Weekend press round-up: Labour delegates vote to back nationalising energy industry

In our latest review of sector coverage in the media, the nationalisation debate returns. Meanwhile, there is continued coverage of the impacts of wholesale gas price hikes, including analysis of the companies benefitting from the current situation.

Labour conference: Delegates vote to back nationalising energy industry

The Labour Party conference has voted to nationalise all UK energy companies, despite leader Sir Keir Starmer ruling this out.

Delegates in Brighton backed a motion which argued this would make the industry greener and fairer for customers.

Sir Keir earlier said nationalisation should happen only where it gave customers “better value for money”,

Labour’s 2019 general election manifesto promised to bring “energy into public ownership to end the great privatisation rip-off and save you money on your fares and bills”.

And, when he ran successfully for party leader the following year, Sir Keir pledged to bring in “common ownership of rail, mail, energy and water”.

Last month, Shadow business secretary Ed Miliband backed the public ownership of energy, water and transport.

He told BBC Newsnight: “We are in favour of common ownership absolutely… Starmer said this in the leadership campaign – we haven’t changed that commitment.”

Labour is currently carrying out a national policy forum, where it is asking members and affiliated organisations for ideas for the next election manifesto.

Asked on BBC One’s Andrew Marr Show whether he would nationalise the big six energy companies – British Gas, EDF, E.ON, npower, Scottish Power and SSE – if he became prime minister, Sir Keir replied: “No.”

He said he would be “pragmatic” and not “ideological”, adding: “Where common ownership is value for money for the taxpayer and delivers better services, then there should be common ownership.”

BBC News

More than half of the public would support renationalising energy companies, polling reveals

More than half of the public have said they would support renationalising energy companies after a week which has seen the industry descend into crisis.

New polling by Opinium, seen by i, found more than 50 per cent of the public would back taking energy companies compared to just over ten per cent who are against it.

It comes as more than a million people found themselves without an energy supplier in a matter of days after soaring wholesale prices saw companies collapse.

The polling of 2001 respondents was carried out between 22 and 23 September and weighted to represent the national population.

Asked to what extent they would support bringing energy companies back into public ownership, 53 per cent said they would – including 29 per cent who said they strongly back the proposal.

This compared to 15 per cent who opposed the measure. Some 23 per cent were indifferent and nine per cent responded that they did not know.

Labour for a Green New Deal – the group taking a socialist climate motion to Labour conference this weekend – have said the polling results vindicate their calls for Sir Keir Starmer to back a more radical climate policy.

iNews

UK energy suppliers warn they cannot absorb rivals’ customers without rescue

The UK’s largest energy retailers have warned that suppliers could refuse to absorb the customers of failed rivals unless the government comes back to negotiate a rescue package, arguing that intervention in the sector is unavoidable.

Kwasi Kwarteng, business secretary, this week backed away from arranging a deal for the sector following emergency talks to address the number of suppliers collapsing because of record wholesale prices, saying the industry had to resolve the problem of orphaned customers itself.

Bill Bullen, chief executive of Utilita, which has roughly 800,000 customers, said the amount of money required to take on the customers of failed suppliers was so big that “it’s impossible” for anyone but the very biggest businesses to participate.

“Without some kind of backing . . . it’s highly unlikely we will be able to go ahead and absorb anyone else,” he added.

Keith Anderson, chief executive of ScottishPower, the UK’s fifth-biggest energy retailer, said the strongest companies were being asked to take on billions of pounds of liabilities and to risk weakening themselves in the process.

The maximum companies can charge householders under the UK regulator’s price cap is £1,277 from October 1, but that amount is at least £500 per annum below the cost of providing gas and electricity at current prices to the average household.

“It is not us asking for a bailout. I don’t need these customers,” Anderson said.

“If you think this issue covers 2m-4m customers, because there are a lot of suppliers out there, you could be talking about £2bn, £3bn, £4bn, £5bn [in uncovered wholesale energy costs].”

Energy executives have warned that if too many suppliers fail at the same time, Ofgem could struggle to find alternative companies with the balance sheet strength, capacity or willingness to take on potentially millions of new customers.

