Weekend press round-up: Banks primed to offer cheap loans for heat pumps

In our latest review of sector coverage in the national media, a major bank has said it stands “ready to play our part” in supporting the decarbonisation of heat. Meanwhile, Ofgem’s move to speed up payments though the Supplier of Last Resort process have come under fire and there is analysis of the impact of decarbonisation on the share prices of oil and gas firms.

Banks primed to offer cheap loans for heat pumps

UK banks are preparing to work with the government on a potential low interest loan scheme for households to cover the cost of installing heat pumps and other measures to achieve the transition to net zero.

William Vereker, chairman of the UK arm of the Spanish-owned bank (Santander), said it would support the government in devising financial schemes for retrofitting homes, just as it did during Covid when the banks offered emergency loans to businesses, guaranteed by the Treasury.

“We stand ready to play our part,” he said. “As we saw in the response to Covid, when government and the financial sector come together with a clearly defined plan of action, we are able to deliver the right outcomes for our communities,” said Vereker.

He was concerned that lower income households risk being left behind in the transition to net zero and said the £5,000 grants the government intends to offer to fund heat pumps would not be large enough as the average cost of retrofitting a home amounts to £10,000.

“It’s clear that larger grants are badly needed for low-income households. For others, interest free loans — offset by energy bill reductions — could be an effective solution,” he said.

He was concerned that lower income households risk being left behind in the transition to net zero and said the £5,000 grants the government intends to offer to fund heat pumps would not be large enough as the average cost of retrofitting a home amounts to £10,000.

“It’s clear that larger grants are badly needed for low-income households. For others, interest free loans — offset by energy bill reductions — could be an effective solution,” he said.

As world leaders and business executives meet in Glasgow for Cop26, Vereker pointed to the importance of making homes energy efficient as they account for 13 per cent of the UK’s carbon emissions. Covid has exacerbated the problem because working from home has led to a 7 per cent rise in residential building emissions between 2019 and 2020.

The Sunday Times

Households face even higher energy costs after string of supplier collapses

Energy suppliers that take on the customers of failed suppliers will able to recoup the costs of doing so faster, in a potential blow to millions of households.

Regulators are proposing the move in an attempt to ease the strain on large companies which have had to fork out millions of pounds to buy energy for new customers as soaring wholesale costs push rivals out of business.

But the proposal has raised concerns about a steeper hit to household bills next year when the energy price cap is already set to increase. Extra costs for other suppliers is also a concern.

An industry insider said: “This is a regressive move engineered by large energy companies which will lead to substantially higher bills for many consumers next year.

“A fairer solution would be for network companies to delay the increase to their charges until 2023, and then recover them over a five-year period.”

In a letter to suppliers last week, Ofgem, the regulator, warned of potentially “significant” rises to network charges from April.

It said: “We appreciate the negative impact this will have on consumers and, possibly, suppliers remaining in the market. We are therefore exploring how to mitigate this impact.”

Nineteen relatively small suppliers have collapsed since the start of September, affecting around 2m customers, as a global gas supply crunch has pushed wholesale gas and power prices to record levels.

Under Ofgem’s safety net procedure, their customers are passed onto surviving companies so that their supply is not interrupted.

Their new provider pays the costs of buying energy for them, honouring credit balances and moving them onto their computer systems.

They are able to recoup these costs from the rest of the industry via a levy system which is ultimately paid for through customer bills.

Chris O’Shea, chief executive of Centrica, which owns British Gas, has estimated the current crisis could add about £100 to every household bill.

Normally, these costs take a while to hit bills as suppliers start to get repaid about 15 months later.

But many suppliers have argued this is too long in the current climate, leading to fears they may be reluctant or unable to step in when needed.

The payments are made by network companies, which then charge suppliers, which then generally pass the costs onto consumers.

The costs among those included in determining the level of the price cap, which is reset every six months.

Under Ofgem’s proposals, network companies will be able to raise their charges from April next year.

Some suppliers may struggle to recoup costs if they have lots of customers on fixed-term contracts which do not expire on time.

This could see suppliers unable to survive, or unfairly piling costs onto customers on new contracts.

