The Energy Transition | 2020 the greenest year on record, National Grid cancels the Capacity Margin Notice, Vehicle-to-Grid rollout White Paper

Written on 15 Jan 2021

This week we look at recent announcements that 2020 was the greenest year on records, Ofgem approving BMRS as reporting service, a jump in the balancing mechanism price to its highest level since 2001, and more.

2020 hailed as greenest year ever by NG ESO with wind, solar and coal-free records

2020 was the greenest year on record for the UK's electricity system, according to National Grid Electricity System Operator (NG ESO). The average carbon intensity – the measure of carbon dioxide emissions per unit of electricity consumed – reached a new low of 181g CO2/kWh, which amounts to a 66% decrease over the last seven years.

The record for wind generation was broken on several occasions in 2020, with the final record being set on 18 December when wind generated 17.2GW. Wind also set a new record for highest share in the energy mix on 26 August, when it contributed 59.9% of the nation's electricity as Storm Francis hit. The commitment to creating new wind generation capacity was also given a boost from Prime Minister Boris Johnson's new target for 40GW of offshore wind capacity by 2030. Solar generation also saw a bumper year, setting a new record for generation at 9.7GW in April, and for its highest share in the energy mix at 34% in May.

The record-breaking levels of power from zero-carbon sources, along with record low electricity demand during the first Covid-19 lockdown were central to reducing 2020's carbon intensity. This also resulted in a coal-free lasting nearly 68 days between 10 April and 16 June 2020 – the longest the country has ever seen. We also saw the first coal-free Christmas in Britain since the Industrial Revolution.

Kwarteng replaces Sharma as BEIS secretary

Kwasi Kwarteng has been promoted to secretary of state for the Department for Business, Energy and Industrial Strategy (BEIS) after the Prime Minister directed Alok Sharma to focus solely on his role of COP26 President. Meanwhile, Anne-Marie Trevelyan will become energy minister, taking over from Kwarteng.

The shuffle follows criticism that Sharma might struggle with balancing the demands of both roles, in particular with the travel demands of his role as COP26 President in the run up to the event in November 2021. Kwarteng was welcomed into the role by RenewableUK’s chief executive Hugh McNeal, who said that the organisation is delighted to have “a strong and passionate advocate for renewable energy” at the very top of the department.

NG ESO cancels Capacity Margin Notice

NG ESO issued and then cancelled a Capacity Margin Notice (CMN) for 18:30 on 8 January. The CMN was issued at 14:04 on 8 January and was withdrawn at 14:35 on the same day. The CMN was the second to be triggered so far this winter.

A CMN is intended to signal that there may be less generation available than is required to meet national electricity demand. Unlike Electricity Margin Notices (EMNs), which are manually issued at the discretion of National Grid ESO, CMNs are automatically triggered four hours in advance when the system's safety margin falls below a certain threshold.

NG ESO cancelled the three EMNs it issued last week (which we reported on) and cancelled a further EMN issued this week for 13 January. NG ESO issued the EMNs and the CMN because of cold temperatures, low renewable output and unavailability of generators.

Ofgem approves BMRS as reporting service following EU exit

In an open letter, Ofgem has approved the use of the Balancing Mechanism Reporting Service (BMRS) as a "reporting service" for Great Britain pursuant to the Transparency Regulation. This was required as a consequence of the end of the Brexit transition period on 31 January 2020, and would have occurred regardless of the EU-UK Trade and Co-operation Agreement outcome.

Ofgem said that its reason for approving BMRS was that, before exit day, it already fulfilled the data publication requirements set out in the Transparency Regulation with respect to the publication of the electricity industry’s data in Great Britain. The only exception to this being the data on the electricity interconnectors connecting into Great Britain who were ensuring the submission of their data directly to the European Network of Transmission System Operators for Electricity.

According to Elexon, this decision will have no impact on BMRS, and market participants don’t have to do anything differently when using the reporting service. All data concerning the European Transparency Regulation and the Regulation on wholesale Energy Market Integrity and Transparency will continue to be published as it is currently in Great Britain.