One executive warned there is a “significant risk” some companies might refuse. “Then you’re in a real crisis,” they said, adding: “We need to plan a viable solution in case the worst happens.”

Some energy companies have argued for state-backed loans, allowing companies to go out into the market and take on debt underwritten by the Treasury to accommodate lossmaking customers.

They suggested that solution would allow losses to be recouped from customers’ bills over 5-10 years rather than a shorter period of typically a year.

The Financial Times

Energy bills set to soar by more than £300 next year

Britain’s mounting cost of living crisis is set to cost households more than £300 each in soaring energy bills next year as the nation’s poorest families take the biggest hit, new forecasts show.

The Centre for Economic and Business Research’s figures underline the prospect of months of financial pressure for consumers, as the Bank of England warns of inflation surging to decade highs above 4pc and ministers ready tax raids on millions from next April.

The regulator Ofgem’s planned 12pc rise in the energy price cap next month for 15 million standard variable tariff customers – as well as a likely further jump of at least 14pc next April after record gas prices – is likely to slice at around £315 a year or 2.5pc of the average household’s disposable income, the consultant said.

Its forecasts for The Telegraph also show the lowest income households are expected to pay an extra £258 a year, but a much bigger share of disposable income at 16pc. While the richest fifth will pay more at £368, the rise accounts for less than 1pc of their disposable incomes.

Daily Telegraph

Long, cold winter ahead for Britain could keep gas prices soaring to record levels

The UK faces a greater than normal risk of cold winter weather this year, according to meteorologists, which threatens to ignite greater demand for gas and keep gas market prices sky-high until 2023.

Both meteorologists and energy market experts are predicting a grim season ahead for UK households, millions of which could lose their energy supplier as companies collapse under the pressure of rising gas prices.

Gas market prices in the UK have quadrupled in the past year due to strong global demand. The hikes were compounded by a string of outages in the electricity system, including a fire at one of the UK’s main power import cables, which has increased its reliance on gas power plants.

The market’s “forward” prices indicate that fuel prices are likely to remain at record levels through the colder months, bringing a winter of discontent for hard-pressed families.

Early weather-pattern modelling by the US forecaster DTN points to a colder winter for the UK and northern Europe this year, with signals of a weakening of the polar vortex “which helps send Arctic air on the move”.

Although it is too soon for official forecasts, DTN said there was “certainly a greater than normal risk of a cold winter for the UK”, with February earmarked as “the coldest of the three winter months”.

Experts fear that a long, cold winter will expose the UK to gas shortages and severe market shocks because its gas storage levels are dwarfed by stores in neighbouring European countries.

Kim Fustier, an analyst at investment giant HSBC, warned that, with European gas stores at levels well below normal, a particularly cold winter could drive prices to new record highs. Gas prices were expected to remain at exceptionally high levels this winter, she said, and to stay high next summer before normalising in 2023.

“A colder-than-average winter could push storage levels to dangerously low levels, raising risks of price spikes and/or shortages in some countries,” she said. “The UK’s situation is more precarious than its European neighbours because of its very limited storage capacity.”

The UK has only enough gas storage to meet four to five days of winter gas demand, while neighbouring European countries typically have several weeks’ worth of gas.

The gas market has already brought factories in the north of England to a standstill, and derailed the carbon dioxide supply chain, which is vital to the food, drink and meat production industries.

The Observer

Soaring electricity prices could add £500m to value of energy firm Drax

Britain’s gas crisis could add half-a-billion pounds to the market value of the energy company Drax as the company prepares to sell its biomass electricity at record market prices.

The FTSE 250 owner of the Drax power plant in North Yorkshire has climbed to its highest share value in almost seven years, as wholesale prices have spiralled to all-time highs, claiming seven small energy suppliers in the past seven weeks.

The company is not exposed to the cost of gas, which has quadrupled on the UK markets in the last year, but it will benefit from the impact of rising UK wholesale electricity prices, which were already some of the highest in Europe.

Drax is poised to reap big profits from the crisis, alongside North Sea gas companies including Norway’s state-backed oil company, Equinor, and independent UK producer Serica Energy, which will be able to sell the gas they produce at record rates.

Drax is expected to generate an earnings boom in 2022 and 2023 from contracts it has sold in advance for the electricity it generates from burning biomass wood chips, which it claims is carbon neutral.

