Weekend press round-up: Energy bills will fall in six weeks, Shapps predicts

In our latest review of sector coverage in the national media, the energy secretary has predicted billpayers will start to see the benefit of falling wholesale power prices this summer. Meanwhile, the former head of the CMA is rumoured to be in the running to chair Ofgem, and National Grid’s chief executive has called for a radical overhaul of the electricity network.

Energy bills will fall in six weeks, Shapps predicts

Energy bills should fall within six weeks, Grant Shapps has predicted.

The energy secretary acknowledged that while wholesale prices were returning to “normal” levels, households had yet to see that reflected in their bills. The wholesale price of gas peaked at about £6 per therm but is at 76p per therm.

Shapps said households should start to see the fall in wholesale prices affect their bills this summer.

He told the BBC’s Sunday with Laura Kuenssberg programme: “What we’re starting to see, or have seen on the wholesale price, those energy prices falling below that cap and getting back to more . . . normal prices.

“Now people haven’t seen all that benefit, much of it, or even any of it yet, but about another six weeks, the summer, that should start to feed into people’s electricity bills.”

However, Greg Jackson, chief executive of Octopus Energy, who was speaking on the same show, said the UK needed to treat energy security as a national emergency like Germany had after Russia’s invasion of Ukraine, which caused the record spike in bills. He said Britain needed to “unleash tens of billions of dollars in investment” to build renewable energy facilities.

Shapps defended the government’s record on renewables, saying it had increased the proportion of renewable and nuclear power in the UK from 7 per cent in 2010 to 57 per cent.

He said the government was putting long-term plans in place that would give Britain the energy security that did not exist before the invasion, which caused the record increase in bills.

However, he acknowledged that there were major challenges in terms of connecting the renewable energy sources to the power grid in order to make use of new power sources.

Shapps said: “We need to build in terms of connections to our grid in the next six, seven, eight years as much as we’ve done for the last three decades. So there’s a massive challenge, we’re almost a victim of our own success in having added so much energy to our grid, that we now have this massive challenge.”

The Times

Tory peer Lord Tyrie in contention to put spark back into Ofgem

Lord Tyrie, the former chair of the competition watchdog and architect of many of Britain’s post-financial crisis banking reforms, is among the candidates vying to head Ofgem, the under-fire energy regulator.

Sky News has learnt that Lord Tyrie has put his name forward to replace Professor Martin Cave, who is due to step down as Ofgem’s chairman in October, at the end of his five-year term.

The Conservative peer’s interest in the role comes after he was also considered as a potential chairman of the Financial Conduct Authority and of the Court of the Bank of England – both of which went to other candidates.

Lord Tyrie stepped down as chairman of the Competition and Markets Authority in 2020 amid unhappiness about his leadership style among senior colleagues.

Nevertheless, he has been one of the most significant figures in parliament in the last 15 years, chairing a commission on banking standards responsible for introducing key changes to the way the industry is supervised.

The Ofgem chair recruitment process, which will ultimately be a decision for Grant Shapps, the energy security and net zero secretary, is still at a relatively early stage, with longlisted candidates yet to be formally interviewed.

If Lord Tyrie does progress to its latter stages, he would inevitably be regarded as a change agent capable of enforcing a radical shake-up at an organisation that is widely regarded to have underperformed during the energy crisis.

Sky News

National Grid’s John Pettigrew: Network needs billions to hit net zero

The chief executive of National Grid has called for a radical overhaul of the electricity network to hit net zero targets and reduce the UK’s exposure to gas prices.

John Pettigrew said there was “no time to lose” as the transmission network needs its biggest transformation since its establishment in 1935 to make it fit for a future of offshore wind turbines, electric cars and heat pumps.

He called for reforms to the planning system to speed up construction and a new, independent future system operator to oversee the net zero drive. He also said a change was needed to the “first-come, first-served” process for the approval of new projects, suggesting that they should be assessed on their merits rather than their place in the queue.

Ministers have set a target of 2035 to decarbonise the UK’s power system, but National Grid now argues that the upgrades need to “step up a gear”. To keep up with changing grid usage, National Grid estimates that by 2030, five times as many pylons and underground lines need to be constructed than in the past 30 years and four times more undersea cables laid than there are at present.

