Utility Week

UTILITY Week 18th November 2016

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16 | 18TH - 24TH NOVEMBER 2016 | UTILITY WEEK Policy & Regulation This week Commitment to coal phase-out reaffirmed Government to phase out all unabated coal by 2025 and replace it with lower-carbon alternatives The government has reaffirmed its commitment to phase out all unabated coal generation by 2025, and replace it with lower- carbon alternatives. In a consultation document published on 9 November, the Department for Business, Energy and Industrial Strategy (Beis) said it wants to see "an orderly transition" away from unabated coal generation. However, it assured that "action will only be taken if there will be no risks to the security of our electricity supplies". In November last year, former energy secretary Amber Rudd promised to cut unabated coal-fired power from the UK generation mix by 2025 as part of her energy policy 'reset'. Under the plans, coal plants will be restricted from 2023 and shut by 2025. Beis has asked stakeholders for their views on how to determine whether a power station has been sufficiently abated to continue to operate. It is also considering options for constraining the operation of coal-fired power stations in the years leading up to 2025, to smooth the rate of unabated coal power station closures. The government said its primary objective is to ensure that the closure of remaining coal-fired power stations takes place in a way that minimises the impact on the electricity system and provides certainty for investors. The consultation will close on 1 February 2017. Subject to stakeholders' views and evidence, the gov- ernment said it plans to bring forward any legislative changes as soon as the timetable allows. LV ELECTRICITY Networks urged to simplify connection The energy regulator and the government have called on the energy networks to "streamline the process" by which storage connects to the grid. Ofgem and the Department for Business, Energy and Indus- trial Strategy (Beis) have pub- lished a call for evidence on the future of smart energy systems. They said there is significant demand to develop electricity storage projects, with more than 19GW of applications having been made to connect electricity storage in recent months. However, the report laid out several barriers to storage, including how it connects to the network, how it is charged for using the network, the absence of a definition, and how final consumption levies are charged. Storage connections are uncommon, so present more of a challenge to network operators. Ofgem and Beis are seeking the views of energy industry players, including new entrants and consumer groups. See feature on opposite page WATER Ofwat mulls licence changes for firms Ofwat has gone to consultation on proposed changes to the licences of the 17 largest water companies. In May 2016, the regulator set out the framework for the 2019 price review (PR19) and develop- ment of wholesale markets. To implement these changes, it is seeking to: change to index price controls based on the Con- sumer Price Index or Consumer Price Index including owner- occupiers' housing costs; set sep- arate controls for water resources and bioresources (sludge) and water and wastewater network plus controls; establish market information databases for water resources and sludge activities; and allow in-period adjustments to price control revenue for out- come delivery incentive rewards and penalties for all companies. The deadline for the consul- tation is 7 December 2016. ELECTRICITY Plan set out for the next CfD auction Details of the next Contracts for Difference (CfD) auction, in which renewable electricity com- panies can compete for the first £290 million worth of contracts, have been set out by government. The government has also confirmed its commitment to spend £730 million annually on renewable electricity projects over this parliament. Applications for the latest CfD open in April 2017 for less established technologies includ- ing offshore wind and anaerobic digestion (>5W). End of the road: unabated coal generation Political Agenda Mathew Beech "Greg Clark is involved in his first 'big six fat cat' story" Business and energy secretary Greg Clark has got involved in the first 'big six fat cat' story of his tenure. While it is unlikely to be the last, his handling of the prickly issue could set the tone for his and the government's leadership in this area. A report at the start of the week by The Sun claimed the major energy suppliers were mak- ing six times the profit they state in their official reports to Ofgem. The claims, which come from the paper's analysis of a their customers' loyalty rather than respecting it," he said. This does not bode well for the suppliers, and follows hints the government may seek to go beyond the CMA's remedies and intervene further in the market despite warnings from the sector. If Clark goes too hard at the suppliers to please consumers, developing an industrial strategy with energy at its core will become a lot more difficult, especially as the good feelings towards him ebb away. report commissioned by Energy UK from accountancy firm PwC, have been labelled as a "misrepresentation of the facts" by the trade association. However, with the cold weather biting, headlines of energy companies profiteering will stoke up consumer anger. Clark has a fine line to tread. He needs to be seen to be acting to protect consumers, while also not going in too hard on a sector he needs to work with closely. Clark's first comments were that he wanted to speak with Energy UK and examine the evidence. "This report appears to confirm my concern that the big energy firms are punishing

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