Daily Telegraph

Why going green will boost Shell and BP shares

The drive to decarbonise the world will push up the share price of oil and gas firms until at least the end of this decade, analysts claim.

As global leaders bash out plans to reduce reliance on fossil fuels at the Cop26 summit in Glasgow, energy firms are reaping the benefits of a global crunch in supply as well as pressure to stop the development of new coal, gas and oil fields.

Andrew Bailey, the governor of the Bank of England, said: “As we substitute out of more damaging hydrocarbons, coal obviously being a case in point, we will probably see increased demand for some other hydrocarbons [ie gas] during the transition.”

The supply of fossil fuels is set to peak in about 2025 thanks to international agreements, but demand is not expected to fall until at least the end of this decade, according to the investment bank Morgan Stanley. The company now expects the price of Brent crude to trade at $95 a barrel by January, up from a previous estimate of $77.50. Last week it was trading at about $83.

Martijn Rats, a commodities expert at Morgan Stanley, said: “For the world to decarbonise, both the demand and supply for fossil fuels need to decline, but getting these two things to sync is challenging. On current trends we expect oil and gas demand to peak by the end of this decade, but we expect the peak in supply by 2025. This could support commodity prices, at least until 2030. If you want to slow down fossil fuel production by the end of the decade, you have to take steps to do that now.”

Energy firms were severely affected by the pandemic as demand plunged, but supply constraints have been a boon for investors. The MSCI World Energy index, which represents the price of traditional energy firms, is up 48.3 per cent this year, while the Global Alternative Energy index, which tracks the performance of firms involved in renewable energy, is down 1.4 per cent. The FTSE is up about 10 per cent.

Georgina Cooper, a co-manager of the Dunedin Income Growth Investment Trust, which includes the French oil and gas firm Total Energies in its top ten holdings, said: “The cash flows and profits of large oil and gas firms are benefiting from higher prices as a recovery in demand for hydrocarbons meets markets that are still somewhat constrained by supply.”

BP’s share price is up more than 30 per cent this year, while Royal Dutch Shell has risen 25 per cent. They are both still down about 30 per cent from their pre-pandemic peaks, however. Glencore, the world’s largest exporter of thermal coal, is up more than 40 per cent this year, while Whitehaven Coal, the Australian miner, has risen 48 per cent.

The Sunday Times

UK’s cash drain as water firms rack up £50bn debt: Foreign owners spend fortune on loans… but fail to stop sewage leaking into rivers

Britain’s biggest water companies have built up colossal debts that drain billions of pounds from pools of money that could be spent on preventing sewage leaks.

An investigation by The Mail on Sunday found that nine of Britain’s biggest water companies have built up a debt mountain of more than £50billion, siphoning off vast payments in interest rates, dividends and ‘finance fees’ each year.

Six of those – Thames Water, Anglian, Northumbrian, Southern, Yorkshire and Wessex – are almost exclusively owned by foreign interests.

The owners include government-controlled investment funds from China, Abu Dhabi, Kuwait and Singapore as well as conglomerates and investors from Hong Kong, Australia, Canada, the US, Germany and Malaysia.

Thames Water is Britain’s largest water provider and has the largest net debt, at £14.1billion.

It is owned by a group of investors including the Abu Dhabi Investment Authority, the China Investment Corporation – two of the world’s largest sovereign wealth funds – and the Ontario Municipal Employees Retirement System, one of Canada’s biggest pension funds.

A spokesman insisted the debt was nearer £12.5billion by its preferred measure and said it puts about £1 billion into network improvements each year.

But its parent, Kemble Water Holdings, also paid out £384million in interest in the year to March, among a host of other fees and expenses.

Meanwhile, Yorkshire Water, with £7.2billion debt, is part owned by the Singapore government; Southern is part owned by Australian fund Macquarie; and Wessex Water is owned by Malaysia’s YTL Power International.

Funds controlled by Hong Kong billionaire Li Ka-shing own Northumbrian Water as well as a stake in Southern Water.

The scale of the liabilities emerges amid growing public concern that water giants are intentionally releasing ever more frequent sewage leaks into seas and rivers.

