hit Eon's sales German energy giant Eon reported an 11 per cent drop in sales in the first half of 2016, from €22.78 billion (£19 billion) to €20.25 billion. The company said this was largely due to falling customer numbers and warmer weather in the UK. Sales in the UK declined by €849 million, largely because of falling customer numbers and a reduction in gas prices in Janu- ary 2016. Meanwhile, adjusted Ebit for the UK business increased to €291 million, owing to "lower costs associated with government-mandated energy- efficiency measures". Adjusted Ebit for the group fell by 6 per cent to €2 billion. ENERGY '£215bn investment needed by 2030' The UK needs an "eye-watering" investment of £215 billion in its energy infrastructure by 2030 in order to replace ageing assets and decarbonise the system, analysis by Barclays Research has found. As the country undergoes an "energy revolution", £95 billion needs to be spent on disruptive technologies such as renewables, battery storage and distributed generation. "With electricity security of supply already on a knife edge, the UK faces the obsolescence of approximately 40 per cent of its CCGT gas fleet by around 2020 and approximately 70 per cent of all reliable generation capacity by 2030," the report said. "Shoring up the UK's current tenuous electricity security of supply… will require an eye- watering level of investment over coming years," the report concluded. Drax: coal's decline is 'well known' UTILITY WEEK | 2ND - 8TH SEPTEMBER 2016 | 13 Welsh Water has announced plans to invest £21 million to improve drinking water supply in west Wales. With parts of the network nearing the end of its opera- tional life, the investment will see more than 174km of water mains in west Wales cleaned or replaced over the next two years. Some of the first areas to receive investments include Hermon, where £500,000-plus will be spent on upgrading the water network, while more than WATER Welsh Water unveils £21m investment programme for west Wales £600,000 will be invested in the drinking water network in Eglwyswrw. Around £650,000 will also be spent in the Pont- siân area in Ceredigion. The widespread investment in the area by the company will also involve replacing more than 5km of the drinking water trunk main in Llechryd and Cilgerran. Last November, Welsh Water experienced a burst on the network in Llechryd which le customers temporarily without water. To minimise the risk of such disruptions to supplies in the future, the company pledged £5 million to replace this strategic trunk main. This was in addition to the £16 million already planned on improving the resilience and quality of the water supply across the area. Welsh Water managing director of water services Ian Christie said: "With some parts of the water network laid over a century ago, the time has come for us to undertake some essen- tial work to cleanse the pipes or where needed replace whole sections. "We are committed to provid- ing customers with a first class supply and our work here, including the replacement of the Llechryd main aer the recent burst, reflects this. "We understand that a large refurbishment programme like this can cause disruption in the short-term, but the long-term benefits include reduced leaks, less interruptions and high qual- ity drinking water for all."

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