The Energy Transition | the value of accessing Balancing Mechanism, CCUS essential to reach net-zero and Scotland’s £24 billion infrastructure plan

Written on 2 Oct 2020

This week we look at the importance of CCUS in the transition to net-zero, Manchester's new agency to support reaching net zero by 2038, Total purchasing London's largest EV charging network and more.

Panel discussion: access to the Balancing Mechanism is now aggregators' greatest asset

The greatest value that can be currently offered by aggregators in the electricity market is access to the Balancing Mechanism , over access to traditional markets. This is according to a recent panel discussion on the role of flexibility in both large-scale and domestic energy systems across Europe during last week’s Energy Storage Virtual Summit.

Earlier this year the Balancing Mechanism, through which electricity system operator National Grid ESO matches supply and demand in real time, was opened up to allow access for independent aggregators without a requirement to hold a supply licence. With the Mechanism now accessible to all sources of electrical flexibility, there has been a change in the nature of participants in the market in the last six months.

During the discussion, Christopher Brown, M&A and strategy at Alexa Capital, said that traditional infrastructure players “have dominated since 2013/14” but that since the Mechanism has started to widen “there’s been a seat shift in the guys interested in this market”. He referenced companies such as Habitat Energy, a grid-scale battery asset optimiser, which recently became the second company to enter the Mechanism as an independent aggregator.

CCUS essential to the net-zero transition according to new report

The International Energy Agency has published a report on the role of carbon capture, utilisation and storage (CCUS) in the transition to clean energy. According to the report, CCUS can deliver 15% of the reduction in global cumulative emissions needed to reach net-zero and, without accelerated deployment of CCUS, heavy industry sectors risk failing to decarbonise in line with climate targets. The report states that CCUS projects should play a central role in reaching net zero targets as one of the four pillars in reducing emissions. The other three such pillars are: the electrification of economies using renewable energy sources; the replacement of fossil fuels with bioenergy; and swapping methane-rich gas for clean-burning hydrogen in factories, transport and homes.

In discussing the deployment of CCUS to date, the report notes that plans for more than 30 commercial-scale CCUS projects have been announced since the start of 2017, and that projects nearing a final investment decision represent an estimated potential investment of $27 billion. While acknowledging this progress, the report concludes that CCUS deployment must be 50% higher than currently predictions if the world is to reach net-zero by 2050.

Particular opportunities for deployment exist within heavy industry sectors, which account for one-fifth of man-made greenhouse gas emissions worldwide each year. The report states that CCUS is virtually the only technology solution for deep emissions reductions from cement production. Hydrogen production facilities which rely on fossil-based processes would also benefit from equipping CCUS, particularly if they are based in regions where fossil fuel prices will continue to be lower than those of renewables in the long-term.

£24bn infrastructure plan announced by the Scottish government

The Scottish government has released its Draft Infrastructure Investment Plan for the next five years. The plan sets out the country's infrastructure priorities and details a total of around £24 billion of investments into large-scale programmes and major projects. The plan broadly involves three main pillars: to enable the transition to a net-zero emission economy; to promote inclusive growth; and to maximise resiliency and sustainability. The plan will also help stimulate Scotland's green economic recovery from the Covid-19 pandemic by supporting 45,000 jobs.

The investment pledged in the draft plan breaks down into:

  • Over £8 billion for environmental sustainability and the transition to net-zero emissions, including £250 million to support 18,000 hectares of forestry and restoring peatlands.
  • Almost £5 billion to boost inclusive economic growth, including £500 million to extend full fibre broadband to businesses and households in rural areas and £30 million for the National Islands Plan.
  • More than £11 billion for cities, towns, villages and rural areas, including £275 million to revitalise town centres and nearly £2 billion on health infrastructure and equipment.

The Scottish government noted that more projects will be added to the plan as and when they move through the procurement process. Certain fundamental aspects of the plan are also the subject of a further consultation launched by the Scottish government ahead of the final version of the plan being published later this year.

Greater Manchester creates Energy Innovation Agency to support net zero

Greater Manchester has established an Energy Innovation Agency to support the region's 2038 net zero target. The agency, which was announced at the Greater Manchester Green Summit, is a collaboration between three Greater Manchester universities, local government and energy supplier SSE Enterprise. It will look to close the current innovation gap and will act as an intermediary between the region’s environmental research output, industry innovators, the energy supply pipeline and stakeholders in Greater Manchester.

The agency intends to further the decarbonisation agenda by focussing on: an acceleration of emission reductions; increased implementation of technological innovations; and enhanced, forward-thinking policy agenda setting. These measures are all designed to facilitate the achievement of Greater Manchester's goal of reaching net zero carbon emissions by 2038: 12 years before the UK's 2050 net zero target.

Stephen Stead, director of Strategy and Digital Services at SSE Enterprise, said that, '[t]he North West is one of the fastest growth areas in Europe with significant investment planned and world class environmental research output.'

GridBeyond launches tool to calculate energy opportunities

GridBeyond, a leader in intelligent energy technology, has released the Energy Opportunity Calculator to help businesses gauge how much they could earn and save through demand response and energy optimisation. The calculator has been created to help cut through the complex energy market, allowing businesses to understand their potential earnings and savings without undertaking a full audit.

The calculator is aimed at industrial and commercial businesses and produces results based on the typical percentage of flexibility from the user's industry, the typical services and programmes available to that industry and the value of these programmes. The results are then split into predicted revenues and savings: revenues are based on demand response and capacity opportunities; and  savings are based on typical energy efficiencies, trading and price optimisation opportunities and operational efficiencies. The user can then download a personalised report containing further details on their results, plus additional information on the services they can participate in, the assets typically found in their industry, and an overview of their market.

Energy trading company VEST Energy launched

VEST Energy, an energy trading company, has been launched to fill the gap between start-ups and less dynamic large energy trading companies. The company was launched at the end of July by Aaron Lally, who previously traded at Mercuria Energy Group, and is backed by private equity firm CF Partners U.K. LLP. The new company is signing up large funds and companies looking for environmental, social and governance investments that would usually finance or build renewable or battery assets, but don't have the trading capabilities to react quickly to changes in market prices.

VEST will use machine learning algorithms to predict energy prices, allowing the company to take advantage of price fluctuations by choosing when to dispatch power from renewables and energy storage assets. Lally believes that with the growth of unsubsidised renewables in the UK, as well as energy storage coming out of Enhanced Frequency Response contracts, the country is 'ripe for this type of product'. Whilst VEST's main focus will be the UK energy market, it also has plans to roll out in Europe in the coming years.

Total purchases London's largest electric vehicle charging network

Oil major Total has taken over the management and operation of Source London, the city's largest electric vehicle (EV) charging network, after agreeing the acquisition of more than 1,600 on-street charge points from the French transportation company Bolloré Group. Source London was originally launched in 2010 as a project led by Transport for London and accounts for more than half of the operational EV charge points in the city.

Total has committed to power the network with 100% renewable electricity, via its energy subsidiary Total Gas & Power. The London network adds to Total’s existing EV charging operations in Amsterdam and Brussels, reinforcing the company's position as a major player in the European EV market. Total is aiming to have more than 150,000 EV charge points across major cities in Europe by 2025.