ENA Bulletin 30 November
Issue 283: Wednesday 30 November 2011
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Chancellor champions networks
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... And targets metal theft
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ENA raise future of energy with Labour Leader
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ENA host dinner with Welsh Conservative Leader
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Chief Executive joins Government Contact Group
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Hendry gets his scissors out on red tape
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£57m smarter grids funding announced
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Brussels update
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Chancellor champions networks
The Chancellor applauded the vital role all our energy networks play in his Autumn Statement yesterday.
The Chancellor recognised world leading reliability of the energy networks saying “the performance of the UK’s electricity sector has improved since 2005 with all indicators of performance (except asset condition) showing a positive trend. The UK has one of the most reliable electricity transmission networks in the world, with 99.9999 per cent system reliability and very low levels of unplanned energy interruptions”.
The Statement also set out the vital role for a smarter network. It said the Government will “put in place the building blocks for a smarter electricity grid that can connect and balance supply and demand in more efficient ways. This may involve an improved ability to export or import electricity, to store electricity produced by intermittent generation, such as wind farms, and to give customers greater ability to manage their demand using new technology such as smart meters”.
An independent report by Imperial College London has shown that an integrated smarter network can save £16 billion of infrastructure investment. If we can realise the full potential of such advances in technology then we will not only deliver energy efficiency and reduction but greater affordability and security of supply.
It had encouraging words about the future of gas saying that “the Government will aim to ensure that the UK’s market framework supports a diverse mix of gas sources (including the North Sea, storage and imports) that remains adequate to meet demand, and that the quality of service on gas networks improves after the gas mains replacement programme is completed”.
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... And targets metal theft
On the day that ENA participated in a summit on metal theft hosted by the Deputy Mayor of London, we were encouraged by the Chancellor’s focus on the issue in his Statement.
He acknowledged that metal theft “is a serious and growing national problem that causes significant damage to communities, businesses, and the UK’s infrastructure networks”. He announced that the Government is establishing a dedicated £5 million national taskforce, led by the British Transport Police. It will comprise officers across England and Wales and target both metal thieves and scrap metal dealers who trade illegally in stolen metal.
Crucially the Government “will also consider longer term options to tackle the increasing problem of stolen metal being traded too easily within the scrap metal industry”. However, as ENA made clear to the Crime Prevention Minister that morning action must be taken soon to change the law if the blow is to be dealt to this dangerous and destructive crime. Every day that we fail to change the law is another day we risk an innocent person being killed.
The fact that the Government has recognised the need to address the crime of metal theft is welcomed. However, we need legislative change now and Government action against this scourge on our society must be swift and firm.
To stop the crime of metal theft means stopping the ability to benefit from it. Without a change in the outdated law of Steptoe and Son, long-term change cannot be achieved. We need a robust licensing scheme, supported by stronger police and Magistrate powers to close and keep closed disreputable yards, and the industry must move to a cashless system for transactions.
A Private Member’s Bill from Graham Jones MP earlier this month set out a number of legislative changes supported by all the industries and organisations affected by the crime. Details of this can be found here. An All-Party Parliamentary Group on Combating Metal Theft, supported by ENA is being launched next Wednesday 7 December.
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ENA raise future of energy with Labour Leader
There is a theme emerging in the message from the Labour Party Leader Ed Miliband. We all know that he wants to see some profound change in how capitalism is managed. However which example of how the system should change does he use more than any other? It is the energy market, ironically a market created by statute and overseen by a regulator. ENA discussed this with him at a think tank event two weeks ago, and our discussion was televised on BBC News 24 live. We reminded him of what he had said in the past. It was a cold December evening back in 2008 when Mr Miliband first set out his vision for the energy market. He described the need to move on from the Lawsonian approach, which he believed had shaped energy for a generation.
Then came his Conference speech this September. He shot out of both barrels. “Big vested interests like the energy companies have gone unchallenged, while you're being ripped off” he stated. He acknowledged the need for investment in energy but said there was “a rigged market”. Quite a departure from the view he held back in 2008. Back then he had said that a system of private firms competing with each other, with independent regulation, was “rightly a settled part of the landscape”.
So Mr Miliband’s speech to the Social Market Foundation a couple of weeks ago was all the more significant as it was about how we change the market framework. Yet again what did he focus on but the energy market. He wants to see a return to an electricity pool of sorts. We raised the challenge of investment in an international market for finance. £200 billion was a lot of money and the market had to provide a level of certainty and attractiveness to secure it.
There was a political instinct underpinning his response. He said that “we had to do something” because the public demanded it. The answer from the networks perspective is to enable the public to manage their energy more efficiently. A smart network was the smart choice for all and the networks’ relationship with the public was going to dramatically change. Perhaps ultimately that is where Mr Miliband should focus.
