Bulletin 22 March

Issue 270: Tuesday 22nd March 2011  

  • Shadow Energy Minister says ‘smart’ means power to the people  

  • ENA give cautious response to Ofgem Strategy Document  

  • ENA bring industry together to discuss Metal Theft

  • ENA discusses legislation with Commons Speaker  

  • Ofgem causes ripples with market findings  

  • DECC announcements designed to support biogas  

  • Huhne promises White Paper on energy reform by July  

  • Stronger networks presence needed on Green Economy Council  

  • Health & Safety legislation to be reformed  

  • New Downing Street energy adviser  

  • When Mr Huhne met Dr Clark  

  • SHE 2011

  • Forthcoming events organised and/or supported by ENA  

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Shadow Energy Minister says ‘smart’ means power to the people  

ENA’s Well Connected 13 event, heard the Shadow Energy Minister speak of the increasing awareness the public and the Irranca-Davies household have of energy usage. The event also saw the launch of ENA’s Annual Review which had as its theme ‘The Road to a Smarter Grid’.  

A self-proclaimed “green tech junkie”, listing rain water harvesting, solar PV and a Smart Meter realtime display amongst the green initiatives he is deploying at home, Huw Irranca-Davies MP said the necessary steps towards climate change were not just good sense for UK Plc but for UK families too.  

Speaking before the Shadow Minister, Nick Winser of National Grid reflected on the achievements over the past 75 years and laid out the challenges ahead. He explained how situations in Australia, the Middle East and Japan provide varied reminders of how unstable the world is and how a diverse mix is essential for our energy future. Praising the leadership from government in the past he stressed the importance that whatever the political landscape now and in decades to come, there is a need for a steady course to be set by politicians and regulators that show bravery.  

The Shadow Minister was quick to echo the importance of this alongside restoring confidence in small scale renewables, investment in gas infrastructure for storage and generation with CCS, and opportunities to put the public in control. He believes that smart communities, smart cities and integral smart networks are key, explaining that “smart means power quite literally in the hands of the consumer...it’s not about big brother or even big society, it’s about understanding your usage and how to reduce it”.  

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ENA give cautious response to Ofgem Strategy Document  

ENA gave a cautious response to the main headlines from Ofgem’s forthcoming Strategy Decision Document, which will seek to implement the principles of the new RIIO model and will be published in full at the end of the month.  

The Decision Document covers the price control reviews of both the gas transmission and distribution, and the electricity transmission companies and will take effect from April 2013 through to March 2021. The Document also includes a decision on the regulatory lives of new electricity distribution assets post-2015. 

Ofgem have only issued a Press Release and the Executive Summary from its forthcoming Strategy Decision Document at this stage. The full document will be published on 30th March. The Document covers the price reviews of the gas distribution (GD1) and the electricity and gas transmission (T1) companies which will be effective from April 2013.

ENA supports many aspects of the new RIIO framework for regulation and believes that it should help GB’s energy network companies deliver value for customers. It is also extremely important in the context of GB’s transition to a low carbon society and the need for some £30bn of investment by the energy network companies over the period to 2020.  

Initial indications suggest that Ofgem has responded in part to the industry’s concerns with the proposals it set out for consultation in December. However, there are clearly still a number of issues to be resolved, particularly in respect of the financial package proposed by Ofgem.

The press release and summary can be found here.  

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ENA bring industry together to discuss Metal Theft

ENA convened a workshop last week to examine the issue of metal theft. This follows a considerable increase in thefts of electricity and gas infrastructure over the past few months. ENA has been busy lobbying for a reform to the law regulating scrap metal dealers. We also want to see a cashless system and greater powers for police to close errant scrap metal yards. This position was strongly backed at the event which brought together all ENA member companies.   

ENA has recently had a high profile on the issue in the media with coverage on TV, radio and the newspapers. This has greatly increased the momentum for change and we will be building on this with a MPs Briefing event in Parliament in the coming months.   ______________________________________________________________  

ENA discusses legislation with Commons Speaker  

ENA made a plea to the Commons Speaker John Bercow MP to add his weight to a call for a reversal of the trend for governments to overly rely on secondary legislation. This leads to legislation not being subject to adequate scrutiny. Legislation in the street works area has been a considerable example of this recently, something which has been criticised by the Better Regulation Executive and the National Audit Office. We also highlighted the possible weakness of the new ‘Copy out’ approach to European Directives which has the potential to create inflexible and inappropriate regulation.  

