Weekend press round-up: Ofgem ordered smart meter rollout to continue despite social distancing

Ofgem’s initial approach to smart meter installations came under fire in the national newspapers this weekend. There were also reports that the UK’s electricity demand has fallen by a tenth since a lockdown was imposed, while there were further updates on how utilities are responding to the pandemic.

Energy watchdog ordered smart meter roll out to continue despite coronavirus social distancing

Britain’s energy watchdog ordered energy suppliers to keep sending personnel into people’s homes to install smart meters despite social distancing measures outlined by the Government, The Telegraph can reveal.

A letter sent on March 18 before the formal lockdown prompted a mutiny from energy firms who refused to comply with the order, leading regulator Ofgem to backtrack on its advice to suppliers.

The letter, seen by The Telegraph, instructed suppliers to continue with the controversial roll out of smart meters, despite strict Government orders to stay at home and avoid contact with others.

“We were absolutely not going to keep sending technicians into people’s homes,” said one chief executive of an energy firm.

“They would have received a letter from our lawyers after this was all over if they had continued to ask us to install smart meters.”

Energy companies were outraged by the muscular tone of the letter, industry sources say, which called on suppliers to stick to the Government’s strict rollout timetable.

Despite deaths across the UK from coronavirus topping 100 that day, Ofgem said that “energy suppliers remain under an obligation to take ‘all reasonable steps’ to deliver the smart meter rollout by end 2020.”

The letter added that Ofgem would continue to monitor companies’ compliance, and warned suppliers not to hold off their installation programmes.

The £13bn smart meter rollout is meant to make households more efficient but has been dogged by problems, with some users complaining of meters failing to work after they switched energy suppliers.

A total of 51 million smart meters are meant to be installed by the end of 2024, but the Department for Business, Energy and Industrial Strategy is considering whether that deadline needs to be extended.

Now, in the latest blow to the delayed programme, Ofgem has conceded that “most suppliers have decided to carry out only emergency metering work” after blowback from the companies tasked with installing the meters.

The backtrack came after industry bodies and companies called on the regulator to be more flexible amid the spread of coronavirus, allowing suppliers to focus on essential work to support their most vulnerable customers.

Trade association Energy UK confirmed that suppliers had decided to temporarily pause the rollout of smart meters, saying that non-essential work in people’s homes had been suspended.

In a letter published on Ofgem’s website on Friday, the regulator’s chief executive said that it would be pragmatic in its policing of energy suppliers as the country reels from the deadly pandemic currently gripping it.

“These are unprecedented times,” said CEO Jonathan Brearley. “I want to make sure that Ofgem does everything we can to help industry respond to this crisis most effectively.”

Daily Telegraph

Britain’s electricity demand falls by a tenth in lockdown

Electricity demand in Britain dropped by a tenth last week after the UK government imposed a lockdown to curb the spread of coronavirus.

As businesses closed, the decline in average daytime demand also led to a fall in wholesale electricity prices as renewables such as wind and solar — which produce electricity very cheaply once built — now provide a greater proportion of the generation mix at the expense of gas plants.

GB day-ahead electricity prices fell 10 per cent last week compared with the prior week and were down 30 per cent year on year, according to S&P Global Platts.

Analysts warn that the decline in wholesale prices could take a while to filter through to consumers because of suppliers’ hedging strategies. However, the drop in demand volume could hit utilities that have significant operations supplying business and industrial customers, such as Centrica, Drax and EDF, said Deepa Venkateswaran, an analyst at Bernstein.

Average electricity demand had remained relatively stable until Tuesday but the lockdown announced by the UK government marked “the end of the normal energy pattern”, said Paul Verrill, director of EnAppSys, an energy consultancy.

Pubs, cafés and restaurants were forced to close while some manufacturers, particularly in the car industry, decided to pause their operations.

EnAppSys compared electricity demand on March 24 and 25 — the two days after lockdown — with a day in April last year that had very similar weather.

“It’s a pretty significant decrease, looking like on average around 10 per cent but [it’s] probably more drastic in the morning because you’ve not got factories starting up in the morning or people are starting a little bit later in the day,” Mr Verrill said.

The greatest difference was at 6am when average demand was 19 per cent lower at 28.1 gigawatts (GW) versus 29.1GW on April 15 2019, the nearest comparable day in spring last year, according to EnAppSys.

Rival consultancy Cornwall Insight compared demand after lockdown with an average day in March last year, with the result showing an 11 per cent difference.

