Weekend press round-up: Energy sector’s Covid bill hits £1.1bn

In our latest review of sector coverage across the national newspapers, new research puts a figure on the energy industry’s lost income during the pandemic. Meanwhile, SSE hits out at Ofgem’s draft determinations, saying they will cause “years of delay” to renewables projects. There are also reports that suppliers are fearing a surge in bad debts in the autumn as the furlough scheme draws to an end.

UK power industry takes $1.4 billion hit from coronavirus

Britain’s power industry lost 1.1 billion pounds ($1.4 billion) in the five months to August as reduced electricity demand and wholesale prices cut revenues for suppliers, generators and grid companies.

The drop in consumption meant that 3.4 million tons of carbon dioxide emissions weren’t pumped into the atmosphere, according to analysis by Hartree Solutions. That’s about 1% of the U.K.’s annual CO2 emissions in 2019.

Just under half of the income loss can be attributed to lower wholesale power prices with the rest down to lower earnings from transportation costs, renewable subsidies, network charges and balancing costs, Hartree said in the report.

The U.K. economy suffered more than any major European nation during the coronavirus lockdown because of its reliance on services and “social consumption,” such as eating out and shopping. The nation’s biggest power utilities from Centrica Plc to Drax Plc have reported reductions in income caused by the impact of the virus.

With August showing the power market almost back to pre-pandemic levels, attention now turns to the heating season during winter.

“Here, several unknowns make for an uncertain outlook amid the threat of a second wave of the coronavirus,” said Adam Lewis, partner at Hartree Solutions. The return of schools in September could provide a boost to demand in the mornings, he said.

The earnings guidance of most utilities assumes no second wave, said Elchin Mammadov an analyst at Bloomberg Intelligence.

If the second wave hits, “there is a risk of another downturn in power demand and prices, which hurt generators, particularly as negative prices become more frequent, and pre-hedged suppliers suffering losses from selling back surplus energy on the wholesale market at lower prices,” he said.

The power sector continues to face financial issues resulting from the pandemic, according to Energy U.K., which lobbies on behalf of more than 100 companies.

“Demand and power prices have started to recover now but it has underlined the volatility of the wholesale market, which not only affects some power plants’ ability to operate profitably but risks curtailing any future investment dependent on wholesale revenue,” said Matt Deitz, policy manager for power at trade group Energy U.K.

Bloomberg

Network company SSE attacks Ofgem’s ‘bureaucratic’ funding plan

Energy network upgrades that are needed to help Britain to meet its target of net zero emissions face “years of delays” because of flawed Ofgem proposals, SSE has warned.

The FTSE 100 energy group and other network companies are lobbying the regulator to rethink price controls proposed last month that they claim will jeopardise decarbonisation efforts.

SSE believes that the plans could delay upgrades to Britain’s electricity transmission network, leaving it unable to cope with power from new offshore wind farms. Wind farms may have to be delayed from connecting to the grid, or paid not to operate, it said. Ofgem’s plans were “risking years of delays to connections and the critical investments required to alleviate current and future constraints”.

Network companies’ revenues come from levies on energy bills. Their investments and how much they charge consumers are regulated via price controls. Ofgem has been under pressure to get tough on the companies after it was accused of allowing them to make excess profits.

The regulator’s proposals will halve companies’ returns from 2021 and will require them to argue their cases for work costing billions of pounds where it is unclear to Ofgem if or when the spending is needed. SSE, Scottish Power and National Grid, which operate power transmission networks, have criticised the proposals.

SSE argues that Ofgem is giving insufficient funding for pre-construction work such as planning and that its process to approve funding the upgrades could take years, risking them not being ready when the wind farms are.

A senior industry source said: “Ofgem has moved work related to a number of renewables projects out of base cases of the three transmission companies and put them into the uncertainty mechanism. This means little or no funding to start pre-construction or design work. A number of these projects have full planning consent, so it seems crazy that they are in an ‘uncertainty’ mechanism.” The source described the funding approval process as “long, arduous and bureaucratic”.