The Speaker acknowledged the over reliance on secondary legislation and the fact that it often fails to be properly scrutinised but said that backbench influence can play a part in holding it to better account.  

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Ofgem causes ripples with market findings  

Ofgem have called for a major overhaul of the supply market. This came in the publication of their findings in the Retail Market Review.    

They have called for “complex and unfair pricing practices” to be swept away and the major energy companies to auction up to 20 per cent of their electricity generation output.  

They have set out proposed reforms such as restricting the number of tariffs and a new licence condition that would require companies to make available between 10% and 20% of their power generation into the market.  

The consultation period for the Retail Market Review closes on 1 June 2011.  

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DECC announcements designed to support biogas  

ENA welcomed the Government’s proposals to support the development of renewable heat by the introduction of a Renewable Heat Incentive (RHI) last week. We believe it paves the way for the use of biomass and biomethane injection into the UK energy mix.  

By 2020 DECC estimate that the renewable heat sector will supply 25% of the heat demand in the industrial sector.  

The biogas industry has said that although the “headline” rate of 6.5 p/kWh has to be reduced somewhat to take account of DECC’s requirement to subtract the energy required to heat the digester taking it down to 5.9 p/kWh, this is still high enough to incentivise biogas producers to go the biomethane to grid route. Significantly it is around 50% more than the rate that DECC first consulted on – 4p/kWh.  

In the domestic sector RHI tariff payments  will start for homes alongside the Green Deal from 2012 to allow a more whole-house approach to heat production and energy saving.    

Meanwhile DECC announced proposed new bands and tariffs for anaerobic digestion (AD) last week. They have done this because they say the current tariff levels have failed to spur a meaningful uptake for AD which they are keen to promote.  

They have also made changes to the solar PV bands saying the projections for take up of FITs published by the previous government did not anticipate any large or small scale non-domestic solar PV installations until 2013. DECC say these projections have proved to be ‘flawed’. They say that current market indications are that a rapid increase in the number of larger solar installations entering the scheme could distort funding for smaller and domestic scale installations as well as other technologies.   

Details of the new tariffs are:  

For large PV installations:  

  • >50kW - ?150kW: 19p/kWh  

  • >150kW - ?250kW: 15p/kWh  

  • >250kW - ?5MW: 8.5p/kWh  

And for farm scale AD installations:

  • ?250kW:   14p/kWh  

  • >250 - ?500kW: 13p/kWh  

DECC are seeking views on proposed tariffs until 6 May 2011. Further details on the RHI can be found here.       ______________________________________________________________

Huhne promises White Paper on energy reform by July

Speaking as the situation in Japan continued to focus minds in the nuclear industry Chris Huhne along with Charles Hendry gave evidence to MPs last week as part of the Energy & Climate Change Select Committee inquiry into the Electricity Market Reform. He said that despite rumours to the contrary the Energy White Paper will be published in July. Given the level of policy work still outstanding and the critical relationship of other work such as the Ofgem Review it now seems likely further policy announcements will trickle out after the White Paper. It is still unlikely that we will see another Energy Bill this year. Only two weeks ago Mr Huhne said that it was better to take longer to make the right decision than to make the wrong one quickly.      

On the nuclear issue over the weekend the DECC Secretary has said that the situation at Fukushima nuclear plant had "undoubtedly" cast a "shadow over the renaissance of the nuclear industry".  The Government has ordered an urgent review of the safety of Britain's nuclear power plants, to be conducted by the chief nuclear officer which will report in May. If this were to be the case signals have already been detected that the role for gas generation could be significantly upscaled.      

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Stronger networks presence needed on Green Economy Council

Last month the government announced the launch of its Green Economy Council (GEC) aimed at bringing together three government departments effectively with business leaders to look at green growth and our low carbon future.      