However, Pettigrew warned that it would cost “tens of billions of pounds” to rewire the grid and admitted that it would mean money would be added to household bills. Electricity transmission in the UK costs the average household about £22 a year — only a very small fraction of overall energy bills. The current price cap is at an annual level of £3,280.

Pettigrew said: “The network’s part of the bill is actually a small element. It’s the commodities that really dominate. There’s a real opportunity here because with the infrastructure investment that will be taken over a period of time it will reduce the UK’s exposure to world gas prices and reduce energy prices, as well as create jobs and enhance GDP.

“So it is tens of billions of pounds of infrastructure investment over several decades, but from an affordability perspective, it will ultimately reduce the bill for customers.”

The Times

UK ministers urged to intervene if Australian bank takes 100% of gas business

Ministers have been urged to intervene if the Australian banking powerhouse Macquarie pushes the button on a mooted £3bn deal to take full control of a vital part of the UK’s gas grid.

A consortium made up of Macquarie Asset Management and British Columbia Investment Management Corporation completed the acquisition of 60% of the equity in National Grid’s gas transmission and meter business in January, in a deal which valued the business at £7.5bn.

The Guardian understands that a clause in that deal allows the consortium first refusal to snap up the remaining 40% from this summer.

The transmission business operates more than 4,000 miles of gas pipes in the UK.

If the consortium exercises the call option, it may prompt concerns over the future of a crucial piece of UK infrastructure as officials attempt to rebalance the nation’s energy system towards low-carbon technologies.

Macquarie owns a string of UK infrastructure assets including the gas network Cadent, Glasgow and Southampton airports, and several windfarm projects along the east and north-west coasts of England.

It has a chequered reputation in the UK, however, over its ownership of Thames Water, where it faced political scrutiny for extracting billions in dividends while its debt soared, and Southern Water, the utility company criticised for repeatedly discharging sewage into the sea.

Gary Carter, the GMB union’s national officer, said: “Massive investment is going to be needed to reach net zero and secure the UK’s energy supply for future generations.

“Can Macquarie really be trusted with whole ownership of owning the nation’s gas transmission business?

“Macquarie’s reputation is one of maximising profits and stripping assets, often at the expense of investment as well as employees, pay and pensions.

“This government must not sit idly by when energy security is at stake.”

The Guardian

UK could unlock £70bn a year in renewable energy, report claims

The UK could unlock £70bn every year by generating enough clean electricity to become a major exporter of energy to mainland Europe, according to a former government economist.

A new report has found that by increasing Britain’s clean electricity generation 50% above its current projections for 2050 it could become a clean energy superpower capable of exporting £17bn of green electricity to Europe a year.

The ambition to generate more green electricity than needed to meet the UK’s climate targets could also create an additional 279,000 British jobs, and support a total of 654,000 British jobs, across the UK’s clean energy industries, according to the report.

The analysis by former government economist Chris Walker for the UK Business Council for Sustainable Development found that it was “plausible” that the UK could transform from a net importer of energy to an exporter of green electricity by taking a lead in the global race to “net zero”.

By going “beyond net zero” the UK’s economy would attract trillions of pounds of global private investment and double the £35bn a year economic benefit forecast for its current path, according to Walker.

However, Britain could miss the “once in a lifetime opportunity” unless government policymakers remove the barriers holding back the UK’s green energy ambitions, the report said.

“The UK’s strong competitive advantages in clean energy generation mean it is uniquely well positioned in the race to net zero which can deliver significant and sustained economic growth, raised productivity and increased exports,” it said.

“Other advanced economies will undertake similar journeys to the UK at the same time. For the UK to cement its leadership in tackling this challenge, crucial public policy decisions need to be taken, backed up by investment from private sector organisations to ensure that the UK makes and captures the necessary investment to capitalise on its strengths,” it added.

The report warned that National Grid was struggling to cope with the number of new clean energy projects applying to connect to the grid, which have surged to 50 a month from 50 a year over the last decade leaving many projects with a 10 to 15-year wait to provide the UK energy system with clean electricity.

The government should also intervene to make sure that the UK has enough batteries to store its renewable electricity and create a market for producing green hydrogen. In addition, the UK’s draughty housing stock and commercial buildings must be retrofitted to improve the UK’s energy efficiency.

