Energy and Utilities

The Energy Transition | Energy security held back by 'phantom' projects

Published on 31st Oct 2023

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

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This week we look at Centrica's report on energy security, new legislation on electric vehicle charging, zero-emission freight developments and more.

Centrica report finds UK energy security held back by 'phantom' power projects

A new report published by Centrica has shown that nearly a fifth of power projects currently in the connection queue for the transmission network still remain in the scoping phase and have not received planning permission or secured land rights. These 'phantom' projects equate to 62GW of the total 371GW of projects in the Transmission Entry Capacity Register which is more than half of the 114GW of projects scheduled to be connected before 2029.

The report found that the UK's queue for connecting new projects is four times oversubscribed and suggests that the queue and associated long wait for connections deters investment that could support the UK's energy transition and damages the UK's energy security.

Ofgem is considering changing the rules to address the queue issues. One such change would be to grant the Electricity System Operator the power to take projects out of the queue if they miss key development milestones. Centrica's report estimates that applying this to projects already in the queue could add an additional 12GW of renewable power to the grid by allowing projects which are ready to go to progress.

Chris O’Shea, Centrica Group Chief Executive welcomed Ofgem's acknowledgement that a rule change is needed, but also noted that "every day we wait for action is costing consumers money. Urgently introducing an industry rule change and applying it to the current queue, so that existing phantom projects lose their place when they miss milestones, would show that Ofgem were helping to reduce costs for consumers, to drive the energy transition and to improve the UK’s energy security."

New legislation to make charging electric vehicles faster and easier

Plans designed to make electric vehicle (EV) charging more transparent and accessible were approved by Parliament on Tuesday 24th October. The new regulations will require electric charging providers to publicly share data on chargepoint availability and charging prices. Once these regulations have received royal assent, EV drivers will also have access to a 24/7 helpline for any issues accessing charging on public roads.

The new regulations come as the UK reaches record numbers of public chargers, with the total number growing by 42% each year and now totalling more than 50,000.

Technology and Decarbonisation Minister, Jesse Norman, said:

"Over time, these new regulations will improve EV charging for millions of drivers, helping them find the chargepoints they want, providing price transparency so that they can compare the cost of different charging options, and updating payment methods. They will make the switch to electric easier than ever for drivers, support the economy and help the UK reach its 2035 goals."

Government announces £200 million of funding for electric vehicle freight projects

The government has announced £200 million of funding, in partnership with Innovate UK, to support zero-emission freight initiatives and accelerate the decarbonisation of Heavy Goods Vehicles (HGVs). The funding will be distributed amongst four projects, aimed at introducing 370 zero-emission HGVs to the roads and developing around 57 refuelling and electric charging sites.

HGVs contribute 20% of all transport emissions across the UK, so decarbonisation of the sector is key to enabling the UK to deliver on its net zero commitments. It is hoped the funding award will help businesses such as large supermarket chains, to lower their transport emissions, while also shielding them from fluctuating petrol and diesel prices. This cost benefit can in turn be passed on to consumers and to guard against future price hikes.

One of the four projects that will receive funding is EV charging developer Voltempo's eFREIGHT 2030 project. The initiative will see one of the UK's first HGV-dedicated EV charging hubs set up in Birmingham and is predicted to generate up to 200 new jobs by 2030.

The government has also ear-marked £2.4 million to allow up to 10 small to medium enterprises develop innovative projects focused on reducing emissions, as well as increasing resilience and encouraging efficiency in the freight sector. The second round of the Freight Innovation Fund opened for applications on 19 October 2023.

Finally, the government has launched two calls for evidence related to zero-emission HGVs. The first call for evidence aims to develop the government's zero emission HGV and coach strategy so that the infrastructure required to meet the 2035 and 2040 phase-out of petrol and diesel HGVs can be ensured. The second call for evidence is seeking to explore whether a temporary weight allowance for volumetric concrete mixers should remain, be amended or be removed completely once the current deadline for the expiry of the current allowance of 2028 is reached.

SSEN Distribution projects secure over £16 million in Ofgem innovation funding

Electricity network operator SSEN Distribution has announced that two projects will each win a share of £16 million of funding from Ofgem's Strategic Innovation Fund, which is being run in partnership with Innovate UK. The funding aims to support innovative projects which will enable the UK to reach its net zero targets as quickly and cost effectively as possible.

One winning scheme is the Local Energy Oxfordshire – Neighbourhoods initiative. The project, run in partnership with University of Oxford and Oxford City Council, is focused on improving the accessibility of decarbonisation projects for homes and workplaces to allow a greater number of families and businesses to participate and benefit. This offers the potential to bring down energy costs for consumers, prevent disruptive upgrades and help towards achieving the UK's net zero targets.

The other project that has been awarded funding is the Vulnerability Identification Via Informative Data project. This initiative uses data obtained through public sources such as smart meters to identify customers which would benefit from resilience, emission-reduction, or cost-cutting measures. It then provides targeted advice and support to these customers and ascertain options for intervention. The data will also be used in partnership with other market participants, such as Aberdeen City Council, to help shape the service provided to customers.

Energy Act receives Royal Assent

The Energy Act 2023 received Royal Assent on 26 October and became law. According to the government, the Act "[lays] the foundation for an energy system fit for the future".

This legislation affects Ofgem in a number of ways. Some of the changes are as follows:

  • Ofgem's duties have been amended by including references to net zero targets. This means Ofgem must consider how its decisions will help the government achieve its net zero targets alongside protecting the interests of existing and future consumers.
  • Ofgem has been appointed as the regulator for heat networks in Great Britain.
  • A new governance framework has been established for energy codes which shifts responsibility from industry committees to "code managers" directly accountable to Ofgem.
  • New business models have been created for hydrogen transport and storage designed to remove market barriers and unlock investment.
  • A new economic regulation model for CO2 transport and storage has been established to encourage private finance and make it easier for new investment in novel technology.

Jonathan Brearley, Ofgem CEO, said:

We welcome the Energy Act getting Royal Assent. It is the most significant energy legislation for a decade and a world-first in giving us a legal mandate targeting net zero…It gives Ofgem the powers to drive through the energy transition - unlocking investment, accelerating planning and building the infrastructure the economy needs. This will give us security from volatile world gas markets and end our dependency on fossil fuels."

Ofgem reaches decision on frameworks for future systems and network regulation

In March this year, Ofgem initiated a consultation on Future Systems and Networks Regulation which set out its proposals on the framework for the next round of price controls for electricity and gas transmission and distribution networks. The existing price controls for electricity and gas transmission and gas distribution networks run until March 2026, and the current price control for electricity distribution will be in place until March 2028. In July Ofgem published its decision not to introduce short-term controls in the gas sectors and to instead focus on medium-term prince control for gas networks starting in March 2026.

Ofgem has now published its decision regarding electricity transmission and gas network controls which will run from 2026 – 2031. Ofgem said that it foresees a sharp increase in the size of networks in this period and a concurrent increase in scale and pace of network investment. To address this change, the regulator intends to introduce a major new projects regime which builds on the success of the accelerate strategic transmission investment regime. The new protocol will consider investments as they arise from strategic planning and Ofgem will consider the effects on ongoing costs, outputs and incentives. Ofgem intends that the new system will ensure speed and quality of delivery to consumers at a low cost.

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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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