The Energy Transition | BEIS gives businesses an extra 12 months to apply for RHI, UK’s first sovereign green bond, Black Start contracts awarded in first competitive tender

Written on 13 Nov 2020

This week we look at extensions to deadlines for certain RHI applicants, the UK's first sovereign green bond, support for a 2030 combustible engine ban, and more.

Government gives 12 month extension to delayed RHI applicants

The Department for Business, Energy and Industrial Strategy (BEIS) has  confirmed that applicants for the Non-Domestic Renewable Heat Incentive (RHI) which have invested significant resources into their projects prior to 17th August 2020 will be eligible for a 12-month extension from March 2021. Qualifying projects will need to submit an 'extension application' which, if granted, will give them until the end of March 2022 to complete commissioning and submit a full application for accreditation. The extension means that firms that had to delay renewable energy projects due to Covid-19 will now have more time to complete them.

BEIS first confirmed it was considering an extension to the RHI in February 2020. Businesses are having to deal with Brexit preparations as well as Covid-19, and green groups have been telling ministers that an extension to the Non-Domestic RHI application window would be preferable.

Heat is one of the UK's biggest hurdles on the road to net-zero. The Renewable Energy Association's  head of policy, Frank Gordon, welcomed the  the decision, noting that it could support "hundreds of businesses" across the UK. The extension will however only apply to commercial enterprises with installation projects already in progress and Gordon pointed out that there is no firm indication on "how new industrial or business heat decarbonisation projects are going to be delivered once the RHI is closed for good next year".

National Grid ESO to delay TERRE go-live until next year

Ofgem has granted a request by National Grid Electricity System Operator (NG ESO) to delay its implementation of the Trans European Replacement Reserves Exchange (TERRE) until the beginning of next year. TERRE is a balancing market scheme that aims to facilitate cross-border trading across Europe.

The scheme was originally due to go live by 15 January 2020, but last November Ofgem granted a derogation for NG ESO to postpone implementation until 30 June 2020 due to technical issues being faced by its French equivalent RTE.

The latest derogation comes after NG ESO stated in early September that the Covid-19 pandemic had created resourcing challenges affecting the go-live of the application programme interface which had been developed to widen access to the balancing mechanism. It said that this delay would affect TERRE, meaning it could not be implemented until early December. NG ESO also suggested that the go-live date should be postponed further until 1 January 2021 as a result of the uncertainty surrounding the UK’s access to EU balancing platforms following the end of the Brexit transition period.

In an open letter, Ofgem expressed concerns about NG ESO falling below its expectations and said that since granting it a derogation, stakeholders have “expressed frustration at the delays, lack of certainty regarding the implementation timelines and the level of engagement they’ve received from the ESO."

National Grid awards £84m in Black Start contracts in first competitive tender

NG ESO has completed its first competitive tender for Black Start services. Six providers have been awarded contracts worth a combined total of £84 million, with five of the six being new providers. The tender, which covered the South West and Midlands, was launched in February 2019. The agreements will provide services from July 2022 and will run for five years, although there is an incentive to start providing the service sooner if possible and at the discretion of NG ESO.

Black Start refers to the procedure to restart power in the event of a partial or total shutdown of the national electricity transmission system. These contracts have traditionally been awarded following bilateral negotiations with  large coal and gas power stations. Through its new tender process, NG ESO is aiming to widen the number of generators that can provide Black Start services and reduce dependence on traditional providers.

NG ESO has been exploring how distributed energy resources (such as solar, wind and hydro) can contribute to the provision of Black Start services through its Distributed ReStart innovation project, with results expected in March 2022.

Chancellor confirms UK's first sovereign green bond and mandatory climate-related disclosures

On 9 November, chancellor Rishi Sunak outlined a number of new green finance measures, including plans for the UK to issue its first sovereign green bonds in 2021 as part of its Covid-19 stimulus planning. These green gilts are intended to help the UK meet its 2050 net zero target and will, according to the government, "help finance projects that will tackle climate change, finance much-needed infrastructure investment and create green jobs across the country."

The market for investments with an environmental, social or governance focus has increased exponentially in recent years. Around £189bn of green bonds were sold last year, amounting to around 3.5% of bond issuance globally. Nations including Germany and Sweden have already issued sovereign green bonds as part of their Covid-19 green recovery, and there has been strong demand for the UK to do likewise. The chancellor therefore promised that these green gilts will not be the UK's last, and that he intends to follow up with a series of further releases to meet growing investor demand for green bonds.

Among the other measures announced by the chancellor was the introduction of mandatory climate reporting for various organisations over the next five years. See this Insight for further information on these new requirements.

Cambridge Econometrics report suggests a 2030 ICE ban could create 32,000 jobs

A new report by Cambridge Econometrics has projected that a ban on the sale of new internal combustion engines (ICE) in the UK by 2030 could create 32,000 jobs and increase GDP by up to 0.2%. The report uses the Department of Transport's transport models and assesses the impact of moving the target ICE ban date (2035) forwards by five years. The report states that this revised target would lead to the UK benefitting from "substantial economic opportunities" across a range of sectors, including electric vehicles, battery manufacturing and charging infrastructure.

Cambridge Econometrics has commented that, "[u]nder both the 2030 and 2035 scenarios analysed, electric vehicle adoption would undergo a rapid increase over the coming decade. However, just 60% of the new car market would be made up of electric vehicles by 2030 with a 2035 phase out, whereas almost 100% would be captured by the same date under the 2030 scenario."

The report follows a recent government consultation on the topic and a decision on whether the government will accept the proposal of moving the ban to 2030 is expected soon. Centrica, DPD UK, Royal Mail and BT/Openreach, which are part of the UK Electric Fleets Coalition, have all backed the report and call for a 2030 ban on sales of petrol and diesel cars.

Iberdrola unveils its largest ever investment plan

Iberdrola, the Spanish energy company which owns the UK's ScottishPower, has launched a €75 billion investment plan "with a 2025 horizon to ensure it is at the forefront of the energy transition".

The "unprecedented" investment is targeted at consolidating Iberdrola's business model and will be split across the following areas:

  • Renewables growth.
  • Network and grid enhancements.
  • Improvements in energy storage.
  • Smart solutions.
  • Countries with climate ambitions and A ratings, including the UK.

One notable feature of the investment plan is the installation of up to 600MW of green hydrogen by 2025 and the development of Europe's largest green hydrogen plant, which is due to be operational in 2021.