The Energy Transition | Green recovery report, Leeds and London set to be global centres of green finance, Elexon calls for ‘holistic reform’

Written on 19 Feb 2021

This week we look at Elexon's report calling for combined reform of system operation and code governance, the House of Commons Environmental Audit Committee Report a green post-Covid-19 recovery, the UK's first hydrogen-powered homes, and more.

'Golden Opportunity' for combined reform of energy system operation and code governance

Elexon, the administrator of the Balancing and Settlement Code, has published a report calling for "holistic reform" of the gas and electricity system operation and code arrangements. Elexon believes that the upcoming review of the system operation announced by the government in its recent energy white paper (which we reported on here), as well as its ongoing review of code governance, provides the perfect opportunity to allow "once in a generation" changes to the system.

This follows a report from Ofgem which proposed fully separating the Electricity System Operator (ESO) from National Grid (which we previously on here). By contrast, Elexon believes that the gas and electricity system operators should be merged, and a new 'market operator' set up as a single independent body responsible for managing all of the energy codes. Currently National Grid ESO and National Grid Gas manage the electricity and gas system operator roles and six different organisations manage the 11 different energy codes.

The report sets out three potential routes for reforming both the operator codes in tandem:

  1. merging the current gas and electricity system operators;
  2. creating a new single and independent market operator to manage the energy codes; or
  3. merging the system operators and market operator as one integrated 'whole system operator' (this is the most radical of the three options).

Elexon has criticised the current system for being overly complicated, and it promotes reform as a way of enabling "faster, more co-ordinated changes to energy code rules aiding in the delivery of net zero", as well as simplifying the current arrangements.

House of Commons Environmental Audit Committee publishes report on green recovery

The House of Commons Environmental Audit Committee has published a report, entitled Growing Back Better: Putting Nature and Net-Zero at the Heart of the Economy Recovery, which makes a series of recommendations on how to ensure a "green" post Covid-19 recovery.

These recommendations include a call on the government to front-load public investment in green measures that will help counter rising unemployment. The report also warns that it may be "unwise" for government to rely on consumers buying electric vehicles (EVs) to decarbonise transport.

Tax changes to support the green recovery are also proposed in the report, including the consideration of a carbon tax and VAT reductions for companies that offer circular economy services, including home energy efficiency and ultra-low emissions vehicles. The Committee believes that these proposed reductions could offer more longer term certainty than measures such as the widely criticised Green Homes Grant (which we previously reported on here) and current scrappage schemes. The report concludes that wider tax changes could offer an opportunity to "reset" the economy for net-zero.

Northern Gas Networks and Cadent to fund UK's first hydrogen-powered homes

In a first of the its kind in the UK, Northern Gas Network (NGN) and Cadent are set to install appliances entirely fuelled by hydrogen into two non-residential, demonstration homes in Gateshead. The project will be part funded by £250,000 from the UK government's Hy4Heat Innovation programme and it is expected that the public will be able to visit the homes to see the appliances in action.

The aim of the demonstration is to promote hydrogen as a source of clean energy and reassure the public that hydrogen is safe to use. Unlike natural gas, hydrogen does not produce carbon when it is used for heating and cooking in the home. Mark Horsley, chief executive at NGN, has said that “the houses bring to life the potential of this green gas for keeping UK homes warm, while minimising impact on the environment”.

Leeds and London set to become green finance centres

Energy Minister, Anne-Marie Trevelyan, announced this week that the new UK Centre for Greening Finance and Investment (CGFI) will have research hubs in both London and Leeds. The hubs will conduct research and provide 'world-class data', as well as environmental and scientific intelligence, to financial institutions to allow climate change and environmental factors to be properly taken into account when making investment decisions. The CFGI is set to launch in April 2021 and the government will invest £10 million into the project through the UK Research and Innovation national funding agency. Sarah Breeden, the Bank of England's executive sponsor for work on climate change, praised the project's efforts to better measure and manage financial risks and opportunities from climate change and noted that the project would increase the resilience of the financial system to such risks.

Arenko first provider to successfully offer non-BMU battery for Dynamic containment

Arenko has announced that it has become the first provider to qualify a non-Balancing Mechanism Unit (BMU) while complying with the dynamic containment requirement for real time monitoring.

The software platform provider successfully completed the qualification process for a non-BMU battery at Gore Street’s Lower Road 10MW battery on 9 February. In order to qualify the battery and pass conformance testing, high resolution operational metering and accurate, automated communication channels were set up with NG ESO.

From 1 April 2021, all non-BMU battery assets delivering dynamic containment will need to qualify for real time monitoring in order to continue delivering the service to NG ESO. Arenko has said that 207MW of the total 405MW worth of battery storage capacity delivering dynamic containment does not currently qualify for real time monitoring.

Arenko’s qualifying solution is fully transferable onto any of its customer’s batteries.

EV battery gigafactory planned for Coventry by 2025

Plans to build an EV battery gigafactory have been revealed by Coventry City Council and Coventry Airport. The factory will be located within the airport and it is claimed that it could accommodate up to 4.5 million square feet of commercial space. The council has forecast that it could attract £2 billion of investment to the area.

The UK government has committed up to £500 million of funding for EVs, including gigafactory development, and the Coventry project will be bidding for funding in due course. The gigafactory is expected to begin operations in 2025, provided the planning process runs to time and government funding is secured.

Battery storage could save consumers £195m annually

Software platform provider Arenko has claimed that using battery storage to provide reserve power could save consumers up to £195 million annually, after NG ESO published the final results from a trial last year.

NG ESO announced in April 2020 that it was launching a new downward flexibility service to help manage low demand during the Covid-19 pandemic. Arenko responded by proposing a battery storage solution, and the operator then launched a three-stage trial in collaboration with Arenko to determine whether additional flexibility could be accessed from storage providers.

Trial results claimed that consumer savings of £0.7m could be realised by using batteries to meet reserve demands. Arenko stated this represents a 40% reduction when compared to business as usual.

The ESO cautioned that “linear scaling of the savings would not be truly representative” but has said that it will now consult with industry to “consider the next steps in realising these savings for the end consumer on an enduring basis.”