Weekend press round-up: Business secretary says power cuts unacceptable

In our latest review of sector coverage in the national newspapers, there is continued concern about the number of properties still without power following Storm Arwen. Meanwhile, there is analysis of the rising cost of balancing supply and demand on Britain’s electricity system, as well the potential for water companies to generate power through anaerobic digestion.

Storm Arwen: Business secretary says power cuts unacceptable

Power cuts from Storm Arwen that have lasted more than a week are “completely unacceptable”, a minister said.

As of 23:00 GMT on Saturday, some 3,000 homes in North East England remained without power after winds of 98mph tore down lines causing cuts on 26 November.

On a visit to St John’s Chapel in County Durham, Business Secretary Kwasi Kwarteng said the performance of power firms would be reviewed.

Northern Powergrid said it hoped to restore all homes by Tuesday.

In Cumbria, 86 properties are still without power, while in Scotland there are about 30 homes left to be reconnected.

Major incidents were declared in County Durham and Northumberland with the Army and Royal Marines deployed to take supplies to residents hit by the outages.

Mr Kwarteng told the BBC 99.5% of homes hit by days of outages had been restored and he was “100% focussed” on power being restored to all.

“I completely accept this is totally unacceptable,” he said.

He added: “It’s wrong and bad for people to be off power for such a long time.

“In this day and age, 4,000 people should not be without power for so long.”

Mr Kwarteng said a review would be carried out and if energy firms were found to have “failed to invest in infrastructure” then “there could be enforcement action”.

He said: “In this particular instance there is a question about the infrastructure in this area being fit for purpose.”

He also said there had been a “huge communication issue” with energy firms keeping residents updated, adding: “I’m trying to work with the companies to make sure the right information is presented.”

Northern Powergrid has previously apologised for poor communication.

A spokeswoman for the firm said: “We are now hopeful that the work we have in front of us will be complete on Tuesday, provided that any additional damage that we find is small.”

BBC News

Britain heads for an energy shock

A recent cold day on both sides of the Channel spelled problems for National Grid operators in the control room in Warwickshire, tasked with keeping Britain’s lights on.

As demand rose on November 24, cheap nuclear power from France was not being sent to Britain through the cable running under the Channel. Instead, electricity was being sent the other way due to high prices that day in France.

Wind speeds, too, were unimpressive. Coal and gas fired power stations did offer to ramp up production – but at a steep price. Shortages in the morning turned into too much power in the afternoon.

By the end of the day, the operators had spent a record £64m on the delicate act of balancing power supplies – asking power stations to ramp up or dial down; batteries to accept and discharge power; cables to the continent to export or import.

It was an exceptionally expensive day, but not without warning. National Grid ESO (electricity system operator), is having to spend more on their responsibility of balancing supply and demand in Britain, heaping costs onto industry and, ultimately, consumer bills.

The growing need is part of the picture. But experts also point to the high prices commanded by generators, while National Grid has little option other than to pay.

Power generator Drax, which is contracted to step in when needed, has been paid £4,000 per MwH to switch its remaining coal turbines in North Yorkshire on during particularly cold and still days since September.

The soaring costs of gas has left many power station owners squeezed, while fossil fuel owners are also trying to make the most of limited run-time as they are pushed out by wind and solar. The market is designed to incentivise generators to meet shortages – at steep prices. Yet experts say even within that, the current dynamics are unprecedented, and troubling.

“In January there were about two or three really pricing at that level – now we are regularly seeing ten of those generators being accepted at that level,” says Rajov Gogna, energy analytics expert at LCP Energy.

“That’s why we’ve seen such deep hikes in total costs – you’re procuring these large units, all of whom are doing this high pricing, and they’re being turned on for six hours, not for 10 minutes.”

Gogna and other experts point to stations jumping out of the commercial market during the day, where the wholesale price of power is currently already extremely high at above £200 per MwH, to instead sell power at many hundreds or thousands of pounds to an in-need National Grid ESO.

“When the system gets tight other power stations realise that they can bid a little less than £4,000 in the balancing mechanism and still be cheaper than the coal units,” says Phil Hewitt, director at market specialists EnAppSys.

He believes roughly 4GW was switched out of the commercial market and into the balancing market on the expensive day on November 24. Doing so is not new, he notes, but the prices being fetched in the balancing market are much higher.

The scale at which it is being done is also greater. “Typically this means now that National Grid is paying the equivalent of 20p/kWh to balance the system on days which are not very tight, but where stations have exited the wholesale market to participate in the balancing mechanism,” Hewitt adds.

Questions over high prices to generate come as Ofgem is separately investigating two companies, SSE and EP SHP, over the rates they have requested to be switched off – the ESO sometimes asks generators to curtail output when there is too much power on the system.

EP SHP, which owns the South Humber Bank power station in Stallingborough, Lincolnshire, is ultimately owned by Daniel Kretinsky, the billionaire investor known as the Czech Sphinx, who recently took a 27pc stake in West Ham United and owns chunks of Royal Mail and Sainsbury’s.

National Grid’s review may land on the bigger picture of market design. Analysts are not blaming generators for making money where they can.

“The regulatory environment in Great Britain means that power stations can pretty much charge whatever they think National Grid will pay,” adds Hewitt.

”National Grid ESO only has an obligation to balance the system at the lowest cost so will do that even if the lowest cost is very high.”