The Guardian

Post-Brexit power trade model adds £1.1bn to bills, energy body warns

Energy costs for consumers could be lowered by £1.1bn a year if the UK pursued greater co-operation with Europe on electricity trading and carbon pricing, according to an industry body.

Energy UK, which represents power generators and traders, said UK households were paying the price for “inefficient trading” arrangements since 2021, with electricity no longer exchanged through the EU market coupling regime.

Although a new trading arrangement had been expected by April 2022, the deadline had passed without progress and the UK-EU specialised committee on energy has met only three times since it was established in early 2021, the lobby group said.

A “mismatch of different trading arrangements has led to a less efficient, more complex and costly model for the trade of electricity over the interconnectors between the EU and GB, as well as adding to the regulatory and administrative burdens of energy traders”, Energy UK said.

The industry body said Brexit had introduced barriers to the way electricity was traded across interconnectors — high-voltage cables on the seabed that export surplus power and import it when supplies are scarce, which provided almost 9 per cent of the UK’s electricity last year.

As an EU member the UK had been part of the internal energy market regime, which created a single price by automatically balancing the needs between countries using computer algorithms to match bids and offers. But since leaving the EU single market in January 2021, the UK has moved to a back-up system that involves running daily auctions.

Traders — big suppliers as well as independent commodity and power businesses — are now being required to purchase or sell energy separately in each geographical market, adding to the complexity and cost of the system.

Energy UK said power exchanges and order books should be recoupled as inefficient cross-border trading arrangements may also reduce investment in joint renewables projects between the UK, neighbouring EU member states and Norway.

The situation is expected to be heightened as UK electricity exports increase due to the volume of offshore wind being built around the British Isles, it added.

The Financial Times

Wind farms to sell energy privately

Wind farm developers behind two unsuccessful bids in Ireland’s first Offshore Renewable Electricity Support Scheme (Oress) auctions will sell their energy to private companies.

Both the 800 megawatt (MW) Arklow Bank Wind Park II, which is being developed by SSE, and the 375MW Oriel Wind Farm — a joint venture between Parkwind and the ESB — failed to secure contracts last week. They will engage with private companies to sell their energy. Both camps intend to carry forward with their projects but neither confirmed that they were in talks to strike corporate purchase power agreements.

An industry insider told The Sunday Times that deal terms will not be as good as the state’s auction.

Developers behind the four successful projects — which have locked in electricity for Irish consumers at the low price of €86.40 per MWh for 20 years — are entering their pre-planning application stage and expected to submit to An Bord Pleanala (ABP) by December.

While some are “anxious” about ABP being sufficiently resourced and challenges to projects by the public, the department of housing is pushing forward with the establishment of the Maritime Area Regulatory Authority (Mara) to oversee the burgeoning industry.

The Sunday Times

Wales accused of spoiling countryside with wind farms to spite the English

The Welsh government has been accused of spoiling the Welsh countryside with wind farms to spite the English.

Cardiff is pressing ahead with onshore wind farm developments when it could explore more offshore projects because it does not want to send fees to the Crown Estate or share control of projects with the UK Government, campaigners have warned.

Fay Jones, Conservative MP for Brecon and Radnorshire, criticised the Welsh government for taking a nationalist policy stance on green energy.

She said: “It doesn’t seem to have offshore in its sights because it won’t derive all of the benefit from that.”

The Crown Estate is the ultimate owner of around half of the coastline and seabed around England, Wales and Northern Ireland (a separate entity, the Crown Estate Scotland is the equivalent north of the border). This means it collects fees from the development of offshore projects.

The Welsh government’s Future Wales strategy document said it supported offshore wind but that these projects did not fall within its remit.

Plaid Cymru, the junior partner in the Welsh government’s coalition deal, has called for the Crown Estate to be devolved to Wales.

Ms Jones said: “If we put those two things together, then you can see the Welsh government’s thinking on this.”

Plans are underway for a major onshore wind farm development at Radnor Forest in her own constituency.

Ms Jones added: “People absolutely hate this project. It tells you a lot about how the Welsh government sees rural Wales as just a cash cow.”

The Welsh government has denied that it is anti-offshore wind. A spokesman said: “We are strong supporters of offshore wind, including floating offshore wind in the Celtic Sea, and have been pressing the Crown Estate to develop a long term plan to secure green energy in a way that can bring economic benefits to our communities.”

The Daily Telegraph

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.