A spokesman for SSE’s networks business said: “The regulatory framework must have the agility and flexibility for investments to be approved at the pace required to meet net zero.”

An Ofgem spokeswoman said it was vital that it could “robustly assess these large-scale investments on behalf of consumers”, while enabling companies to do the necessary work to achieve net zero. She said that the assessment process for funding was similar to in the existing price control and would be refined further.

The Times

Energy suppliers fear rising bad debts as furlough scheme ends

British energy suppliers are fearing a surge in bad debts in the autumn as the UK government’s job retention scheme draws to an end.

Several large energy suppliers, including Centrica and Bulb, have expressed concerns over a rise in households defaulting on their electricity and gas bills in the second half of the year as unemployment climbs and the government’s furlough scheme ends in October.

The withdrawal of the scheme will come at a difficult time of the year for the energy sector, when even in more normal times some smaller suppliers have struggled to meet autumn deadlines to pay for policies that support the development of renewable electricity, pushing many out of business. Some 20 energy suppliers have gone bust since November 2016 in a sector that suffers from thin margins and fierce competition.

The UK government and utilities promised at the start of lockdown not to disconnect any households that were in financial distress as a result of the coronavirus pandemic.

“The thing that we’ve been very conscious of since March is the risk of a large number of customers getting into financial difficulty and not paying their bills,” Hayden Wood, chief executive of Bulb told the Financial Times in an interview.

“I know the government has provided a huge amount of support through things like the furlough scheme. But there is a strong risk that if there’s a second wave, if there’s really high unemployment that a large number of businesses in the UK will find it challenging with non-payment by customers.”

Emma Pinchbeck, chief executive of Energy UK, a trade body representing energy providers, said because of Covid-19 “energy suppliers are facing likely increases in debt and other rising system costs, in an industry which already operates on small margins”.

Steve Jennings, head of PwC’s energy practice, said water and electricity bills are often among the first things households stop paying so “utilities are right to be worried that they will suffer if consumer debt rises”.

Centrica’s chief financial officer Johnathan Ford recently told analysts that the risk of bad debt was “more weighted towards the second half, especially given the planned withdrawal of government support for jobs”.

The Financial Times

Shell looks to inflate case for generating power offshore

Royal Dutch Shell hopes to boost the profits it makes from offshore wind farms by using surplus electricity to produce hydrogen and to charge batteries at sea.

The oil company claims that using such technologies to store energy, as well as installing floating solar panels next to the turbines, should enable it to offer “a continuous power supply”, even when the wind isn’t blowing.

Shell is preparing to put the technologies through trials at a new wind farm it is building off the coast of the Netherlands. If they are successful, they could be deployed more widely across the industry, according to the company.

This would better utilise the cables that link the wind farms to shore and would boost returns for developers by enabling them to store surplus power on windy days, when the market is swamped with electricity, and sell it for more money later.

The Anglo-Dutch business is one of the biggest oil groups in the world, worth approximately £90 billion. It explores for and produces oil and natural gas and sells a wide variety of fuels. It is expanding its offshore wind operations as part of its plans to build a significant low-carbon electricity business and to cut its emissions to “net zero” by 2050.

Shell and Eneco, its partner, won a tender late last month to build the Hollandse Kust project just over 11 miles off the Dutch coast.

The wind farm, which is not subsidised, will have 69 turbines and is expected to generate enough power over a year to meet the needs of a million homes. Its output will fluctuate from 759 megawatts when the turbines are spinning full-tilt to nil on a windless day.

Dorine Bosman, Shell’s vice-president for offshore wind, said that the technologies it would test at the site were intended to “stabilise the output and dampen the peaks and troughs that we might see in normal straight offshore wind operations”.

It was too early to say what level of power output could be maintained by using the technologies combined, but “that’s exactly why this is innovation. Let’s see what it all does, how it all links up together. . . . We just don’t do innovation for innovation’s sake.”