Daily Telegraph

Water groups pioneer ‘waste not, want not’ energy schemes

For the past six years, Northumbrian Water has been using sewage to produce gas and electricity that can supply up to 7,000 homes.

The sewage from its 418 treatment plants is separated so the liquid can be treated and returned to the environment, while the solids are turned into sludge, which is processed through anaerobic digestion plants to produce biomethane.

Northumbrian Water, which provides sewerage and water services to people in north-east England, uses some of the resulting gas to generate its own electricity, while selling most of it to the national grid to heat local homes. This process of turning waste into energy turns a cost into an income — saving the company about £15m per year and helping it to meet its net zero emissions target by 2027.

So far, Northumbrian Water is the only water and sewerage company in the UK to use all of its sludge to generate biogas. But other utilities worldwide are racing to catch up as they seek to shift from collecting effluent to turning it into saleable products — such as fertiliser or energy — and helping combat climate change.

Anaerobic digestion — the process of turning waste into energy — was first developed in Victorian times as a means of stopping the build-up of sewage and preventing the spread of disease. A century later, the essential technology remains the same but has been improved.

Cambi, a Norwegian company that listed on the Oslo stock exchange earlier this year, sells the technology behind thermal hydrolysis plants. These apply high temperatures and pressure to sewage sludge, or other types of wet organic waste, to produce bigger quantities of gas than conventional anaerobic digestion plants. There are 77 Cambi plants worldwide, in locations ranging from Brussels and Bydgoszcz in Poland to Beijing, Hong Kong and Sydney.

“Sludge and waste just aren’t being valued sufficiently so there’s room for a lot of expansion,” says Bill Barber, technical director at Cambi. “The world’s population is increasing so there is simply more sludge to deal with.”

Barber says that every person produces around 30g to 80g of useful dried material a day — enough to drive a biogas bus for about 50 metres or to keep LED lights on in a room throughout the day.

Cambi’s biggest market, so far, has been the UK, where the rollout has been aided by financial incentives from water regulator Ofwat. The regulator has also introduced measures to encourage trading in sludge between companies, so that they can produce economies of scale.

According to Water UK, which represents water utilities across England, the 17 large water and sewerage companies have increased their biomethane production in the past two years from 382GW-hours to 477GW-hours — enough to power 40,000 homes.

The Financial Times

Fifth of new cars on road are electric

About one in five new cars sold in Britain in November were fully electric plug-in vehicles, the highest proportion recorded in a normal month outside lockdowns.

Of the new cars registered last month, more than 20,000, or almost 19 per cent of the total, were zero-emission vehicles, according to New AutoMotive, a green motoring consultancy, which released its figures before the publication of official industry data today.

While the 20,000 is, numerically, not higher than the 32,000 battery-electric vehicles registered in September, a key month for sales when number plates change, it does demonstrate the direction of travel: it is more than double the number of zero-emission vehicles that were being sold a year ago.

It also means that pure electric vehicles are now out-selling diesel by more than two to one. Within the past decade, diesel was accounting for nearly half the UK market.

However, the November figures may have been flattered by the fact that it was “a Tesla month”. The elecric car company tends to ship its vehicles to Britain once a quarter and November was the latest month for deliveries. Last month Tesla made up about 15 per cent of all the electric cars sold, giving the automotive disruptor-in-chief about 3 per cent of the total UK market, higher than a string of established brands, including Jaguar.

The Times

Bulb’s £1.7bn rescue came despite cheaper option, documents show

Bulb, the collapsed energy supplier, could have been rescued at a much lower cost to UK taxpayers than the £1.7bn deal chosen by the government, newly unveiled court papers show.

The documents filed on behalf of Britain’s energy regulator Ofgem reveal that allowing Bulb to be rescued by a so-called supplier of last resort, through which households are quickly transferred to another provider, would have cost £1.28bn.

Bulb, Britain’s seventh-biggest supplier with 1.6m customers, was placed into “special administration” last week after admitting it could no longer cope with the soaring wholesale gas and electricity prices that have sparked the biggest crisis in the sector for 20 years — and will lead household energy bills to rise significantly.

Under the scheme, which has not been used before, the government said it would put up £1.7bn in working capital to allow Bulb to continue trading while it is managed by the administrators.

Ofgem claimed in its written arguments that it had opted against the cheaper process because of uncertainty about whether another provider would be able to manage the transfer of Bulb’s 1.6m customers and fears this could ultimately precipitate a much larger energy supplier failure in the future.

The Ofgem documents also show that Bulb had total net liabilities of £325m by the end of October and had anticipated a total loss of £782m between October and March 2022. It forecast a total peak cash requirement of £893.8m in April 2022.

Officials have insisted that the £1.7bn set aside is a loan to be drawn down as and when needed, and that if wholesale gas prices were to fall then the taxpayer outlay would be lower.

Ofgem argued in its written statement that this route “would be funded by government, which has the ability to control how and when that funding is repaid and if and when it is passed on to other energy market participants”.

The supplier of last resort mechanism has been used for the 24 other energy providers that have collapsed since the beginning of August.

But the government said on Friday that “the special administration regime was the only viable option for Bulb to ensure 1.7m customers received continued supply. The government will seek to recoup costs at a later date, ensuring that we get the best outcome for Bulb’s customers and the British taxpayer.”

One government official said the supplier of last resort process “only works if there are companies willing to take on customers. There were no companies willing to take on 1.7m customers.”

“The big six” suppliers “told Ofgem no . . . nothing got over the line in the end,” the official added.

The Financial 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.