Energy and Utilities

The Energy Transition | Carbon capture capacity threshold to be scrapped

Published on 27th Mar 2023

Welcome to our top picks of the latest energy regulatory and market developments in the UK's transition to net zero.

Industrial landscape with different energy resources. Sustainable development.

This week we look at updates to the Carbon Capture Readiness requirements, the final stages of the Demand Flexibility Service trial, the potential of a "digital spine" for the UK grid, and more.

Carbon capture capacity threshold to be scrapped for new plants

Under Carbon Capture Readiness (CCR) requirements, power plants sized above 300MW are required to set aside space for carbon capture technology. As part of a consultation on updates to the CCR, (which will be renamed Decarbonisation Readiness (DR) under the proposals) the Department for Energy Security and Net Zero (DESNZ) has advocated for the removal of this threshold.

DESNZ's view is that the threshold has created an "unintended market distortion" by discouraging the development of power plants above 300 MW, with 80% of new-build gas-fired plants which have secured agreements since 2017 sized below 300 MW. DESNZ states that its aim in removing the threshold is to remove these market distortions and to "support the rapid decarbonisation of the electricity system".

As part of the consultation, DESNZ is also proposing to include substantially refurbished combustion power plants within the scope of DR.

The proposed updates to CCR would, if implemented, apply to England only, with the current CCR requirements continuing to apply in Wales and Scotland.

National Grid ESO issues call for input as Demand Flexibility Service trial nears end

National Grid ESO is seeking feedback on its Demand Flexibility Service (DFS), the trial period for which will come to an end on 31 March 2023.

The DFS trial was launched on 1 November 2022, with the aim of giving National Grid ESO additional flexibility during what was what expected to be a challenging winter period.

The service incentivised consumers and selected industrial and commercial users to voluntarily participate in adapting the timing of their electricity use to balance out major peaks in demand and reduce the overall constrained period during the day.

There were 18 testing events held during the trial period, with the two most recent tests delivering approximately 1.6GWh of capacity. There have also been two live uses of DFS, which have delivered approximately 0.6GWh of capacity.

Feedback from suppliers has been positive, with Octopus Energy (one of the participants in the trial) stating that “National Grid’s new demand flexibility service is already offering a cheaper, more practical and sustainable solution to peaks in energy demand." However, National Grid ESO has identified the cost of the service as a barrier that will need to be overcome if the service is to be rolled out on a wider basis, having spent around £5.6 million on the tests, and £3 million on the live events.

The closing date for responses to the call for input is Monday 3 April at 10am. The feedback will inform the agenda for a number of "deep dive" workshops planned for April 2023.

Potential "digital spine" solution to facilitate the UK energy system transition

The UK’s energy system is undergoing a transformation as it transitions to a low-carbon future with the adoption of new technologies such as electric vehicles and energy storage. To enable this transition, there is a need for a more flexible and resilient energy system that can integrate and manage these new resources effectively.

One potential solution is the development of a “digital spine” for the UK’s energy grid, which would provide a secure and interoperable data exchange platform for all energy system stakeholders. The concept involves creating a technical process and a defined governance system that would allow real-time monitoring and control of the energy system, enabling more efficient and reliable energy management.

The digital spine feasibility study, which is funded by the government and led by Arup, Energy Systems Catapult, and the University of Bath, aims to evaluate the technical and governance requirements for such a system. The study will engage with stakeholders to identify the potential scope of the digital spine and the data infrastructure needed to develop it.

If successful, the digital spine could contribute to the development of future regulation of and innovation in the UK energy system, enabling more efficient and effective management of renewable energy sources.

UK government announces £1.8 billion funding to improve energy efficiency

The UK government has announced a £1.8 billion funding package to improve the energy efficiency of homes and public buildings across England. The funding is part of the government's efforts to reach its goal of net zero carbon emissions by 2050. The funding will be used to install energy-efficient measures such as insulation, heat pumps, and solar panels in social housing, as well as public buildings such as hospitals and schools. This will help to reduce energy demand and cut carbon emissions, while also reducing energy bills for households and improving the comfort of public buildings.

The funding is expected to support up to 80,000 jobs in the green economy and deliver significant environmental and economic benefits. The government hopes that this investment will help to kick-start a green economic recovery from the Covid-19 pandemic and contribute to the UK's climate goals.

Centrica and Lhyfe to explore green hydrogen production via offshore wind

Centrica, the British energy company, is partnering with European green and renewable hydrogen producer Lhyfe to explore green hydrogen development via offshore wind. The partnership will focus on a pilot green hydrogen production site in the Southern North Sea and develop an end-to-end process involving hydrogen production, storage, and distribution, which would be an industry first. Centrica plans to use its Rough gas storage site to store the hydrogen produced via the project. The companies aim to combine Lhyfe's expertise in hydrogen production with Centrica's experience in gas storage and infrastructure to ensure the hydrogen produced can be safely stored and used in the UK.

As the project is still in its early stages, it is yet to be decided which windfarm will provide the power to produce the hydrogen.

This article was written with the assistance of Sophie Myatt and David Herron, Trainee Solicitors.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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