The hydrogen will be produced through electrolysis on very windy days, when the wind farm may be generating more power than is needed, and will be turned back into electricity using hydrogen fuel cells when it is calm. The battery will operate on the same principle. Ms Bosman, 57, said that she had not seen either storage technology used alongside turbines before. The floating solar panels will offer additional power when it is sunny.

She said that the proposal was more efficient than installing complementary generation and storage onshore because it would make better use of the power transmission cables.

The Times

Carbon capture systems must be developed in the UK if we are to have any hope of reaching net zero

Stretching 81 miles out to sea from Scotland’s rugged north-east coast, the Goldeneye pipeline has helped bring vast amounts of gas back to the mainland for owner Shell during its 16 years of operation.

Yet the UK’s energy needs are changing, and Goldeneye has to change, too. Plans are under way to use it to take carbon dioxide from the mainland’s factories and power plants and stash it out of harm’s way deep under the North Sea.

The Acorn project is among several embryonic Carbon Capture and Storage (CCS) projects being developed by Shell, Vitol, Drax and others in Yorkshire, Liverpool and elsewhere as the nation looks for evermore creative ways to cut carbon emissions.

Despite input from some of the UK’s best engineering brains and the clear demand for the service, the projects have yet to reach the next steps as politicians and industry bosses wrestle with perhaps the trickiest question: who is going to pay for them?

Industry is unlikely to fully leap into the costly arena without government support. Ministers are examining business models with the clock ticking towards the deadlines of the Paris climate goals, and the UK’s promise to hit net zero emissions by 2050.

“Despite the obvious environmental positives that come from CCS, it will require private investment which will need some certainty of return – just as with offshore wind many years ago,” says Steve Jennings, head of energy at PwC. “It’s critical we look for solutions now – CCS might be the only option when you can’t change the industrial process.”

Despite the allure of being able to scrub carbon sins, large scale carbon capture projects have been relatively slow off the ground globally. Norway led the way with its Sleipner project in 1996, and there are about 25 major projects up and running, including in the US, Australia and Abu Dhabi, with a similar number on the way.

Interest is resuming after a fall during the 2008 financial crash, with costs coming down and oil and gas giants under intense pressure to help. But far more will be needed as the world tries to cut emissions by 45pc before the decade is out. The UK has had a stop-start relationship with the technology, with the government cancelling a £1bn CCS competition in 2015, which had drawn interest from the likes of Shell and SSE.

The legally binding net zero target introduced last June has reinvigorated interest, however, and Boris Johnson’s administration has pledged £800m to support two major projects connected to industrial sites. However, they have yet to reveal the results of a consultation opened one year ago on what sorts of subsidies and returns should be available to the industry. Projects’ viability also rests heavily on the price industrial giants have to pay for their carbon emissions, currently unsettled by Brexit.

Projects gaining ground in the meantime are those that have found another commercial use for the carbon dioxide, rather than simply stashing it underground. Tata Chemicals Europe is developing a system to use carbon dioxide from the power plant at its Northwich industrial site to make more of the widely used chemical sodium bicarbonate. “The loop makes this project successful,” says Ladan Iravanian, projects director.

Acorn and some others are planning to combine CCS with facilities to turn natural gas into hydrogen, the clean-burning gas that may yet take a wider role in UK heating. That has several benefits for its backers. “I would love to be producing hydrocarbons well into the next few decades but to do that as close to net zero as possible,” says Phil Kirk, chief executive of Chrysaor, the North Sea’s largest oil producer and a key part of the Acorn project. “Developing a market for hydrogen could well be key for our natural gas business.”

He is among many industry bosses who argue that the question of who pays for CCS plants has to be approached carefully. Heap too high costs on to industry and you risk driving it abroad, along with its emissions. The relatively high cost of UK electricity already rankles.

“The really interesting challenge is how can we make a difference to the carbon dioxide emissions of the UK without just letting those jobs go abroad,” says Kirk. “The Government could have to look at the price of imports, carbon taxes at the border – difficult questions. But the corollary has to be the cost of energy to the consumer, and jobs.”

