Energy and Utilities

The Energy Transition | T-4 capacity market auction clears at record high

Published on 27th Feb 2023

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

Battery energy flow

This week we look at a record high clearing price for the T-4 capacity market auction, National Grid's announcement to reform the connections process, £56 million of funding for EV chargepoints the Inclusive Smart Solutions Programme, and funding to improve the compatibility of wind farms with UK air defence.

T-4 capacity market auction clears at record high

The four-year-ahead (T-4) capacity market auction provisionally cleared at a record high on 21 February at a price of £63 per kW per year. This is roughly double the price of last year's previous record T-4 auction, which cleared at £30.59 per kW per year. The highest ever price for a capacity market auction was during last year's year-ahead auction, which cleared at the maximum price of £75 per kW per year.

The capacity market auctions are used to award contracts to generators to provide additional capacity to the grid in times of high demand. A total of 43.9GW has been procured in this latest T-4 auction across 542 capacity market units. The largest amount of capacity was awarded to gas sources, which secured over 29GW.

National Grid announces reforms to connections process 

National Grid ESO announced reforms to the way customers connect to the electricity grid on 22 February 2023. The reforms include the following five point plan to speed up the current connections queue in the short term:

1.    Operating a Transmission Entry Capacity Amnesty until April 2023, which will allow developers to terminate their existing connection contracts without incurring penalties, freeing up capacity in the queue.

2.    Updating current background modelling assumptions in order to reflect connection rates.

3.    Allowing storage technologies to connect to the grid faster by changing the way they are treated on the network.

4.    Developing new terms for connection contracts in order to progress suitable projects more efficiently.

5.    Offering battery storage projects an option to connect to the transmission network more quickly, if, in return, they will turn off without payment when the system comes under stress.

The connections reform project has been launched in order to increase the effectiveness of the transmission system and to overcome challenges such as increasing numbers of connection applications, changes to the mix of connecting technologies and more uncertainty over network investment planning.

Other aspects of the reform project include a two-step offer process that will be implemented from 1 March 2023 in England and Wales, where the first step will be the initial offer issued on standard terms, and the second step will be a follow-up offer. There will also be a Transmission Reinforcement Works (TRW) review for all contracted offers with a connection date falling after 1 January 2026, which will rationalise the TRW required for the parties.

Inclusive Smart Solutions programme launched to support smart energy technologies

The Department for Energy Security and Net Zero has launched a £2.75 million Inclusive Smart Solutions programme to fund a step-change in how low-income and vulnerable consumers access smart energy technologies. The funding will be used to conduct research among targeted consumers in order to better understand the barriers to a smart and flexible energy system. The research will be used to inform the design and development of solutions which will facilitate access to smart technologies.

Smart technologies use data and digitalisation to help consumers use energy more efficiently, increase the flexibility of the electricity system and decrease prices. These include demand side response technologies, which encourage consumers to use electricity at particular times in order to decrease demand at peak times.

The programme sits within the Flexibility Innovation Programme, which funds innovation for smart energy applications as part of the £1 billion Net Zero Innovation Portfolio. The Net Zero Innovation Portfolio fund was established as part of the UK government's ten point plan for a green industrial revolution to accelerate the development and roll-out of low-carbon technologies.

£56 million of funding for EV chargepoints

On 21 February 2023, the government announced an additional £56 million of public and industry funding to increase the number of electric vehicle (EV) chargepoints across the country.

The investment will boost the existing Local Electric Vehicle Infrastructure pilot schemes in Barnet, Durham, and North Yorkshire, while also funding new schemes under the same banner in 16 areas across the country. This will initially deliver up to 2,400 new chargepoints with the aim to facilitate tens of thousands more in the long-term.

The announcement also included the allocation of £7 million of funding for the On-Street Residential Chargepoint Scheme, which has already installed 3,000 chargepoints with a further 10,000 on the way.

The move aims to facilitate the mainstream uptake of EVs across the country by recognising the vast increases in charging infrastructure required to facilitate the transition. Minister for Transport Jesse Norman said that "[the] commitment will lead to thousands of new chargers being installed, and plans for tens of thousands extra in due course, so that more people than ever can make the transition to using EVs."

£14 million funding for innovations to help offshore windfarms co-exist with UK air defences

The UK Ministry of Defence (MOD), in partnership with the Department for Energy Security and Net Zero (DESNZ) launched the first stream of the Windfarm Mitigation for Air Defence Phase 3 competition on 21 February 2023. This scheme allocates £14 million of government funding to innovations which further enable the co-existence of offshore windfarms and UK airspace defence radar.

Offshore wind will be an increasingly vital aspect of the UK's energy supply on the road to net zero, with the government targeting 50GW of offshore wind capacity by 2030. However, windfarms may interfere with data obtained by surveillance radars which form the cornerstone of the UK's airspace defence detection systems. Wind turbines reflect radio waves which increases clutter and makes it difficult for radars to identify targets such as aircraft. In addition, radars have a limited dynamic detection range and, where windfarms present a large radio wave, this can make it difficult to detect smaller objects. These issues have led to concerns that large new projects could be delayed or rejected during the planning process.

The competition seeks to fund projects which can demonstrate innovation across specific challenge areas which include the use of smart materials on turbine structures, and alternative radar techniques to maintain surveillance over cluttered areas. The MOD and wind farm developers are confident that these innovations can mitigate any potential negative effects large windfarm developments may have on the UK's defence systems.

Secretary of State for DESNZ Grant Shapps stated that the UK is already home to the four largest offshore wind farms in the world and the funding to increase collaboration with the MOD is important in "unlocking the capacity for the fifth largest windfarm and beyond to further accelerate our dominance of this vital renewable resource".

This article was written with the assistance of Saskia Zant-Boer and Luke Webb, 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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