Utility Week

UTILITY Week 25th November 2016

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UTILITY WEEK | 25TH NOVEMBER - 1ST DECEMBER 2016 | 11 Policy & Regulation This week Politicians 'must cede CfD auctions control' Politically determined auctions mean investors face uncertainty over the timing and technologies Politicians should relinquish control over Contracts for Dif- ference (CfD) auctions to make them more regular and predict- able for investors, peers have been told. The problem with the auctions is that they are still "politically determined", meaning investors face great uncertainty over when they will take place and what technologies will be eligible. "When are we going to find out whether we are going to have an auction?", questioned Renewable UK chief executive Hugh McNeal. "Well, we'll find out when we're going to have an auction when the politics allows us." Giving evidence before the House of Lords Economic Affairs Committee, he continued: "When might we have some form of route to market for onshore wind? Right now we de facto have a freeze." When asked by the committee how this issue could be resolved, he said politicians would have to be per- suaded to "give up" some of their control over the auc- tions: "It would be wise given the amounts of investment involved, if we were to hand over some of the political control and power for that to some other body, a system operator or whoever… that provides, not certainty, but regularity for investment." In his last budget as chancellor in March, George Osborne announced that £730 million of annual subsidies would be made available across three auctions in the cur- rent parliament. He said £290 million of annual funding would be up for grabs in the first auction, which would be dedicated to "less established" technologies. TG ELECTRICITY Cardiff City Council in tidal lagoon talks Cardiff City Council is to discuss the creation of a £6-8 billion tidal lagoon in Cardiff Bay. A report to Cabinet will recommend that a scrutiny task and finish group should gather independent, expert advice on the opportunities and issues that a lagoon could bring to the area. The report comes as an independent review set up by the government assesses the feasibility of tidal lagoon power in the UK. The review is led by Charles Hendry and is expected to be completed this autumn. In the event the project is progressed following the Hendry Review, the council will also consider the requirements for, detailed appraisal of the potential economic, social and environmental implications of the project for Cardiff. WATER Affinity wins supply/ sewerage licence Affinity Water has been granted a water supply and sewerage licence by Ofwat. The company, which has rebranded its business retail arm as Affinity for Business, became the final incumbent to make its intentions for the market known, in September. Now that its licence has been granted, Affinity will be able to operate as a water retailer to its existing customers as well as compete for new ones. It is intended that Affinity for Business will become the retail supplier for customers in the Affinity Water regions via the Retail Exit mechanism. ELECTRICITY Targets confirmed for capacity auctions National Grid has confirmed the procurement targets and time- table for the upcoming capacity market auctions. The main four-year-ahead (T-4) auction, which will take place on 6 December, has been set a target buy of 51.7GW. The figure is down slightly on the 52GW target set out by former energy secretary Amber Rudd in an open letter to the delivery body in July. The target for the early year- ahead (EA) auction has also been dropped slightly from 53.8GW to 53.6GW. The auction was first proposed by the government in March to bring an end to the Contingency Balancing Reserve a year early, and was adopted in May aer a consultation. It will take place on 31 January 2017. The target for the transitional arrangements (TA) auction, which is dedicated to demand- side response, is unchanged at 300MW. The auction is scheduled for 22 March 2017. McNeal: Regularity needed for investment Political Agenda Tom Grimwood "Hammond must decide on the future of the CPS" The government, both pre- and post-Brexit iterations, is com- mitted to phasing out unabated coal by 2025. A key plank of this policy is the carbon price sup- port (CPS), boosting the carbon price paid by the most polluting of generators. This, combined with a global gas glut, has seen coal replace gas as the marginal fuel. Ferry- bridge, Longannet and Rugeley have all closed as a result and Eggborough seems set to follow. Coal is coming off the system, tors towards gas and low carbon technologies. Hammond, lauded by some as a forward thinker and a green thinker, has to balance this. The Conservatives want to be seen to boost business, which would mean scrapping the CPS, but also of being a global green leader, which would involve retaining it. The main thing industry wants is clarity. The chancellor's first big set piece should hopefully provide some. so this is a victory for the gov- ernment. Or is it? Since the CPS came in three years ago, manufacturing bodies have complained that it pushes up energy bills for big industry, harming their competitiveness with European and global rivals. Going to press, we do not know what chancellor Phil- lip Hammond's first autumn statement will include, but he is under pressure from both sides of the carbon argument. Some want the CPS scrapped, boosting industrial competitive- ness – much needed in the wake of the UK's EU exit vote. Others want to keep it in place, at least until coal is dead, to push inves-

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