Weekend press round-up: Centrica chief vows to ‘strip out the rubbish’ to revive group’s fortunes

In our latest review of sector coverage across the national newspapers, Centrica’s chief executive Chris O’Shea gives a rare interview ahead of the group’s annual results this week. Meanwhile, there are further pleas for the government to save its beleaguered Green Homes Grants scheme and Drax’s wood pellet production facility in the US has been fined $2.5 million over air pollution breaches.

Centrica chief vows to ‘strip out the rubbish’ to revive group’s fortunes

Centrica is talking to the government about how to finance a conversion of Britain’s biggest gas storage site to hydrogen, as its new chief executive faces pressure to prove the company will profit from the transition to cleaner energy.

Chris O’Shea also sees an opportunity in trading the electricity generated by wind farms on behalf of their owners as he tries to revive the fortunes of the more than 200-year-old company best known as the owner of British Gas.

In a rare interview ahead of its annual results this week, O’Shea admitted he would not have designed Centrica’s business model “if I’d had a blank sheet of paper”. He insisted, however, the company still had “unique opportunities” to participate in the energy transition as the UK and Ireland strive to stop contributing to climate change by 2050.

British Gas was among the early investors in offshore wind 20 years ago, but Centrica has since sold its wind farms along with big, central fossil fuel plants to focus on customer-facing businesses including energy supply and “smart” home devices such as a thermostat that can be controlled via an app. Its oil and gas joint venture is also on the block.

But those markets have faced challenges, including a boom in smaller, cheaper energy suppliers and a government cap on household bills. Or they have disappointed; in 2019 Centrica abandoned a £1bn revenue target for its smart homes business.

O’Shea, who took the top job at Centrica last year, said the group already has 12 gigawatts of energy assets under management, helping the owners of the assets optimise their returns on the electricity they generate. He sees this as a real “growth area” as investors pour money into the likes of offshore wind — something Centrica itself is unlikely to re-enter any time soon as returns are lower than its cost of capital.

“If you have got a financial investor who wants to build a wind farm for example, they may not want to have a trading business to optimise the plant, we provide that service to them,” the 47-year-old said.

“I’d love if we were something like Orsted but we are not,” said O’Shea.

The company, which has 7m energy customers, has also been in preliminary discussions with the government on finance models that could allow it to upgrade its Rough gas storage site off the Yorkshire coast, the largest facility of its kind in Britain.

The nearly four-decades-old facility was closed to new supplies of natural gas in 2017 following failures in its ageing wells, but O’Shea believes it could be refurbished to house low carbon hydrogen, one of the key “green” technologies backed by Prime Minister Boris Johnson. The Centrica boss estimates the cost at about £650m but said it would likely need a “regulated model” to encourage the group to invest.

Centrica has agreements with manufacturers such as Volkswagen and Ford to fit electric vehicle chargers. It also has an 8,000-strong workforce of engineers, the largest in the sector, that O’Shea said could be deployed to help households convert from natural gas to low carbon heating systems and improve the energy efficiency of properties.

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The Financial Times

Keep funding green homes to meet emissions target, say businesses

Business groups are urging the chancellor, Rishi Sunak, to keep funding home insulation and other low-carbon measures under the green homes grant, which is under threat from cuts.

They warned that moves to reduce the amount of money paid out under the scheme, or abandon it altogether, would make it harder to reach the government’s target of net zero emissions by 2050, and damage the UK’s credibility as host nation of this year’s Cop26 UN climate summit and president of the G7 group of rich nations.

“Only a long-term programme can provide the economic, social and environmental benefits associated with a focus on green homes, support the government’s important levelling-up agenda, and make real progress towards achieving the net zero target,” wrote the 25 organisations, in a letter to Sunak seen by the Guardian. “The UK has made commitments to a green recovery, and risks undermining its credibility on the global stage at the Cop26 and G7 summits if it allows its keystone green stimulus measure to fail.”

More than 25 organisations, including the CBI employers’ association, Energy UK which represents energy suppliers, and the Royal Institute of British Architects, signed the letter organised by the Energy Efficiency Infrastructure Group.

They said an effective home efficiency programme would support nearly 200,000 jobs by 2030, and the resulting cost savings to households would amount to £7.5bn a year.

The £1.5bn green homes grant was the flagship policy unveiled last year as part of the government’s pledge to “build back better” after the coronavirus crisis. Under the scheme, homeowners receive subsidies covering up to two-thirds of the cost of new insulation, heat pumps or other low-carbon improvements. More than 100,000 people have applied for the grants since the launch last September.

After a series of administrative disasters, however, more than £1bn of the money allocated to the scheme remains unspent, despite the high demand. Homeowners have faced difficulties getting approvals and the vouchers needed for payment, while builders have been put off by the burden of red tape.

New data released last week showed that more than 103,000 homeowners made applications under the scheme, but only one in five had received vouchers, and only 2,777 home improvements had been fitted.