Daily Telegraph

UK firm’s solar power breakthrough could make world’s most efficient panels by 2021

British rooftops could be hosting a breakthrough in new solar power technology by next summer, using a crystal first discovered more than 200 years ago to help harness more of the sun’s power.

An Oxford-based solar technology firm hopes by the end of the year to begin manufacturing the world’s most efficient solar panels, and become the first to sell them to the public within the next year.

Oxford PV claims that the next-generation solar panels will be able to generate almost a third more electricity than traditional silicon-based solar panels by coating the panels with a thin layer of a crystal material called perovskite.

The breakthrough would offer the first major step-change in solar power generation since the technology emerged in the 1950s, and could play a major role in helping to tackle the climate crisis by increasing clean energy.

By coating a traditional solar power cell with perovskite a solar panel can increase its power generation, and lower the overall costs of the clean electricity, because the crystal is able to absorb different parts of the solar spectrum than traditional silicon.

Typically a silicon solar cell is able to convert up to about 22% of the available solar energy into electricity. But in June 2018, Oxford PV’s perovskite-on-silicon solar cell surpassed the best performing silicon-only solar cell by reaching a new world record of 27.3%.

The perovskite-coated panels will appear different too. Instead of the blue tint usually associated with traditional silicon panels, Oxford PV’s panels will appear black and blend in better with rooftop slates.

The crystal was first discovered by a Russian mineralogist in the Ural mountains in 1839 but for the last 10 years scientists around the world have been locked in a race to engineer the mineral to help generate more renewable electricity at a lower cost.

Dr Chris Case, the chief technology officer at Oxford PV, said using perovskite represents “a true change” for solar technology, which has remained relatively unchanged since the silicon-based panels developed in the 1950s.

“Silicon has reached its culmination of capability,” he said. “There are residual improvements to be made, and cost of production opportunities, but from a performance standpoint it is at its efficiency limit. The perovskite material is something totally innovative for solar.”

The company won £100,000 of funding from the UK government in 2010, before attracting equity investment from Norwegian oil giant Equinor, Legal & General Capital and the Chinese renewables giant Goldwind.

Frank Averdung, Oxford PV’s chief executive, said the company will be able to steal a march on the first commercially available solar panels which use perovskite to improve solar generation against the company’s rivals.

“There are other companies working on perovskite, of course, and these other companies will eventually have a commercial focus, but none of these companies has the same focus on the combination of silicon and perovskite which we do,” he said.

The Guardian

Green power needs to be dense power

Here are two green power projects (writes Jonathan Ford). The first, a solar farm in Kent, Britain’s largest, received planning consent from the business and energy secretary, Alok Sharma, in May. The second is a planned nuclear project at Sizewell in Suffolk. Its developer, EDF Energy of France, recently applied for approval, which has yet to be received.

Both would make substantial contributions to Britain’s green electricity supply. Cleve Hill would have sufficient solar panels to generate 350 megawatts – enough, its developers claim, to power 91,000 homes. Sizewell, meanwhile, would be an order of magnitude greater. Its two giant reactors would have the capacity to generate 3,200MW of electricity, roughly 7 per cent of Britain’s current power needs.

The really stark difference comes when you consider their respective physical footprints. While Cleve Hill would need around 950 acres of land for the roughly 800,000 panels required to generate its output, Sizewell would require a mere 80 acres to house its plant.

Nor does that paint the whole picture. The gap actually widens further when you consider their respective output. Cleve Hill’s panels will not be generating constantly: thanks to Britain’s rainy climate, solar produces power only 11 per cent of the time. Meanwhile, nuclear’s so-called capacity factor is roughly 90 per cent.

What all this means is that simply to match annual output churned out by Sizewell’s 3,200MW reactors, you wouldn’t just need nine 350MW Cleve Hills, but more like 77. Turn that into acres and it comes to almost 74,000. That’s equivalent to some 300 square kilometres of land, versus the 0.3 sq km the nuclear plant consumed.

It all goes to illustrate one of the awkward truths about renewables, and one that is often buried beneath impressive statistics showing the declining cost of solar panels and wind turbines. Their relatively low “power density” makes them more consumptive of resources.

