Energy and Utilities

The Energy Transition | UK government publishes responses to REMA consultation

Published on 13th Mar 2023

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

Energy storage fields, with solar panels and wind turbines

This week we look at the REMA summary of responses, National Grid's use of back up coal-fired power stations for the first time this winter, National Grid's roll out of anti-leak technology and the government's £14 million of funding to accelerate the rollout of low carbon heating.

UK government publishes responses to Review of Electricity Market Arrangements consultation 

The UK government published the responses to the consultation on the review of electricity market arrangements on 7 March 2023. The consultation received responses from 225 market participants, including generators, developers, suppliers and trade bodies. The consultation, which opened in July last year, covered market reform across wholesale markets, mass low carbon power, flexibility, capacity adequacy and system operability. Key challenges for the future system include managing price volatility, providing efficient locational signals to minimise costs and retaining system operability as it decarbonises. 

One of the proposals was whether the government should consider splitting the wholesale market, instead implementing a zonal or nodal pricing structure. Nodal pricing would mean that prices would reflect the locational value of energy, as prices would be determined for multiple locations on the grid. Zonal pricing charges all consumers within a set area the same price. 

The government will continue to consider both of these structures as a means of providing sharper locational signals within market arrangements, in accordance with 46% of respondent's views. It decided to retain all options proposed for further consideration, with the exceptions of pay-as-bid pricing and local imbalance pricing. 
85% of respondents agreed that the government should continue with the option of optimising the capacity market. This would involve differentiating technologies by carbon intensity, for example, by introducing a low carbon split auction or multiple clearing prices in order to incentivise flexible assets. Suggested incentives for the provision of ancillary services included different auction prices and multipliers to reward flexible assets for benefits such as faster response times. 

Arrangements that the government will no longer be considering include local imbalance pricing, capacity payments, decentralised reliability options, a pay-as-bid system, Dutch subsidies and equivalent firm power auctions. 

Local imbalance pricing and pay-as-bid systems were not taken forward as they did not meet the least cost and investor confidence criteria. Equivalent firm power auctions see power procured through a technology-blind process that would require renewable generators to include the cost of supplying firm capacity when they are unable to generate. This proposal was not taken forward due to concerns that it would undermine wider efficiency, risk decreasing investment and increasing capital costs. 

A second consultation will be published in 2023. 

National Grid uses coal fired power stations for the first time this winter

National Grid ordered two coal plants at West Burton A to start producing power for the grid on 7 March for the first time this winter, after ordering them to start warming on 6 March. 

Two more 570MW Drax assets were also asked to be warmed, but both these requests were later cancelled. An Electricity Margin Notice was issued by the National Grid Electricity System Operator, which notified the market of the need for more supply between 16.30 and 20.30 on 7 March.  

This follows demand flexibility tests that were issued by National Grid in the latter months of 2022 and record loss of load probabilities in November as a result of low temperatures. 

National Grid rolls out anti-leak technology at Sizewell and Dinorwig substations 

National Grid has rolled out novel anti-leak technology to reduce planned outages across its Sizewell and Dinorwig substations, two of the UK's largest hydroelectric and nuclear plants. The technology has been developed by Rawwater, an engineering company, that has been working with National Grid to deploy its M3 Molten Metal Manipulation technology. The technology seals flowing leaks of sulphur hexafluoride (SF6), an insulating gas used in high voltage electricity equipment to prevent short circuits and keep networks safe and reliable.

Flowing leaks have, in the past, required planned outages to fix them, however, this technology allows a mould to be easily applied to leaking pipework into which a low-melting point alloy is injected. There is no cure time once it has solidified, meaning it can be applied to equipment that is currently in service allowing power to continue to flow to the grid. 

The technology was developed through an innovation programmed which was jointly funded by the Network Innovation Competition and Rawwater. 

UK government announces £14 million in funding to assist households in moving to low carbon heating

The UK government has announced £14 million of funding to accelerate the adoption of low carbon heating in homes. 

£9.7 million of funding has been awarded to four projects to assist with cutting the costs of low carbon heating methods. This funding will be used to make heat pumps cheaper and easier to install. It will also be used to rollout out these technologies in concentrated areas in order to minimise disruption to households. 

A £5 million heat training grant will also be provided, which will support the training of 10,000 trainees over the next two years to become low carbon experts. This will not only create new green jobs but also encourage green industries and boost the economy. There will be grants of £500 towards training of heating engineers which could cover the costs of a level 3 heat pump course. This support will be available until at least 2025 and will cover heat training for heat networks as well. 

The combination of both heat networks training and heat pump training will allow for areas of overlap and collaboration, particularly on the installation of large-scale heat pumps for heat networks. 

It is hoped the combination of funding to develop better low carbon heat products combined with training a skilled workforce will assist and accelerate the road to net zero.
 

This article was written with the assistance of Hannah Wooderson 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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