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ENA host dinner with Welsh Conservative Leader
ENA brought together all our members operating in Wales to Cardiff last week for a dinner with Andrew RT Davies AM, the Leader of the Opposition in the Welsh Assembly. Also at the dinner was the Opposition Energy Spokesman Russell George AM. In what turned out to be a three and a half hour discussion a range of subjects were raised. The member companies present were National Grid, Scottish Power, Wales & West Utilities and Western Power Distribution.
Following the May Assembly elections Andrew was elected as Leader in July 2011 and following that Russell George was confirmed as the Energy Spokesman.
The role of the networks in helping to facilitate rural broadband was discussed, this being a critical issue for all the Parties in the Welsh Assembly.
Planning is also a key issue in the Welsh Assembly at the moment following Welsh First Minister Carwyn Jones’ desire to take control of more energy projects. On 3 November 2011, commenting on evidence given to the Environment committee - in which energy firms warned of the Welsh Government's “confusing and slow” planning process, Russell George said that this was "more proof” that “the planning process is not fit for purpose and should be urgently reviewed”.
Other key issues that were focused on included the smarter network, the future role for gas and metal theft.
The Welsh Conservative Leader and his Energy Spokesman came away with a much deeper knowledge of the energy networks than they had started with. We will be meeting Russell later next month when he is London.
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Chief Executive joins Government Contact Group
Following an invitation from Minister of State Greg Barker MP, ENA’s David Smith joined a small number of key industry leaders to discuss the full potential of distributed energy.
The EMR proposals set out a strong future for small-scale, localised renewables and it is clear through the initiatives of the Green Deal that they want to provide the right framework for distributed generation to deliver some of our demand. The Government Industry Contact Group on Distributed Energy will meet quarterly and whilst recognising the important role for this part of our energy future it also sees the challenges.
ENA has set out how various aspects of these can be overcome through the development of smarter networks. But again there is no silver bullet and as the changes to the market and the Green Deal shift the energy landscape, it is clear through groups such as this and Osborne’s comments in the Autumn Statement that the networks will be vital to ensuring the challenges are addressed.
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Hendry gets his scissors out on red tape
Charles Hendry has declared war on red tape. Last Friday he launched “the Red Tape Challenge”. They are looking at removing some redundant regulation and simplifying others.
The Red Tape Challenge is a cross-Whitehall initiative to reduce excessive regulation. It cuts across all areas of regulation in Government. Comments can be made until 30 December 2011.
Ironically this creates an environment where new but useful regulation is seriously inhibited and a range of hoops have to be gone through before it can be achieved. In a sector that needs regulation that can be a problem, one that ENA continues to grapple with.
Full details on how to respond can be found here.
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£57m smarter grids funding announced
Over the weekend Ofgem announced that six projects are to share £57 million of funding to help local power networks become smarter. The money comes from Ofgem’s £500 million Low Carbon Networks Fund. ENA are co-ordinating this work and held a conference in July 2011 (an event that will be held annually).
The projects will run in several areas across Great Britain, piloting new technology and commercial arrangements. They will create learning that will be shared amongst all distribution network companies so they can develop the networks of the future.
The projects being funded this year are:
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Project and DNO |
Location |
Cost
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Capacity to Customers |
North West England |
£9.1m |
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Flexible Plug & Play |
Cambridgeshire |
£6.7m |
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Flexible Networks for a low Carbon Future |
St Andrews (Scotland), Wrexham (Wales) and Whitchurch (England) |
£3.6m |
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FALCON |
Milton Keynes |
£12.4m |
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BRISTOL |
Bristol |
£2.2m |
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New Thames Valley Vision |
Bracknell |
£22.8m |
Meanwhile the Technology Strategy board is to invest up to £2.4m in feasibility studies to stimulate innovation in power distribution and in management of demand. Proposals are invited that demonstrate innovation in component design, software, implementation, integrated systems and novel business or operational models.
There are two strands to the competition. The first is for feasibility studies lasting up to four months where grants will not exceed £25k. The second is for feasibility studies lasting between 6–12 months where grants will not exceed £100k.
Projects in both strands are open to companies of any size but must be led by a small or medium-sized enterprise (SME). Strand 1 projects may be collaborative or led by a single company. Strand 2 projects must be collaborative.
This is a single-stage competition. It opens on 9 January 2012 and the deadline for the receipt of applications is at noon on 22 February 2012. A briefing day for potential applicants will be held on 18 January 2012.
Full details can be found here.
