Energy and Utilities

The Energy Transition | UK Nuclear Fusion given £650m boost

Published on 23rd Oct 2023

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

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This week we look at the UK's new fusion strategy, a new transatlantic hydrogen corridor, energy pricing announcements and soaring renewable generation leading to a drop in wholesale prices.

UK to provide £650m Fusion Futures Programme boost

The UK government has this week announced £650m of funding to support the UK nuclear fusion sector.

This funding was unveiled as part of the Fusion Futures Programme, designed to increase training programme opportunities for over 2,200 apprentices across the country. Further opportunities for apprentices will stem from partnerships between universities and nuclear businesses. The funding will also support the creation of a new fuel cycle testing centre, as well as bolstering development infrastructure opportunities for private fusion companies.

Up to £200m of the total funding is expected to support the fuel cycle testing facility to develop new technologies aimed at enhancing the breeding fuel for fusion power plants. An allocation of £200m is expected for R&D components projects to support UK industry growth into future fusion power plants.

In addition, £50m has been ringfenced for the further development of the Culham campus in Oxfordshire. This funding is intended to create new premises to help develop fusion companies and drive inward investment.

£35m is to be provided to the Fusion Industry Programme challenge fund, up to £25m to aid and enhance international R&D collaboration, and up to £18m will be offered to develop a Technology Transfer Hub aimed at strengthening connections between the UK's leading research organisations and other programmes worldwide. Finally, up to £11m will further support the Spherical Tokamak for Energy Production (STEP) programme, which is striving to design and construct a prototype fusion power plant.

Transatlantic partnership announced for new clean hydrogen corridor

The Mission Possible Partnership (MPP) has recently announced a new initiative to deliver shipments of clean hydrogen from the US to Europe by the end of 2026.

The MPP is a group of more than twenty corporations which together form the market-leading firms for green industry. With strong commitments to decarbonising heavy industry, the MPP has now joined forces with RMI, Systemiq, Power2X, and others to form the Transatlantic Clean Hydrogen Trade Coalition (H2TC).

This week the group has reasserted commitments to support the facilitation of transatlantic trade of over three million metric tons per year of clean green hydrogen by 2030. This would be in the form of green ammonia and methanol.

Green hydrogen and derivatives such as ammonia and methanol are widely expected to play an essential role in the decarbonisation of numerous heavy industries, such as shipping.

Promoting the new alliance, MPP co-chair, Chad Holliday, stated "the capacity to import relatively cheap clean hydrogen from the US to complement local production will have a direct and significant impact on the European industry's efforts to deploy clean production processes at scale, including in the fertiliser, steel, and shipping sectors. More broadly, it underscores the potential of targeted coalitions to overcome the critical next stage challenges to operationalising net zero commitments."

ESO reveals demand flexibility service tests will be subject to increased price competition this winter

The Electricity System Operator (ESO) has published its Market Information Report for winter 2023/2024, revealing that the Demand Flexibility Service (DFS) tests will introduce greater price competition for the coming winter.

As we have previously reported, the DFS is returning for winter 2023/2024. The first six DFS test events, scheduled to take place during November and December 2023, will be subject to a Guaranteed Acceptance Price (GAP), as was the case in winter 2022/2023. Customers participating in the DFS test events during that period were guaranteed a minimum price of £3,000 per MWh, and this GAP will remain the same for winter 2023/2024.

However, from January 2024 onwards, if the forecast volume in each of the subsequent tests (of which there is no set occurrence) exceeds 1.25 GW, this minimum price will be disapplied. In order to prevent participants from deliberately understating the figures, and thereby ensuring the 1.25 GW threshold is not met, the indicative forecast volumes submitted will be routinely reviewed to ensure the figures correlate with the observed delivery rates during test events.

The ESO has stated that it recognises this change to the DFS will remove a degree of commercial incentive to participate in the scheme, which may, in turn, lead to a fall in the DFS market capacity. The 1.2 GW threshold is required to ensure that 1GW of demand reduction can be delivered during live events this winter to return margins to within reliability standard, considering 80-87% of procured volumes were delivered in DFS live events winter 2022/2023.

Record European renewable energy generation sees wholesale prices plunge

According to a report by EnAppSys renewable power generation in Europe hit a record high in Q3 2023, 12% more than Q3 in 2022 – this represents the highest Q3 growth rate since EnAppSys started tracking the data.

The biggest driver of this growth was from wind generation, which produced a massive 95TWh – jumping from 84TWh in the same period last year.

This report follows National Grid ESO's electricity generation statistics which showed renewables accounted for 52% of the UK grid in July and 49% in September. The renewable source contributing the most energy in each of these months was wind.

EnAppSys' report has set out that renewables contributed to 48% of total output across Europe in Q3.

The marked increase in renewable generation in Q3 coincided with a drop in wholesale electricity prices. This has mainly been attributed to falling gas prices, but strong wind generation in September also contributed to the reduction. This is encouraging news for the British energy sector as the UK currently has the second largest capacity of operational wind projects at 80MW and 14% of total global off-shore wind generation is located in the UK.   

This article was written with the assistance of Jack Duffy, Madeleine Begg and Johnny Hartrick, Trainee Solicitors.


* 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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