Energy and Utilities

The Energy Transition | House of Lords push for electric vehicle charging "for all", businesses unite to accelerate the EV transition, and Ofgem publishes its latest default tariff cap decision

Published on 6th Aug 2021

This week, we report on the House of Lords' push for accessible EV charging, the new Electric Vehicle Fleet Accelerator group intended to boost the EV transition, Octopus Energy's move to Spain and more.


House of Lords pushes for electric vehicle "charging for all"

According to a report by the House of Lords’ Science and Technology Select Committee, the UK electric vehicle (EV) charging network is growing too slowly and more work is needed to maintain and deploy charging points. Additionally, the report suggested that the government should facilitate the standardisation of technologies and payment methods for EV charging.

The report, titled " Battery strategy goes flat: Net-zero target at risk", also highlighted other issues for the development of the UK battery sector, such as the insufficiency of the current growth trajectory of battery manufacturing to support the EV transition. The report suggests that it is therefore likely that car manufacturing will be outsourced as the UK falls far behind its competitors.

This will also affect battery storage for the grid, with smarter systems needed to balance supply and demand as the UK moves towards an energy infrastructure that is predominantly comprised of intermittent renewable generation. This is a significant issue, as energy demand will likely double by 2050 from 300TWh, given the growth of green technology such as heat pumps and EVs. The report quoted the Managing Director of Providence Policy, Dr Keith MacLean who highlighted that currently the gas grid supplies 3–4TWh per day of storage in pipes and tanks, ensuring inherent flexibility to meet demand peaks.

The report also recommends:

  • Longer-term storage to cover successive days of high demand and low wind speeds in winter.
  • Storage across all energy vectors, including long-term coverage and balancing services for voltage and inertia with a total power level of 200-500GW.
  • A range of storage technologies of different capacities to meet the demands of the electricity system.
  • That the link between EVs and energy storage be noted for its potential to enable smart charging, and vehicle-to-grid offering an additional route to balancing the grid

Big names in British business team up to accelerate the EV transition

The Electric Vehicle Fleet Accelerator (EVFA) has been set up by seven British businesses, which are hoping to increase the adoption of EVs. The EVFA is the brain child of Boris Johnson's "Build Back Better Business Council", and comprises Tesco, Severn Trent, ScottishPower, Royal Mail, Direct Line Group, BT and bp. The group has set out the following four goals which are crucial in achieving the UK's EV ambitions:

  • Future-proofing the electricity network infrastructure.
  • Enabling the UK-wide rollout of a charging infrastructure.
  • Increasing the supply of UK-made vehicles.
  • Overcoming demand obstacles.

The EVFA claims that if these four goals are achieved, then some £50 billion of investment in EV infrastructure and fleets could be unlocked over five years. The group is calling on the Department for Transport to set out a clear funding framework for the next 12 months to leverage private investment in charging infrastructure. This would help to ensure that public funding targets are met in areas which are less attractive to private investment.

The EVFA also recommend that:

  • Ofgem consults on its policy for distribution network operators (DNOs) to be last resort providers for EV charging infrastructure. DNOs are currently prevented from managing, developing or owning public EV chargepoints. However, DNOs can act as a provider of last resort where it can be proven that the market won’t deliver.
  • Local Authorities be required to support the growth of charging hubs alongside on-street charging infrastructure.
  • The Ministry of Housing, Communities and Local Government and Local Authorities should work with key stakeholders such as DNOs and chargepoint operators to fast track EV charging infrastructure to encourage the rapid development of ultrafast charging sites.
  • Standards should be set for interoperability of charging platforms over the next 2-3 years, ensuring a seamless experience for consumers when they want to locate, use and pay for charging at public points.
  • The Treasury should (between 2024-2030) address the disparity between the 5% VAT incurred on electricity at home compared with the 20% VAT incurred at public chargepoints.

Ofgem publishes August 2021 default tariff cap decision

Today, Ofgem has published the updated cap levels for the seventh charge restriction period, spanning the six months from 1 October 2021 to 31 March 2022. The level of the cap for this period has risen by 12% since the last update. From 1 October 2021, the cap level will rise to £1,277.

The regulator has broken down the cap calculations as follows:

  • Wholesale costs have risen by £155 since the last update. The regulator explained that increased demand for gas combined with lower global supplies has led to higher gas prices, which have in turn pushed up electricity prices.
  • Policy costs have fallen by £13 since the last update as a result of a fall in Contracts for Difference costs.
  • The smart meter rollout allowance has decreased by £3 since the last update following Ofgem's updated analysis for the additional costs of smart metering.
  • Though no new allowance related to Covid-19 is included in the calculation, the cap includes a £9 adjustment relating to Ofgem's earlier decision to allow energy suppliers to recoup some of their additional costs incurred in supplying credit customers during the pandemic. In order to minimise the impact on consumers, these costs are being spread across periods between April 2021 and March 2022.

National Grid ESO's proposal to remove BSUoS charges from generation

National Grid ESO (NG ESO) has launched a consultation which proposes amendments to the Connection and Use System Code (CUSC) to synchronise UK market arrangements with those found in EU member states. The goal of these proposals is to establish improved trade and competition across the EU, thereby delivering benefits to the end consumers. To this end, it is proposed that all requirements to pay Balancing Services Use of System (BSUoS) fees, which are currently levied upon all relevant CUSC parties on a non-locational MWh basis, be removed from UK generators.

NG ESO has justified this change by citing the fact that the within the borders of the UK's European trading partners and other interconnected countries, the same fees for balancing activities are typically charged entirely on demand. Consequently, the wholesale prices put forward by generators in interconnected countries will not mirror the costs incurred by UK generators. NG ESO estimates that UK generation was disadvantaged by this extra cost by roughly £600m in 2017. The Second Balancing Services Charges Task Force, which was established to provide analysis to support decisions on the future direction of BSUoS, recommended that BSUoS charges ought to be paid by final demand. The consultation was delayed pending the conclusions of the Task Force, but now has a predicted implementation date of 1 April 2023.

NG ESO also points out that the proposals set out in the consultation will further align the treatment of distribution and transmission connected generation assets. Further, the removal of BSUoS charges, according to NG ESO, will help align the overall costs of UK generation with those incurred in other EU markets to enable fairer competition with generation in those markets, which are not subject to such charges.

Octopus energy moves to Spain with Umeme acquisition

Through its acquisition of green energy start up, Umeme, Octopus Energy has entered into the Spanish energy market. Octopus hopes to attract one million Spanish energy accounts to its brand by 2027, as part of its overall goal to reach 100 million accounts. Octopus is one of Britain's fastest growing companies with a customer base that has ballooned to 2.4 million in only 5 years. This rapid growth has been partially due to Octopus' proprietary cloud-based energy technology platform, Kraken.

Octopus Energy now has retail, generation or tech licenses in 11 countries across four continents, though the move to Spain is the company's first opportunity outside of the UK to combine its renewable generation and supply businesses.. In October 2020, Octopus Renewables purchased four solar sites in Andalusia, with a projected capacity of 175MWp when completed in 2024. The Umeme acquisition will help Octopus to offer 100% renewable energy optimised by its Kraken platform in Spain (amongst other services). Greg Jackson, CEO and Founder of Octopus Energy said that they were impressed by “Umeme’s entrepreneurial spirit and tech-led approach, which is very rare in the energy sector". Jackson added that: “Our targets for Spain may be high, but I have no doubt that we will see a similar growth trajectory in Spain as we did in our other locations. Since the beginning of the year, our German customer base doubled and in the US we increased customer numbers by a factor of five. There is no reason why we can’t deliver the same outstanding results in Spain.”

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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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