The Energy Transition | UK government signs memorandum of understanding on offshore renewable energy
Published on 9th Jan 2023
This week we look at the government's signing of a memorandum of understanding with the North Seas Energy Cooperation, a new government consultation on delaying CfD start dates, the government's Nuclear Fusion Fund and the extension of the Energy Bill Relief Scheme for non-domestic customers.
UK government signs memorandum of understanding with the North Seas Energy Cooperation on offshore renewable energy
The government signed a memorandum of understanding with the North Seas Energy Cooperation (NSEC) on 18 December 2022. The memorandum will fulfil commitments contained within the UK-EU Trade and Cooperation Agreement and will accelerate the energy transition, while also reducing dependency on Russian fossil fuels.
NSEC members include Belgium, Denmark, France, Germany, Luxembourg, the Netherlands and the European Commission and it is hoped this will start a new phase of UK-EU cooperation. Although not legally binding, the memorandum sets out the terms of cooperation between the UK and the EU and aims to facilitate cooperation on the development of offshore renewable energy including grids in the North Sea.
It will allow both the UK and NSEC to cooperate with a view to facilitating cost-effective and sustainable development of offshore wind, as well as focus on the planning and development of specific projects. Both parties intend to meet yearly to identify, review and provide guidance on specific projects of common interest.
It is hoped that the memorandum will also assist in achieving the UK's target of increasing offshore wind capacity to 50GW and the EU's target of 60GW by 2030. National Grid ESO has also indicated that offshore wind farms could deliver savings to consumers of up to £3 billion, highlighting the significance of the memorandum.
BEIS publishes consultation on generator's ability to delay the start of their Contract for Difference
The Department for Business, Energy and Industrial Strategy (BEIS) has published a consultation proposing changes to the drafting of the Contracts for Difference (CfD) Standard Terms and Conditions and Private Network Agreement.
The consultation proposes changes which would prohibit generators from delaying their CfD start date in order to benefit from exceptionally high energy prices. BEIS has stated that the the the "changes ensure that the flexibility in the contract for generators to delay their CfD start date should not be used to optimise electricity generation revenue during the target commissioning window prior to starting the CfD contract."
The proposed drafting changes would come into force ahead of the fifth CfD allocation round which is scheduled to open in March 2023. The changes will require a generator's CfD start date to be no later than 10 business days after receiving confirmation that their operational conditions precedent have been fulfilled.
The consultation will be open for responses until 5 February 2023.
Government launches £75 million Nuclear Fuel Fund
The government launched its £75 million Nuclear Fuel Fund on Monday 2 January. The fund is aimed at supporting the development of the UK's nuclear fuel supply chain in order develop the capabilities required to meet future fuel demand. The announcement is part of the government's ambition to develop 24GW of nuclear power by 2050.
The fund aims to overcome common barriers to investment in the industry such as high upfront costs of establishing new facilities, industry uncertainties and a shortage of suitably qualified and experienced personnel. It will support projects which develop the front-end supply chain for uranium and fuel products by offering match funding. Light water reactor fuel supply, high assay low enriched uranium supply chain and advanced modular reactor fuel fabrication capabilities have been identified as being particularly strategically important for the UK's future ambitions.
Energy Bill Relief Scheme extended to non-domestic customers
The government announced on 29 December 2022 that the Energy Bill Relief Scheme will be extended to non-domestic customers. The discount is available to businesses, voluntary sector organisations and public sector organisations and will be applied to energy used between 1 October 2022 and 31 March 2023.
The government supported price has been set at £211/MWh for electricity and £75/MWh for gas. When the scheme was announced, wholesale prices were estimated to reach £600/MWh for electricity and £180/MWh for gas. The final unit price paid by businesses will differ from the price paid by domestic customers as it will reflect network charges and operating costs, as well as the impact of competition between suppliers.
This article was written with the assistance of Saskia Zant-Boer and Hannah Wooderson, Trainee Solicitors.