According to a report by the Angling Trust and Salmon & Trout Conservation, a lack of investment in networks in the past two decades has caused such severe pollution that there were more than 400,000 cases of sewage spilling into rivers and coastal waters last year.

Recent video footage showed a water pipe spewing untreated sewage into a Hampshire harbour for 49 hours straight.

Water companies will be forced to slash how much sewage they pump into rivers and seas after a public backlash sparked a House of Commons row last month.

Environment Secretary George Eustice has now confirmed that water companies will by law be required ‘to secure a progressive reduction in the adverse impacts of discharges from storm overflows’.

Water companies and regulator Ofwat have repeatedly defended the practice of allowing leaks into rivers and seas. This often occurs when Britain’s sewage system becomes overwhelmed by rainwater.

Water firms say it is better to allow the sewage to leak into waterways because otherwise it would back up into streets and homes.

They also argue that the pollution is controlled and diluted by rainwater.

Firms say they are heavily regulated and face strict limits on how much they can reinvest in their networks as part of measures to keep bills down.

But campaigners say more must be done to hold firms to account and prevent leaks.

Mail on Sunday

Vattenfall boss Anna Borg: UK’s nimbys must embrace wind farms

For Anna Borg, visiting Glasgow for Cop26 must feel like stepping on home turf. The chief executive of the Swedish state-owned energy giant Vattenfall, one of Britain’s biggest wind farm developers, has found plenty of support for erecting turbines in Scotland, where it has a number of wind farms.

South of the border, though, it is more of a struggle. Its Vanguard project off the Norfolk coast, which will provide enough electricity to power nearly 2 million homes, has been hit by lengthy delays. The project is nearly 30 miles from the coast — and yet locals are up in arms.

A retired RAF pilot argued that the Norfolk countryside was under threat from plans to construct a network of 40 miles of cables running through land close to his home. He raised £16,000 to challenge the government’s decision to grant development consent to Vattenfall’s project. The High Court this year ruled in his favour, forcing the company back to the drawing board.

“We started out in 2009 to develop these projects — and we’re still waiting for the final consent,” sighs Borg, 50, who warns that Britain is at risk of missing its target of cutting carbon emissions by 68 per cent by 2030 if these projects do not get the go-ahead.

Similar protests have occurred at Vattenfall’s rivals in Britain. Scottish Power’s plans to build two substations in Suffolk faced a backlash from locals including the comedian Griff Rhys Jones.

Treading carefully, Borg, who has been in charge of the power company for just over a year, says people have to make sacrifices to reach net zero. “We need to find some kind of social acceptance for the transformation needed. It’s not possible to make this kind of fundamental transformation without it being noticed. And I think that’s important to acknowledge,” she says of the resistance.

Borg, who has piercing blue eyes and is immaculately dressed, has been making these points to world leaders at Cop26. She believes an overhaul of the planning process must occur if we are to avoid the sort of delays seen in building new nuclear plants. “The trick is to make this happen in reality. And in order to do that, the consulting and the permitting processes need to be smoother and faster.

“It’s a major transition happening in a very short period. So you need a totally different approach to this . . . I think politics play an important role to clear the road of the obstacles.” She wants different steps of the permission process to be run at the same time to speed things up.

It is an argument Borg also made at a dinner last month at Downing Street, in what has been a whirlwind first year in charge. She attended a White House summit on climate change in April, has made the world’s first “green steel” (using hydrogen instead of coal), and brought forward Vattenfall’s deadline for getting to net-zero emissions from 2050 to 2040. The business recently aligned with the Paris climate agreement, meaning it is in line to meet its own goal to help limit global warming to no more than 1.5C.

In recent years, Vattenfall has been winding down its coal-fired power stations across Europe, shutting several plants and phasing out the use of lignite coal in Germany — the least efficient type of coal. It has regularly hosted climate protesters at those sites.

Vattenfall owns seven nuclear reactors in Sweden and three in Germany. The German government decided to pull the plug on nuclear in response to the Fukushima disaster in 2011, triggering a huge legal battle with four big operators, including Vattenfall. The Swedish group even dragged the German government before the International Centre for Settlement of Investment Disputes in Washington DC, seeking €4.3 billion in damages. This year, it received €1.4 billion (£1.2 billion) in compensation for lost profits on electricity that would have been generated. Those plants are being wound down.