This is a laudable and important step in furthering the work of climate change whilst ensuring investment and improvement, one that should be welcomed. However, last week the Secretary of State Chris Huhne, wrote to members of both the Business Energy Forum (BEF) and the Business Climate Change and Energy Group (BCCEG) to inform them that these groups would be drawing to a close and thanking them for their valuable input. He cited the creation of GEC as part of his reason for doing this.      

BEF was set up by the former Department for Trade and Industry to look at, amongst other things, infrastructure investment and stability. The membership brought together Ofgem, suppliers and networks, including National Grid. BCCEG had a more climate change focus and included Treasury, Trade Associations, intensive users and other key stakeholders.      

Whilst there are some areas of overlap between the work of GEC, BEF and BCCEG, and there has been an offer of opportunities to meet with policy makers, the closure of the two energy focused groups should at least point to a review of the membership of the Council. To leave out the companies currently working to provide the means for a low carbon future, now that their regular contact with policy makers has been withdrawn, seems to be somewhat of an oversight.      

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Health & Safety legislation to be reformed

Following the Young Review last year the Government announced this week a new framework for Health and safety regulation. It will focus on high hazard sites and tackling rogue employers and consultants, “not tying up the vast majority of Britain's businesses in unnecessary red tape and regulations”.  It was announced by Employment Minister Chris Grayling and is designed to support the Government's growth agenda and to ease the regulatory burdens on business.  

Under the plans:

  • Responsible employers will no longer face automatic health and safety inspections. Instead health and safety inspectors are being instructed to concentrate their efforts on high risk locations, like major energy facilities, and on rogue employers who are putting the safety of their staff and the public at risk. The Government estimate this will cut the number of inspections carried out in the UK by at least a third. Rogue employers who endanger public and employee safety will also have to pay for the costs of the investigation into their activities.

  • Ministers are taking steps to eliminate "cowboy" health and safety consultants who are unqualified but are responsible for many of Britain's most inappropriate health and safety recommendations. A new register of qualified consultants will be made available to businesses, and those who are untrained or give false advice will be excluded from the approved list.

  • The Government is also launching a review of all existing health and safety law with a view to scrapping measures that are not needed and put an unnecessary burden on business. The review will be chaired by a leading risk management specialist, Professor Ragnar E Lofstedt, of King's College London and will publish its findings in the autumn.

The new framework can be read here.

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New Downing Street energy adviser

There have been reports that Downing Street is about to appoint an Energy & Environment Adviser. Our understanding is that he is going to be Ben Moxham formerly of BP Alternative energy and now the Riverstone Group. He will be interviewed by the PM and Deputy PM but he is on a shortlist of one. The appointment comes following a revamping of the Downing Street team starting with the appointment of Andrew Cooper as Director of Strategy. The coalition Government is set to exceed the previous Government’s number of special advisers very soon. There has been a recent frustration emanating from Number 10 and amongst Ministers about the barriers in Government to policy delivery and these appointments are seen as a way of addressing this.     

Mr Moxham’s is currently Vice President of the Riverstone group which works in the insurance industry. Prior to joining Riverstone, he was at BP plc. He was part of the team that launched BP Alternative Energy, comprising the company’s interests in renewables, gas power and carbon capture and storage. He began his career as one of four staff editors of Foreign Affairs, the leading magazine of US foreign policy and international affairs, based at the Council of Foreign Relations in New York.

He is an Oxford graduate with First Class Honours in Philosophy, Politics and Economics.      

ENA will be making contact once his role has been confirmed.

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When Mr Huhne met Dr Clark

The Attlee Suite in the House of Commons was the setting for an interesting meeting this week. For it was serendipitous that here the current DECC Secretary Chris Huhne and the former Conservative Shadow DECC Secretary Dr Greg Clark happened to meet. The setting was a meeting of old members of the former SDP. Also in attendance was the former Labour Transport Secretary Lord Andrew Adonis as well as two members of the SDP ‘gang of four’ Baroness Shirley Williams and Lord Bill Rodgers.      

Dr Greg Clark is now the Minister for Decentralisation at DCLG. The man who would have hoped to be the DECC Secretary still retains a great interest in energy issues and the Bulletin reminisced with him on when he covered the role along with Charles Hendry in Opposition.      