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Brussels update
Energy companies call for EU 2030 climate and energy package
ENA heard Ian Marchant, CEO of Scottish and Southern Energy (SSE), give the keynote speech at a well attended, high-level, Brussels conference last week. He was joined by speakers from what Mr Marchant described as a ‘loose coalition’ with two other European energy utility companies, Eneco (The Netherlands) and DONG Energy (Denmark), to jointly call on the European Commission to bring forward proposals for an ambitious second climate and energy package.
SSE want the European power sector to lead the way on decarbonisation, and for the Commission to look at new, and, legally binding 2030 targets, for carbon reductions (40%), renewables and for energy efficiency. But Mr Marchant made it clear that the energy industry, and its investors, need targets that are clear, believable, and binding.
SSE, DONG and Eneco are all keen to build on the momentum created by the first climate package, and see binding targets as essential to bridge the EU policy gap post 2020. In turn, Mr Marchant says the companies need from Government:
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A supportive investment climate
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Funding for early stage R&D e.g. on CCS
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Market design that recognises the need for a robust price for externalities e.g. CO2
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The necessary infrastructure to support new forms of generation in new locations
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The training and support to meet the new skills and jobs agenda.
Mechthild Wörsdörfer, Head of Energy Policy at DG ENER, who joined Ian Marchant on the platform, strongly welcomed this new initiative from these energy companies. She outlined the work the Commission had been doing on their 2050 Energy Roadmap, which is due for publication on 13 December 2011, with a range of fuel mix scenarios, all of which also focused on 2030 but were consistent with the EU’s overall objective of an 85% reduction in the 1990 level of emissions by 2050.
DG ENER Energy Roadmap 2050 – policy outcomes
Ms Wörsdörfer confirmed that the Commission is now finalising its work on the Roadmap, and fine tuning its key (‘no regrets’) policy recommendations and actions flowing from the scenario conclusions. The 2020 Roadmap is due for publication on 13 December 2011, and will be a top priority for the Danish Presidency.
She underlined that the Commission’s 7 modelled scenarios: business as usual; current policy initiatives; high energy efficiency; high renewables; delayed CCS; and low nuclear, were simply scenarios, and not forecasts, accepting there were a number of unknowns between now and 2030, including changes to EU economies, geopolitical developments, and technology changes.
However, the clear messages coming though from all the scenarios, if the 2050 emissions reductions were to be achieved, were the need for high levels of energy efficiency and renewables, and overall a growing reliance on electricity in every sector, including transport and heating.
ENA networks members will be glad to hear that Ms Wörsdörfer pinpointed as a top priority the need to have a modernised, intelligent networks infrastructure necessary to make any and all of the decarbonisation scenarios a reality. The new EU infrastructure package published in October 2011 witnessed the Commission’s commitment to supporting work in this area across Europe.
The Commission also saw the need to complete work on the internal market, by 2014, as essential, recognising the associated investment challenges required throughout the energy system to effectively decarbonise.
Golden Age of Gas?
Ironically, following on from the SSE, DONG, Eneco 2030/2050 discussions, at which gas was barely mentioned, just a day later ENA participated at another Brussels event, this time hosted by the Friends of Europe, at which the ‘Golden Age of Gas’ that the IEA’s summer report had suggested, was still considered to be a very real possibility.
Fatih Birol, the IEA’s Chief Economist, speaking of the findings from IEA’s just launched 2011 World Energy Outlook, saw much less uncertainty over the outlook for natural gas, both on the supply and demand sides. IEA’s research pointed to a much brighter future for gas to 2035.
Gas consumption (another dash for gas?) has risen in all three IEA scenarios, underlining how well gas did in a rage of policy scenarios to 2035. In the ‘new policies’ scenario, global demand for gas all but reached that for coal, with 80% of the demand coming from non-OECD countries.
Unconventional gas now accounts for over half of the estimated natural gas base, and is more widely dispersed than conventional resources, a fact that has positive implications for gas security.
From the European perspective, Russia will continue as Europe’s main gas exporter. However, Europe will increasingly be competing with China and India amongst others for Russia’s gas supplies, which will have an impact on wholesale prices.
The good news is that the US’s development of shale gas is expected to free up approximately one third of the LNG market, in addition Australia is on course to build six new major LNG plants, which make it a bigger producer than Qatar.
It seems to be generally accepted that shale gas has a lot of potential in many countries, however, there are some question marks about environmental and safety concerns. Dr Birol took the view that if there was full transparency, and best available technologies and practices were applied, then these risks could be safely minimised.
In Brussels, ENA has heard rumours that the Commission is intending to produce a policy document (a Communication) on shale gas, although there is no sign of anything as yet. In the meantime, the European Parliament has been very cautious in its approach, has held several Parliamentary hearings on shale gas, with a range of expert witnesses, and has asked for further studies to be done in this area.
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