Tom Edwards, an analyst at Cornwall Insight, said thermal generation plants — which are now predominantly gas but still include a handful of coal stations — were being squeezed as a result of the drop in demand. Generators with the lowest marginal costs of production, such as wind and solar, are called upon first to meet demand.

Cheap electricity had also been flowing to Britain via subsea cables from continental Europe, where demand had also been hit hard by the pandemic, Mr Edwards said.

“Generally the UK is probably one of the more expensive wholesale markets for electricity on the continent and therefore the power is flowing to us,” he added.

Mr Verrill said the higher proportion of renewable energy meeting demand could have consequences for the stability of the electricity system.

National Grid, the FTSE 100 company in charge of matching supply and demand and maintaining the grid at a stable frequency, could be forced into greater “interventions”, such as paying wind farms to switch off or trying to curtail imports from Europe, said Mr Verrill.

National Grid said: “We have comprehensive and well-developed procedures in place to manage the effects of a pandemic and do not anticipate any issues in continuing to reliably supply electricity.”

FT Weekend

Routine plans are shelved as energy industry gears up for virus fight

Energy giant EDF redeployed 700 of its smart meter engineers last week to help customers with prepayment meters or emergencies.

“Hundreds of them have volunteered to go further, providing food and medicine deliveries to those in need,” the French state-owned company said in a note to customers.

Across the energy industry, routine but previously key plans such as installing smart meters are being shelved as it gears up to help the country’s fight against coronavirus.

Power generators, suppliers and network operators are working to keep the lights on and machines running in homes, hospitals and public transport – even as their own workforce needs to self-isolate, falls ill, or needs to take care of children.

That is being done against a backdrop of financial stress. Businesses and individuals are likely to be increasingly unable to pay energy bills as work dries up while domestic energy bills are expected to soar by £52m a week as more time is spent at home.

Energy suppliers are stepping in to help customers with financial support on bills. But many are already stretched from years of shrinking margins and fierce competition. It raises the prospect that the industry might be next in line for extra financial support from government.

Bosses are understood to have warned government officials that they might need some help depending on how much debt is built up by customers in the coming weeks and months – although how that might be delivered is far from clear.

Steve Jennings, head of energy at PwC, says: “Energy suppliers who are operating on wafer-thin margins are likely to have some big challenges.”

“They are trying to help customers, but that’s going to build up debt levels. It will be interesting to see to what extent is government going to stand behind energy suppliers that are struggling because of debt.”

Coronavirus is causing difficulties at almost every step of the energy supply chain, from building power stations to generating power and serving households.

The fall off in demand as car companies and other manufacturers shut down, combined with the fall in oil and gas prices, has sent power prices down around 20pc, putting pressure on generators such as SSE and EDF.

Falling power prices are also likely to lead to higher costs for the taxpayer, as the government has agreed a fixed price of electricity for many wind and solar plants and will need to make up the difference.

On a practical level, there are concerns about staffing levels at power plants if too many workers go off sick or need to self-isolate.

There are also worries that sub-contractors could feel under pressure to come into work despite feeling unwell, creating an infection risk. Utilities workers are on the government’s key worker list, but there are concerns this is inconsistently applied and anecdotal evidence that police do not always recognise letters from employers.

EDF halved the numbers at its Hinkley Point C nuclear power plant construction site last week to around 2,000 to minimise infection risk. The government has not ordered building sites to close, but many are already doing so.

Work was suspended last week at a biomass power plant being built in Teesside, but is continuing at least for the time being at SSE’s Keadby gas station being built in Lincolnshire. About 80 power stations are being built in the UK – almost all small wind, solar or biogass plants – all are now at risk of disruption.

With household suppliers battling everything from customer debt to working from home, Octopus Energy boss Greg Jackson has bought hazmat suits to protect his engineers and customers on home visits. It has also set up a TV channel, Octo TV, to educate the children of employees while schools are shut.

“The team wanted a way to help parents continue to work without feeling bad about their children,” he says.

Sunday Telegraph

Energy firm delays posting its annual figures due to coronavirus crisis

Kirkham-based Inspired Energy has said it expects an uptick in business when the coronavirus lock-down ends.

The firm, which is predicting revenues of £49.1m up 50 per cent, announced a delay in publishing its latest annual results, due on March 31, following requests from the from the Financial Conduct Authority.

Chief executive Mark Dickinson, said: “While we undoubtedly are in a period of economic uncertainty, the board believes that the group’s profitable and cash generative nature coupled with a strong order book and substantial liquidity at its disposal will see it well placed as the economy emerges from the current period of uncertainty.

“As a management team we will ensure we remain disciplined and proportionate in our response to the crisis.