Vattenfall’s attention now is on renewable energy, particularly wind power. Britain is a big focus, Borg says.

Climate sceptics regularly point to the low levels of power produced by wind when there is not much of it, but Borg hits back by claiming better storage solutions in the coming years will fix that: “If you say wind power is not working, what you probably mean is that there is no way to store the electricity produced when there is a lot of wind power.”

The Sunday Times

Landlords face £10bn bill in energy efficiency drive

Millions of landlords face a bill of almost £10bn to make their properties better insulated if the Government forges ahead with plans to make rented accommodation more energy efficient, according to analysis from a leading law firm.

JMW Solicitors estimates that around 2m landlords will be stung by the proposals from the Business Department, which will require all houses for tenants to achieve a rating of at least band C under the Energy Performance Certificate (EPC) scheme.

The firm warned that the cost of installing new insulation and other energy saving measures would run to £4,700 per property – or £9.4bn in total.

David Smith, a partner at JMW, said: “The approach taken by the Department for Business, Energy & Industrial Strategy in their proposal is difficult to understand as it fails to take into consideration the reality of properties in the UK.

“There are some new build properties which do not meet the new requirement of a band C EPC and older properties which will never be able to meet it, regardless of the owners’ best efforts and intentions.”

The EPC regime measures how good a house is at retaining heat, with ratings from Band A (Very efficient) to Band G (Inefficient). The average UK house is in Band D.

Ministers are now seeking to force all rental properties to have a rating of at least C by 2025 in a bid to cut carbon emissions, in proposals outlined in a government consultation earlier this year.

If a property does not meet minimum standards, landlords could be levied with fines of up to £30,000 per property, according to the consultation documents.

Proposals will also include a private property database requiring landlords to disclose an EPC rating before a property can be advertised, and prohibiting letting agents and online property platforms from renting out properties which are not compliant with the new rules.

Daily Telegraph

UK asks Qatar to become gas ‘supplier of last resort’

The UK has held talks with Qatar over a long-term gas arrangement that would make the Gulf state a “supplier of last resort”, according to people briefed on the discussions.

Such a deal would help ensure a stable source of LNG from Qatar even when global supplies are tight. A worldwide gas supply shortage has caused a surge in prices in recent months, leaving energy intensive industries and suppliers in the UK struggling and many consumers facing a sharp rise in household bills.

Qatar, the world’s largest exporter of liquefied natural gas, has also rerouted four large tankers to the UK over the past two weeks. A person familiar with the talks said the shipments came after Boris Johnson, UK prime minister, asked Sheikh Tamim bin Hamad al-Thani, the Qatari emir, at a recent meeting for help.

The two leaders met at the UN General Assembly in September and agreed to “deepen” the relationship between the two countries, which already have strong business, diplomatic and military ties. The pair met again on the sidelines of the COP26 summit in Glasgow this week. Johnson also spoke to Saad al-Kaabi, Qatar’s energy minister, on the margins of a UK global investment summit last month.

Downing Street insisted that the UK had not “requested or secured any additional shipments from the Qatari government” and that energy supply remained secure throughout the winter. Doha declined to comment.

People briefed on the discussions confirmed that London is pursuing a potential long-term gas deal given concerns over increased competition for LNG supplies with Asia.

One UK government insider said: “The Qataris have indicated a willingness to agree longer-term supply deals to deliver . . . gas to the UK in an emergency scenario — a sort of ‘supplier of last resort’ arrangement.”

Another person briefed on the discussions said: “The UK realises it needs a long-term deal to have a stable energy supply to the point they become carbon neutral, but it’s not yet clear how this could be done.”

The Financial Times

COP26: Where have emissions fallen the most in England?

Parts of England are thought to have seen a reduction in carbon dioxide (CO2) emissions by more than 80% over 15 years, official estimates show.

Between 2005 and 2019 Northumberland saw the biggest percentage drop in emissions per person, at 83%.

But experts say the change is not a complete picture, as industries shift overseas rather than decarbonising.