The company is also expected to benefit from electricity produced in its last remaining coal units which it sold directly to the market to help meet demand in recent weeks. On some days this has earned the company up to £4,000 a megawatt-hour or 100 times the typical market price for electricity.

Drax’s share price went above 500p a share for the first time since late 2013 this week, up from 412p two weeks ago, to value the company at £1.97bn. HSBC has set a target share price of 620p a share for the company, implying an increase in value of more than £500m.

“This ‘crunch’ has demonstrated the need for the UK to develop alternative, renewable, flexible sources of power generation, apart from intermittent wind and solar, to ensure security of supply,” said Verity Mitchell, an analyst at HSBC.

Meanwhile, Drax earnings a share are expected to climb by 26% next year, and 28% in 2023, by selling electricity based on the “forward” market price which soared in line with short-term trading.

In addition to its lucrative electricity sales Drax may benefit from the UK’s carbon dioxide shortage, Mitchell added, which was triggered by the shutdown of two major fertiliser factories in the north of England earlier this month due to the rocketing price of the gas they rely on to function.

The factories primarily produce ammonia but also sell carbon dioxide as a by-product, which makes up 60% of the UK’s CO2 supplies that are essential to the country’s food, drink and meat production industries.

The Guardian

The City power players making money from the energy crisis

As Boris Johnson announced last March that he was plunging the country into lockdown, Daniel Kretinsky went shopping in Hampshire. The Prague-based tycoon, known as the Czech Sphinx for his inscrutability, bought the Humbly Grove gas storage facility near Basingstoke from Malaysian oil behemoth Petronas.

He had just started buying shares in Royal Mail, where he is now the largest shareholder, and would go on to gobble up a healthy chunk of Sainsbury’s. A share price rally for both means he is sitting on a paper profit running into hundreds of millions of pounds.

Initially, his deal for Humbly Grove seemed ill-timed. Factories closed their doors and planes were stuck on the tarmac, which meant demand for gas plummeted. Now, with gas prices at record levels, it looks like the trade of a lifetime.

Read the full feature (subscription required) here

The Sunday Times

Ministers close to deal that could end China’s role in UK nuclear power station

Ministers are closing in on a deal that could kick China off a project to build a £20bn nuclear power station on the Suffolk coast and pump in tens of millions of pounds of taxpayer cash instead – a move that would heighten geopolitical tensions.

The government could announce plans to take a stake in Sizewell C power station, alongside the French state-backed power giant EDF, as early as next month, ahead of the Cop26 climate summit.

That would be likely to result in China General Nuclear (CGN), which currently has a 20% stake in Sizewell, being removed from the project.

It risks inflaming political tensions, which are running high after Britain’s decision to join the Aukus nuclear submarine pact with the US and Australia – a move designed to counteract China’s military expansion. CGN, the power giant backed by the communist state, is also bankrolling EDF’s Hinkley Point C power station in Somerset.

Sizewell, which is still going through planning and development, would eventually power 6m homes, but has been plagued by opposition from local campaigners, fears over its price tag and China’s involvement.

Washington has been leaning heavily on Westminster to remove China from Britain’s nuclear power plans, blacklisting CGN, citing fears over national security and accusing it of stealing military technology – claims it denies. The former US secretary of state Mike Pompeo last year urged Britain to choose sides in the battle to develop nuclear technology, saying it “stands ready to assist our friends in the UK with any needs they have”.

Under plans for Sizewell being discussed by Whitehall officials and EDF, the government could take a stake in a development company that will push it through various stages of planning and bureaucracy, sharing the costs with EDF.

Private sector investors such as the insurance funds L&G and Aviva would then be lured in at a later stage in return for a government-backed funding model called the regulated asset base (RAB), diluting the taxpayer and EDF. Legislation on RAB funding – the same model used to fund airports such as Heathrow and water companies – is due to progress through parliament next month.

EDF’s board is due to hold a meeting in November to discuss pushing Sizewell forward but is understood to be wary about pumping tens of millions into the project without firm commitment from Westminster.