Earlier this month, in a response to a parliamentary question by Labour, the business minister Anne-Marie Trevelyan said the unspent money would be withdrawn. The chancellor has allocated £320m for the scheme for the financial year from April, but this is a small amount compared with the more than £1bn unspent money for this year. Campaigners and an influential committee of MPs have said the unspent money should be made available beyond the end of March.

A government spokesperson said: “The green homes grant voucher scheme was designed to provide a short-term economic stimulus while tackling our contribution to climate change. However, the prevalence of Covid-19 since the scheme’s launch in September last year has led to an understandable reluctance on the part of the public to welcome tradespeople into their homes.”

However, with demand running many times higher than the number of vouchers issued, experts are unconvinced by the government’s claim that householder reluctance is to blame for the scheme’s failure so far.

Ed Matthew, campaigns director at the climate change thinktank E3G, said: “It is simply not true to suggest there is low demand for the green homes grant. The scheme is struggling because it has been poorly administered. It needs to be urgently reformed, not axed. This investment is crucial for kickstarting a green recovery.”

The Guardian

Homeowners in the north west face thirty years of higher energy bills

Homeowners in the north west could face 30 years of higher energy bills as they back behind making their home more efficient, according to new analysis.

Houses in London and the South East of the country are likely to meet targets by 2031, according to property data company Kamma, while it might take homes in Manchester and Liverpool until 2061.

This could leave homeowners and renters paying higher energy bills in Merseyside and elsewhere for up to three decades, and also put a dent in the UK’s climate plans.

The Government wants homes across the UK to reach an energy efficiency score of EPC C by 2030. The EPC system (Energy Performance Certificate) assigns a rating of between the A, the best, and G, the worst.

Plugging up leaky homes can help the UK on its target to release no more emissions than it absorbs by 2050, the so-called net zero plan.

Household emissions currently make up 22% of the greenhouse gasses produced in the UK.

More than 60% of UK homes have a D rating or below, but this fluctuates from 64% in Yorkshire and Humber to 55% in London, Kamma said.

Wales and the West Midlands lies at 63% at D or below, while the North West is slightly better at 62%.

But rather than narrowing, the gap is widening. In the last decade, there have been more energy efficiency improvements, such as double glazing, insulation or solar water heating, in London homes, than in the North West – the area where progress has been slowest.

“We need to double the pace of energy efficiency improvement of homes to meet these new targets by 2030,” said Kamma chief executive Orla Shields.

Kamma’s figures were released as part of its evidence to a Government consultation on using the property sector to encourage homeowners to improve energy efficiency.

It includes proposals that could force banks to reveal how much they have lent for energy efficiency improvements, as well as the EPC rating of their mortgage portfolio.

Daily Telegraph

Sizewell C proves to be a turn-off for City giant Legal & General

Legal & General has ruled out helping to fund the new Sizewell C nuclear power plant, dealing a blow to EDF as it seeks backers for the £20bn project.

EDF is in negotiations with the government about taxpayer support for the planned plant in Suffolk but will also need institutional investors, which it argues can make stable returns over the decades of a reactor’s life.

L&G has not spoken publicly about its plans but in a written response to a pension-holder, one of its investment service consultants said: “I have had it confirmed that Legal & General will not be investing in the Sizewell C nuclear power plant.” L&G declined to comment further.

It comes after Aviva Investors expressed concerns about the potential ESG (environmental, social and governance) risks of nuclear power. It said the ESG impact of nuclear was “far from clear at this time.”

The government is relying on nuclear power to help reach its legally binding target of cutting carbon emissions to net zero by 2050, but investors also need to get comfortable with radioactive waste management, water usage, and the remote but catastrophic risks of a nuclear accident.

L&G, which has more than £1trn assets under management, has invested more than £1.3bn towards low-carbon energy sources such as solar panels and ground source heat pumps.

Daily Telegraph

Mississippi wood pellet plant that supplies UK electricity grid fined $2.5m over air pollution

A British-owned facility in the US that supplies wood pellets for green UK electricity has been fined $2.5m over air pollution breaches.

Drax Amite processes wood from local forests in Mississippi into pellets that are shipped to the UK to be burned as renewable energy at the company’s facility in Yorkshire.

It has been fined by the Mississippi Department on Environmental Quality (MDEQ) for breaching limits on volatile organic compounds, which can exacerbate respiratory conditions, since 2017.

It is believed to be the largest such fine against a wood pellet facility.

The fine was welcomed by local environmental campaigners, who have raised concerns over the impact of the UK biomass industry on local forests and air quality in the southern US, which they say impacts particularly on lower income communities.

“We deserve the right to breathe clean air,” said Kathy Egland of the National Association for the Advancement of Colored People.

Drax was also ordered to install equipment to capture the VOC emissions, which are produced during the drying and milling process.

The UK is one of the world’s biggest consumers of biomass, which accounts for 12 per cent of its electricity mix.