In Northumberland the drop in estimated emissions, from 12.5 tonnes of CO2 per person to 2.1, was due to the closure of industrial sites such as Lynemouth’s aluminium smelting plant in 2012.

The area’s forests and grassland also had a substantial impact by absorbing more CO2 from the atmosphere than releasing it, compared to other places.

Meanwhile, emissions in High Peak, which forms part of the Peak District in Derbyshire, are still dominated by industry, with only a 16% fall over 15 years.

The area is home to Hope Cement Works, a large local employer. In 2019 emissions stood at 31.9 tonnes of CO2 per person, down from 38.1 in 2005.

Dr Jonathan Radcliffe from the University of Birmingham said the current emissions estimates “only tell part of the story” as the data measures where carbon emissions occur, and do not include the emissions attached to products bought in the UK but made elsewhere.

“Over 40% of the UK’s overall carbon footprint comes from emissions associated with imported goods,” he said.

“Growing the manufacturing base in the UK could reduce the UK’s carbon footprint, as we progressively decarbonise, which should be recognised in how we account for emissions at a national scale, and incentives for companies to invest.”

BBC News

‘Power to the people’: Portable electric car chargers to make charging ‘more convenient’

Electric car owners will soon be able to rely on a portable EV charger as one company looks to remove drivers’ concerns over range issues.

ZipCharge Go will provide drivers with up to 20 miles of range, providing sufficient range for the average daily commute in just over 30 minutes. The portable charger can be neatly stored in the boot of the car or at home and can be used in all normal weather conditions like a normal fixed electric car charge point.

ZipCharge is looking to democratise vehicle charging with the creation of the compact, portable EV charger, allowing drivers to charge anywhere they park.

Around 65 percent of households in dense metropolitan areas don’t have off-street parking, making it difficult for some drivers to charge.

A massive 89 percent of car buyers have said they would consider purchasing an electric vehicle if they could charge at home.

According to the Society of Motor Manufacturers and Traders (SMMT), in 2021 alone, the UK will register more new EVs than in the years between 2010 and 2019 combined.

There are currently 600,000 plug-in electric hybrid vehicles (PHEV) and battery electric vehicles (BEV) on roads in the UK that could make use of the ZipCharge product.

They unveiled the Go portable charger at COP26 earlier this week, where companies and Governments have been active in trying to agree to measures to lower carbon emissions.

The company aims to use recycled materials when manufacturing all of their chargers by the second half of this decade.

Daily Express

Greens and SNP clash on carbon capture site

Holyrood’s ruling coalition parties are deeply split over green energy, with the SNP accusing the Scottish Greens of endangering thousands of jobs.

The party led by Scottish ministers Patrick Harvie and Lorna Slater is firmly opposed to the establishment of a large carbon capture and storage facility at St Fergus in Aberdeenshire while the Nationalists see it as a massive economic and environmental opportunity.

Last month the UK government disappointed supporters of the Acorn project by choosing to back a facility on the Humber and around Liverpool first, with the Scottish plant expected to be developed as part of a second phase — or earlier if the English project falls through.

Acorn would take and store carbon dioxide in depleted oil and gas reservoirs in the North Sea, utilising existing underwater infrastructure used to extract gas in recent decades, and using gas to help produce “blue hydrogen”. Nicola Sturgeon, the SNP first minister, regards the project, which promises to create 20,000 jobs, as essential if Scotland’s net zero targets are to be met.

However, the Greens, who were already at odds over future oil and gas development, are against the continuing use of fossil fuels and want hydrogen to be produced instead by using clean, renewable power.

Ian Blackford, the SNP’s Westminster leader, said: “This project is integral to Scotland’s future energy needs and provides work for thousands of skilled people who work in North Sea oil and gas, and it is absolutely essential to meeting Scotland’s net zero targets by 2045. Green opposition is endangering all of that.” Green environment spokesman Mark Ruskell said there will be a huge future demand for hydrogen as big industrial plants look to slash emissions, but that the only truly clean hydrogen is from renewable sources. The focus, he said, must be on green hydrogen in government strategies, rather than blue, which could lock the country into fossil-fuel extraction for decades to come.”

The Sunday Times

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.