EDF has been lobbying intensively for a RAB mechanism, arguing that it could slash the “strike price” – the guaranteed price for Sizewell’s electricity – to between £30 and £60 per megawatt hour. Hinkley’s £92.50 MWh strike price has been criticised as excessive at a time when offshore wind costs are falling.

The Observer

Mini nukes to get boost from Government funding

The Government is considering ploughing more cash into mini nuclear reactors in an attempt to prevent further energy crises as Britain transitions to net-zero carbon emissions.

Rolls-Royce could be in line for extra support for its small modular reactors as the current energy price crunch heightens the political focus on bolstering the security of the nation’s long-term electricity supply.

The manufacturing titan secured £210m of backing from private investors for the project over the summer, allowing it to unlock matched funding from the Government.

But £385m was earmarked for research and development support last year, and talks are still ongoing as to how much the consortium will get, raising the possibility of the funds being more than matched by the state.

Sources close to the decision noted that “Rolls-Royce is ahead of the game in terms of tech,” and its status as a British company will also make it attractive to ministers.

Sunday Telegraph

UK start-up plans worlds longest subsea electric cable with Morocco

A start-up with former Tesco chief executive Sir Dave Lewis as executive chair is planning to build the world’s longest undersea electric cable, stretching 3,800km between north Africa and Britain.

Xlinks is proposing to complete the £16bn Morocco-UK link by the end of this decade, delivering enough electricity to power more than 7m British homes.

Lewis said the project was also raising £800m to build three production facilities in the UK in a bid to tap into growing demand for the electric cables used for offshore wind farms and undersea interconnectors.

“We have secured with the Moroccan government an area of about 1,500 sq km . . . On that land we are going to put a solar farm, a wind farm and batteries which combined will produce about 10.5 gigawatts of power,” he told the Financial Times.

The project aims to produce clean energy in Morocco around the clock, from the sun during the daytime and wind at night, with battery power to help bridge the gaps. “This is renewable energy that behaves like baseload,” Lewis said. “We have none of the intermittency.”

Some of the electricity will then be transported to a site in Devon through four undersea cables with a combined capacity of 3.6GW.

Xlinks, headquartered in London and established in 2018, has not yet secured funding for the Morocco-UK link. It is led by chief executive Simon Morrish, who is also founder of Levitate Capital, a venture company.

The Financial Times

‘Conflict of interest’ over minister and husband’s energy firm

A rising star of Boris Johnson’s Government is facing questions over potential conflicts of interest due to her husband’s work.

Helen Whately, MP for Faversham and Kent, was promoted in this month’s reshuffle from care minister to Exchequer Secretary to the Treasury, where her brief includes energy and climate policy.

The 45-year-old’s husband, Marcus Whately, co-founded, runs and owns a stake in Estover, a biomass power plant developer, which has plants in Northumberland, Kent and Scotland.

Her appointment comes at a particularly critical time given the Government’s push to slash carbon emissions to net zero, with industries and businesses fighting for influence and subsidies. Biomass is a controversial industry, with critics questioning its role in tackling climate change.

Almuth Ernsting, a campaigner with Biofuelwatch, said: “Helen Whately’s appointment as Exchequer Secretary to the Treasury, responsible for the energy infrastructure, energy, environment and climate policy portfolio, raises serious conflict of interest concerns, given her husband’s vested interests in biomass energy.”

Sunday Telegraph

Investors pump in £200m for cool green datacentres

A London investment trust has raised £200 million to build environmentally friendly datacentres in Nordic countries, where cold weather can cool the powerful computing equipment naturally and green energy is plentiful.

Datacentres are vast “sheds” full of computer servers that power the internet, storing digital information and doing ever more complex calculations on a vast and growing scale.

They consume about 1 per cent of the world’s electricity supply, because of the large amounts of energy needed by the computers and cooling equipment to control the heat they generate.

Digital 9 raised £475 million this year in a stock market debut and is thought to have raised a further £200 million to expand its operations.

JPMorgan is arranging the fundraising and an announcement could be made to the stock market this week, investors said.

The company has one datacentre on a former Nato base in Iceland and will use the new funds to buy more. It will also buy or build subsea data cables, adding to its network linking the US and Europe, which are used by Facebook, Google, Amazon, Netflix and Microsoft.

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.