Amid a push to move away from coal, the Government now provides the largest subsidies in Europe, with £1bn backing every year for the industry.

The vast majority of that goes to Drax, which has so far converted four of its six former coal units in Yorkshire to burn biomass.

The company ships the majority of its wood pellets from the southern US, accounting for almost 60 per cent of the demand from the region.

A Drax spokesperson said the company had monitored the emissions and notified MDEQ of its breach, and will finish installing equipment to reduce the pollution by July.

It said: “The safety of our people and the communities in which we operate is our priority. We take our environmental responsibilities seriously and we are committed to complying with all local and federal regulations.”

Daily Telegraph

Workers clear ‘huge, disgusting’ fatberg from London sewer

Members of the public have been urged to be careful what they flush after a “huge, disgusting” fatberg the weight of a small bungalow was cleared from an east London sewer.

Thames Water engineers and MTS Cleansing Services spent two weeks using high-powered water jets and hand tools to chip away at and eventually remove the rock-like heap, which was said to have smelled like composting festival toilets and rotten meat, from a conduit in Canary Wharf.

The fatberg had got stuck under Yabsley Street, clogging long sections of the sewer, and could have spilled sewage into people’s homes if it had grown any further, engineers said.

Fatbergs are formed when oil, grease and fat poured down drains combine with non-biodegradable items such as wet wipes, nappies and cotton buds.

The head of waste networks at Thames Water, Matt Rimmer, described the fatberg as “huge and disgusting”, and said that it had taken “a great deal of brute force” to clear the blockage.

“We’d ask everyone to help fight the fatberg by only flushing the 3Ps – pee, poo and paper – as well as disposing of fat and oils in the bin, not the sink,” he said.

Chris Henderson of MTS Cleansing Services said teams had worked tirelessly and achieved great results in difficult conditions.

It is the latest in a series of fatbergs to have been removed in recent years. One the size of an African elephant was broken up in October 2020. Thames Water removed 140 tonnes of fatbergs from the drains of Greenwich, Pall Mall and the Shard in 2019.

Thames Water said it spent £18m a year clearing 75,000 blockages from sewers in London and the Thames Valley. Its “bin it, don’t block it” campaign urges customers to consider what can and cannot be flushed down their toilets.

The Guardian

Electric busmaker Arrival schedules first UK road trial

Electric buses built by Arrival, the UK-based manufacturer, will be tested on British roads for the first time later this year in a trial with the transport company First Group.

The tests will begin in the autumn of this year, starting with four of the first production vehicles produced at Arrival’s research and development facility in Banbury, Oxfordshire. Discussions are under way about further trials with other companies.

The trials are the latest step in the rapid expansion of Arrival, which has attracted investment worth hundreds of millions of pounds to build battery-powered vans and buses with zero exhaust emissions. The company, still yet to start full production, hopes that by 2024 it will make revenues of about $3.1bn (£2.2bn) from bus sales, along with about $10.9bn from vans.

Arrival is also looking at an undisclosed number of new sites for factories within the UK, a signal of its intent to ramp up output as it prepares a reverse listing on the Nasdaq stock exchange in New York at a valuation of $5.4bn (£3.9bn). The company’s main operations will remain in the UK.

Bus companies are hurrying to cut carbon emissions to meet clean air regulations in cities. First Group will not buy diesel buses after 2022, and it plans to eliminate exhaust emissions by 2035.

First Group is also running separate trials of electric buses made by the rival manufacturers BYD ADL, Optare and Yutong, as well as a trial of hydrogen fuel cell buses in Aberdeen, its home city.

Arrival hopes to roll out bus production quickly to target big cities around the world. It aims to produce 1,000 buses in 2022 and 11,000 in 2024. As well as a facility at Bicester, also in Oxfordshire, Arrival has started work on a factory in Rock Hill, South Carolina.

Arrival, which now employs more than 1,400 people, was founded in secret in 2014 by Denis Sverdlov, a Russian telecoms entrepreneur. The company is using “microfactory” facilities that break with the traditional logic of making cars on big production lines, instead using robots to assemble vehicles in “cells”.

Arrival’s first publicly announced product, an electric van for “last-mile” delivery in cities, will begin trials with United Parcel Service, a US courier, at the end of February. UPS last year ordered 10,000 vans in a deal worth €400m (£350m).

Avinash Rugoobur, Arrival’s president, said built-in tracking, information screens and internet connections could allow the buses to connect better with other modes of transport and provide better user experiences. The flat floor also makes accessibility easier.

“We’re really at the start of what’s possible just within the bus platform,” Rugoobur said. Buses in use today “definitely do the job, but similar to the van market we’re talking about technology that hasn’t moved to where the world is today.”

The electric buses will be priced much like diesel buses, although Arrival estimates that the total cost of ownership will be significantly less because of lower fuel and maintenance costs. It has not disclosed the buses’ range, but Rugoobur said they should be able to handle most urban routes.

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.