“At times of significant trading pressures, companies like Inspired Energy tend to be part of the solution for corporate energy consumers looking to regain their competitiveness and restart their economic engines and as such demand for our service often increases at times of crisis.

“This was the experience of the energy advisory sector during the financial crisis of 2008.

“On behalf of the Board, I would like to thank our staff, customers and wider stakeholders, whose health, safety and wellbeing remains our overriding priority.”

The firm said in line with existing guidance provided in its trading update on January 30, Inspired Energy expected to report revenues for the year ended December 31 of approximately £49.1m, an increase of 50 per cent on the previous year.

It added that adjusted EBITDA would be around £19m, an increase of 38 per cent on 2018 and cash generated from operations (excluding restructuring costs and the impact of deal fees) would be approximately £14m. Net debt was said to be £33m at the year end.

Lancashire Post

Aberdeen: teetering between its high-carbon past and a green future

Aberdeen is one of the few cities in the world where your taxi driver is almost guaranteed to know the global market price for oil.

It is the second week of March in the capital of the North Sea oil and gas industry and Aberdonians have witnessed one of the sharpest oil price slumps in a generation. The Granite City is still one week away from a market collapse even deeper than the 2016 price crash.

“This is a real worry so soon after the last downturn,” one taxi driver says. “It doesn’t take long for people to lose their jobs if the oil price is under $35 [£28] a barrel. Within three or four months of low oil prices contract workers can be out of work. It’s always quicker than you’d think.”

A week later oil is trading at about $25 a barrel, wiping billions from the market value of UK oil companies, and an industry report warns that the North Sea oil and gas industry is in a “paper-thin” position. Oil companies are expected to axe their spending plans to weather the latest market rout, which threatens to halve the revenue from the barrels of oil they produce this year.

As the UK moves towards a net-zero carbon future many have questioned whether there can still be a place for the UK’s ageing oil industry. Now, a green future might be Aberdeen’s best bet for a long-term future.

“If you were to ask a dyed-in-the-wool Aberdonian who has worked in the oil industry for the last 20, 30 years whether they are interested in climate action they would probably only go along with it as long as it didn’t impact their livelihoods,” one North Sea veteran says. “These same people are realising that renewables might just save them.”

Sir Ian Wood is one such convert. During the North Sea’s boom years in the 1970s and 80s the billionaire oil tycoon used the UK’s lead in offshore oil and gas to transform his modest family firm, Wood Group, into one of the world’s largest oil engineering companies. Today, he believes the city that ignited the world’s dependence on fossil fuels believes it may hold the answer to tackling its consequences.

Wood set up Opportunity North East as oil prices tumbled in 2015. His threefold plan to rebalance the region’s economy recasts the offshore heritage and engineering legacy of the north-east of Scotland as a vital advantage in building a greener economy.

First, accelerate the offshore wind boom, including a new generation of floating wind farms. Next, use this abundant clean energy to run electrolyser machines which siphon off the carbon from hydrocarbon gas to produce clean-burning hydrogen for transport fuels and industry. Finally, store the leftover carbon “waste” from this process beneath the seabed to prevent it contributing to rising global temperatures.

“This all sounds very glib,” Wood says. “It will take, in my opinion, 10 to 15 years to get this right. Once we have it, we will be able to sequester quite a lot of carbon emissions.”

Getting it right would also secure a route to market for North Sea gas and a place for Aberdeen at the centre of the UK’s hydrogen economy. The city has already taken steps to lay claim to a green future, including the establishment of the Net Zero Solution Centre, a hub of green tech innovation within the Oil and Gas Technology Centre (OGTC), which could one day export low-carbon energy solutions globally.

Colette Cohen, the chief executive of the OGTC, says leading oil companies are beginning to take meaningful steps towards complying with the UK’s legally binding climate targets, but the oil price collapse has raised doubts.

“When we were first set up three years ago the industry was still struggling against the last oil market downturn,” she says. “When we were talking about what their carbon footprint would look like in the next decade, companies were saying: ‘I may not exist then, it’s really financially challenging right now.’”

In the last year, there has been a palpable shift within the industry, she says, but the latest market crash “has to be a concern” for future green investments. “Everything around net zero costs money. If oil companies are backed into survival mode their ability to spend any spare cash on future-proofing their operations becomes more difficult.”

Leith believes the latest crash may be enough to convince companies that investing in clean energy alternatives and “survival mode” are not mutually exclusive.

“There are always some who would prefer to batten down the hatches and hope for an upturn in oil prices so that they can go back to what they regard as normal. If anyone is still under that misconception then the last few weeks should have put that to bed,” he says.

The Guardian

Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.