With planning and the localism agenda likely to have a major impact on energy infrastructure development we all hope that the ties that once bound Dr Clark and Mr Huhne in the SDP endure.      

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SHE 2011

With unprecedented challenges facing the energy industry, the advent of a new Government and the launch of Powering Improvement, SHE2011 is set to be the best ever.      

Among the highlights are addresses from Paul Noon, General Secretary for Prospect, Dame Carol Black, author of the Working for a healthier tomorrow report and Lawrence Waterman, Head of Health and Safety for the Olympic Delivery Authority.      

We will also hear from our Powering Improvement champions for 2011, John Crackett of Central Networks and Jane Willis of the HSE.      

The Energy Industry Safety, Health & Environment Conference is unique in the way it brings together all stakeholders, from the companies through Government and its agencies to the trades unions, to focus on safety, health and environment issues.      

This is the 22nd such conference and it has established itself as ‘the event’ to attend for all those involved in safety, health and environment issues across the energy sector and beyond.      

The Conference takes place on the 13th,14th and 15th of April 2011 at the famous Belfry Hotel near Birmingham, starting with a pre-conference reception being held there on the night of the 13th April and formal conference dinner on the night of the 14th. The conference is being hosted by E.ON UK.      

As with last year delegate fees include accommodation for both nights of the conference (13th and 14th). Special rates are offered to ENA, AEP, ERA, GISG and Gas Forum members.      

For more details and to make your booking click here.       

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Brussels Update

Extraordinary Energy Council meeting on 21 March

This week the Hungarian Presidency convened an extraordinary Energy Council meeting to look at recent international energy developments, particularly the situation in Libya and Japan, to assess their impact on world energy markets, and in particular on the EU energy sector.      

Energy Commissioner Oettinger was in attendance, to provide Energy Ministers with the most up to date information. The Commissioner has requested that Member States  conduct stress tests on the 143 nuclear power stations based in Europe, to test their capacity to deal with disasters such as earthquakes and floods, looking at  their age, construction type, back-up systems and capacity to guarantee operations. Energy Ministers expressed their support for this approach. Of course any decisions on the future of these nuclear stations will be for Member States, but the Commission believes it needs to take a leadership role.      

The Presidency will report to the President of the European Council on this exchange of views, and this topic will be on the agenda for the June Energy Council. EU Heads of State will no doubt discuss all this at the next European Council, later this week.        

EU priorities for new network codes

The European Commission recently published a consultation on the priorities for EU network codes, for both gas and electricity up to 2014. The consultation will close on 10 April.      

The Commission says it accepts that it “might not be realistic” to finalise all of the framework guidelines and network codes listed in the Electricity and Gas Regulations in time to meet the Council’s 2014 deadline just set for the completion of the internal market. We agree. The pace of work on the new pan European codes should not be rushed simply to meet an arbitrary deadline, which was not part of the 3rd package negotiations.      

Clearly ACER and the two ENTSOs, as newly formed organisations, with substantial new responsibilities, will take some time to establish the best possible approach in terms of stakeholder consultation on the codes. More work needs to be done to ensure that those stakeholders directly impacted by a code, for example the distribution companies in the context of the new grid connection code, are able to positively contribute to the drafting process. Last year’s pilot code work, to test the end to end process, revealed the extent of the challenge that the regulators and TSOs face in terms of the volume and level of detail of the stakeholder responses.      

Infrastructure Blueprint – planning consultation

DG ENER has just launched a consultation on permit granting procedures, as part of its follow up work on November’s Infrastructure Blueprint. The Commission’s deadline for comments is 30 April.      

There is an obvious need to streamline and accelerate planning procedures for networks projects, both transmission and distribution, across Europe.      

The Commission asks what can be done to improve communications with citizens. In the UK we can point to the Localism Bill, which is intended to encourage early and effective involvement of local inhabitants in the decision making process, with guidelines aimed at increasing the transparency and predictability of the process for all parties.      

Clearly regional and national Governments should take the lead in terms of overall responsibility for public policy communications, although there could be a supporting role for the EU to reinforce these messages. Energy networks companies are already actively communicating to the wider public the scale of the work anticipated to deliver the 2020 and 2050 targets.      

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