The issue was once illustrated by the former chief scientific officer to the UK energy department, the late David MacKay. He compared his own territorial estimate of UK energy consumption, roughly 1.25W/square metre, with the energy yield of a wind turbine, which he put at roughly 2.5W for each square metre they occupied. On that basis he estimated that you would need to cover half the UK’s landmass to generate the necessary energy.

The political impossibility of anything remotely like this ever happening should be evident. A study of the US state of Iowa by the consultancy Lucid Catalyst showed that political resistance to wind projects escalated between 2008 and 2019 as more schemes were put forward.

About 60 per cent of counties in the state progressively imposed restrictions or moratoriums on wind development. And that was despite renewables operators deploying only 11 gigawatts (GW) of capacity over the period, a fraction of the 517 GW theoretical maximum estimated by the National Renewables Energy Laboratory, a body funded by the US energy department.

In a crowded country such as Britain, the pressures on land use are sharper, given the competing priorities to grow food, plant more forests and protect existing wildlife habitats. Put simply, greater land use for energy generation has an escalating opportunity cost.

Greenpeace, no enemy of renewables, expressed concerns about the Cleve Hill development, arguing that “vast continuous fields of panels on agricultural land” were not “the best way to go solar”.

This should prompt reflection in light of the UK’s political commitment to achieve net zero carbon emissions by 2050. It is hard enough decarbonising electricity, as Germany has discovered with its costly and struggling “Energiewende”. But electricity is about a quarter of final energy demand and the rest is largely powered by fossil fuels.

The Financial Times

Testing sewage could predict local coronavirus outbreaks five days before they reach hospitals

Testing sewage could predict local coronavirus outbreaks five days before they happen, scientists from Yale have found.

The new research found that testing waste from households can give an indication of an area at risk of a coronavirus outbreak that could require lockdown.

Their results found that the detection of the viral strain of Covid-19 in sewage leads to hospital admissions in an average 4.6 days.

The scientists said that their model provides an earlier indication of where coronavirus is growing in the community than data from hospital admissions.

Scientists said that advances in the UK’s testing programme such as these could lead to much quicker identification of the coronavirus, meaning the Government can act quicker to lockdown areas.

Brian Neve, Non Executive Director of Spiro Control, and a practicing process control engineer, said that trials such as these show that “waste water epidemiology should be used as early warning, some of them are confident about prediction numbers and hence indicate that it can be used for policy decisions.

“In future better and more upstream waste water sampling could result in even faster detection further reducing the delays.”

Work has been quietly ongoing on this since March in the UK, with the Department for Environment, Food & Rural Affairs (Defra) leading on the effort in sampling in 44 sites across England.

Their hope is that this data will feed into the Covid-19 alert system, alongside local testing, and allow for the Government to act swiftly in it’s “whack-a-mole” local lockdowns.

Daily Telegraph

Hitachi seeks to resurrect Welsh nuclear plant plans

Hitachi is talking to the UK government about resurrecting plans for a nuclear power plant in north Wales, which were frozen at the start of last year.

Horizon Nuclear Power, a UK-based subsidiary of Hitachi, has been holding “detailed conversations” with the government in recent weeks to persuade ministers that the proposed Wylfa Newydd plant on Anglesey could be quickly re-mobilised if they can produce a new financing model for large nuclear power stations in Britain.

Hitachi suspended the £20bn Wylfa project at the start of 2019 after failing to reach an agreement over financing. The Japanese group decided at the time the project still posed “too great a commercial challenge”, despite the UK government offering to take a one-third equity stake and provide debt financing.

But Hitachi has maintained a skeleton staff at Horizon and continued to pursue planning permission for Wylfa after the government launched a review into a “regulated asset base” funding model, which would see consumers pay upfront through their energy bills for a new plant and significantly reduce the construction risk for developers.

There has also been talk in the industry of the state taking majority stakes in nuclear schemes, which could enable developers such as Horizon to become contractors. A decision on Wylfa’s planning application is expected by the end of next month.

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.