Vehicle-to-grid rollout could reduce emissions and deliver £880m in annual savings

Nissan, E.On and Imperial College London have released a new White Paper detailing the benefits of vehicle-to-grid (V2G) technology. Research from the paper has found that accelerated widespread adoption of V2G through enabling government policies could unlock cost savings between £410m and £885m annually over the next decade, while reducing emissions from power networks.

V2G enables plug-in vehicles to act as a source of distributed energy storage by providing demand-response services to the power grid. The batteries in parked electric vehicles (EVs) can be used to transfer electricity from the EV to the distribution network and back based on demand needs and electricity prices. The paper looked at four use cases to calculate the potential financial benefits, including day-ahead power market trading, third party cost component avoidance, triad savings and firm frequency response. It found that that V2G could deliver the following benefits:

  • The potential for reducing carbon emissions from the power system to as low as minus 243 gCO2/km.
  • Electricity system operation cost savings of up to £12,000 per annum per EV and a CO2reduction of approximately 60 tonnes per annum per EV.
  • Annual fleet V2G charging benefits could range between £700-£1,250 per vehicle.

As such, the paper recommends that the government ensures that there are appropriate market and regulatory conditions in place to allow widespread adoption of V2G to be achieved. Government policy should also "prioritise V2G charging architecture when developing EV charging regulations, in order to ensure an optimal decarbonisation strategy for the long-term".

Balancing mechanism price reaches highest level since 2001, hitting £4,000/MWh

The imbalance price (being the amount paid by balancing mechanism participants if their contracted energy volume is not in equilibrium) peaked at £4,000/MWh on 8 January, the highest level since 2001.

For price periods 39-40 (between 19:30 and 20:30 on 8 January) the imbalance price reached a high equivalent to 400p a unit. It followed a significant spike to £2,750/MWh for price period 35 on the same day.

Price volatility is set to become increasingly common as the UK relies more on intermittent generation sources such as offshore wind.

Anglian Water and Drax become founding signatories to the royal Terra Carta

Anglian Water and Drax are the two founding signatories of the Prince of Wales’ Terra Carta, a "charter that puts sustainability at the heart of the private sector". The Charter was revealed on 11 January and is part of the Sustainable Markets Initiative. Signatories of the Terra Carta pledge themselves to abide by 13 commitments, which include:

  • Recognising the urgency of the global climate, biodiversity and health crises and the stewardship with which we must act.
  • Acknowledging that to build a sustainable future, the transition must focus on a robust, positive and parallel impact for nature, people and planet.

Signatories of the Terra Carta will also voluntarily abide by the Charter's statement of intent. This seeks to commit private institutions and businesses to supporting international climate initiatives, adopting sustainable practices, protecting biodiversity and encouraging global investment in the green economy. CEO of Anglian Water, Peter Simpson, said the Terra Carta is "a blueprint for immediate action leading to real progress" and that it was a privilege for Anglian Water to be a founding signatory.

Green Homes Grant off to a slow start

Junior Energy Minister, Lord Callanan, revealed to the House of Lords on 6 January that the government's Green Homes Grant (GHG) scheme had so far issued only 11,000 grants. The House heard that over 58,000 applications for funding had been received since the GHG scheme opened in September 2020. Under the scheme, an applicant is entitled to apply for up to £5,000 to improve energy efficiency in the home, with poorer households receiving up to £10,000.

The figures revealed that the scheme is behind schedule and has so far only achieved 10% of the original grant target. In light of the delays and concerns that the original timescale of March 2021 was not obtainable, the government announced last year that it was extending the scheme to 2022. In response, members of the House of Lords called for any underspend from the original GHG budget to be carried over, whilst also raising concerns that the number of contractors involved in the scheme was too low. Lord Callanan revealed that 765 companies had registered as part of the GHG scheme and the government has recognised that more contractors need to be engaged with the scheme.

And finally, click here to download the latest edition of Osborne Clarke's Regulatory Outlook which focuses on what the new EU-UK relationship means for different areas of regulation.