The Energy Transition | Ofgem’s £300 million investment for green infrastructure, the UK’s first overseas wind project and how Ofgem’s transmission charges disadvantage UK-based green projects

Written on 28 May 2021

This week we look at Ofgem's £300 million investment for green infrastructure, Hecate Independent Power's launch of the UK's first overseas wind project and the negative impact of Ofgem's transmission charges on British green projects and more.

£300 million Ofgem investment for substantial increase in ultra-fast electric vehicle chargers

In a joint initiative with Electricity Network Company (ENC), Ofgem has released a £300 million funding boost for the UK's green infrastructure network. The £300 million investment will support roughly 204 low carbon projects designed to enhance the UK's heat facilities and electric transport, including electric vehicle (EV) charging points. The projects are set to begin this year.

The first half of the funding has been sourced from an underspend of distribution network operators, which were given an undisclosed sum by ENC for green projects in 2018. The remaining £150 million will come from consumers who will pay an extra 65 pence on their electricity bills per month, per household, for the next two years. This surplus charge will eventually fall to 15 pence.

The projects involve a distribution of cabling for 1,800 new ultra-rapid EV charging points at motorway service stations and a further 1,750 in towns and cities. This represents a significant increase from the 918 EV chargers, which exist today. Most notably, the regulator's investment will triple the number of public charging points, which Ofgem believes will encourage EV usage.

Hecate spearheads the UK's first overseas 10GW offshore wind project

Hecate Independent Power (HIP) has announced a 10GW wind project in the North Atlantic that is to be linked to the UK through deep-sea transmission cables. It is estimated that the project will cost £21 billion, but it remains unclear how it will be financed. HIP also reports that the project will be the UK's first wind farm to be constructed in overseas territorial waters.

HIP has indicated that the project will include fixed and floating turbines, and will incorporate submarine cables which will be manufactured in a bespoke £200 million power cable plant to be built in the UK. The wind project will be divided into 10 segments, which will be built close to the southern and eastern coasts of Iceland.

HIP has made four applications to the National Grid for the wind project to be connected to the UK at four unknown locations. It is anticipated that the first wave of capacity (some 2GW) will be live by early 2025.

Ofgem's transmission charges significantly disadvantage UK renewables

A new report by RenewableUK has suggested that Ofgem's transmission charges are discouraging the generation of UK wind energy by making it less expensive to import via EU interconnectors. Research by the Renewable Infrastructure Development Group suggests that operators in the Netherlands, France and Germany export energy at significantly cheaper rates than UK projects because they pay very low or zero transmission charges. For example, on average, Scottish generators pay £6.42 per megawatt hour in transmission charges; EU generators pay just 46 pence.

Of the 36 countries in the European transmission network, 20 do not charge generators, and only five levy charges based on location, including the UK, Ireland and Northern Ireland. Scottish generators pay the largest transmission charges in Europe to supply power to England, but EU interconnectors do not have to pay to use the UK transmission system.

According to the report, these pricing disparities put Scottish generators at a “significant disadvantage” compared to sites in Norway, Denmark, Germany, Belgium, France or the Netherlands. The report also claims that the price gaps are likely to impact where future renewable energy projects will be built, as the sector relies increasingly on European market forces and less on subsidies. The report concluded that the UK’s transmission charges regime may risk billions of pounds of green infrastructure investment in the UK by making it cheaper to import power from Europe.

BEIS to release £166.5 million of funding for clean energy technology

The Department for Business, Energy and Industrial Strategy (BEIS) has announced that it will provide £166.5 million for greenhouse gas removal, carbon capture and hydrogen technologies.

After the commitments in Boris Johnson's 10 Point Plan to generate 5GW of hydrogen by 2030, remove 10 megatonnes of CO2 and create 250,000 jobs, BEIS has set out its most recent aims regarding clean energy investments.

The £166.5 million of funding has been allocated across a number of projects, including:

  • £60 million for the development of low carbon electrolysis and hydrogen.
  • £37.5 million for the government's greenhouse gas removal methods initiative.
  • £20 million for the development of the next generation of carbon capture, utilisation and storage technologies to be rolled out by 2030.
  • £20 million for a new virtual Industrial Decarbonisation Research and Innovation Centre.
  • £16.5 million (via the Industrial Energy Transformation Fund) for developing technologies to assist carbon-intensive sectors reduce emissions and lower energy bills.

Macquarie Capital expands UK biogas portfolio

Macquarie Capital has announced the acquisition of a majority stake in Evercreech Renewable Energy Ltd, a planned greenfield anaerobic digestion project in the UK. This follows Macquarie's recent acquisition of Adapt Biogas, which provides operational and maintenance services to anaerobic digestion plants. The acquisition of Evercreech will form part of Macquarie's existing biogas portfolio, doubling its capacity of gas to grid biomethane.

Macquarie's investment will fund the construction of the Evercreech plant in Somerset. Once operational, the plant will supply energy to the nearby residential population, as well as providing local manufacturers with a less carbon-intensive waste disposal service. This is expected to save 95,000 tonnes of food waste from landfill each year, which is the equivalent to the food waste produced by 400,000 homes in the UK annually.

Patrick Ottersbach, a Managing Director at Macquarie Capital, said "the addition of the Evercreech plant to the platform is a significant step towards realising [Macquarie Capital's] ambitions and becoming an important part of a growing sector that is expected to play a key role in the UK's plans to reach net zero".

UK Power Networks awards contracts for new 'virtual power station'

UK Power Networks (UKPN) has awarded new contracts for energy capacity worth £30 million to 17 innovative companies to create a new virtual power station consisting largely of EV's connected to the network.

Companies including Octopus Energy, Ohme and Electric Miles have been awarded contracts so far, and UKPN hopes that innovative technologies will be utilised to harness distributed energy resources including EV batteries and demand side response. Together, these will create a virtual power station to manage increased demand for electricity at lower cost. Over two thirds of the new capacity totalling 248MW will come from using EV batteries and smart charging when the vehicles are connected to power networks. The providers who have been awarded the contracts will recruit up 25,000 EV owners to support the network and ensure its success.

Sul Alli, Director of Strategy and Customer Service at UKPN, has said "Britain is leading the world at harnessing the power of all these EV batteries that are going to be connected and using them for public good".