Weekend press round-up: Millions warned of power cuts this winter

Our latest review of sector coverage in the national media includes a bleak report of government fears that six million households could be asked to ration electricity this winter. Meanwhile, National Grid is said to be examining ways to ramp up gas pipeline capacity and a new poll shows a quarter of UK households are looking to improve the energy efficiency of their homes in the face of soaring bills.

Millions warned of power cuts this winter

Six million households could face blackouts this winter because of Russia’s invasion of Ukraine, ministers have been warned, as they look to bolster electricity supplies by prolonging the life of coal and nuclear power stations.

The Times has been told that the government’s “reasonable” worst-case scenario, which has been drawn up by officials from across Whitehall, says that there could be widespread gas shortages if Russia goes further in cutting off supplies to the EU.

A minister said the briefing suggested that electricity could have to be rationed for up to six million homes at the start of next year, mostly at peaks in the morning and evening. The curbs could last more than a month, causing energy prices to rise again and leaving GDP lower than forecast for years to come.

Kwasi Kwarteng, the business secretary, has written to the owners of Britain’s three remaining coal-fired power stations to ask them to stay open for longer than planned. They were due to close in September under plans to phase them out entirely by 2024 to reduce emissions.

Hinkley Point B, a nuclear power station in Somerset, could also be given an 18-month extension. The plant, which is nearly 50 years old, was due to be decommissioned this summer. Britain buys less than 4 per cent of its gas directly from Russia but is connected to European markets. The EU typically gets 40 per cent of its gas from Russia and its members have continued paying it hundreds of millions of euros a day since the invasion.

The worst-case scenario is understood to raise concerns that Norwegian imports of gas, on which Britain is reliant, could more than halve because of increased EU demand. Imports of liquefied natural gas, which are brought into Britain by tankers, could also halve because of greater competition.

The modelling is understood to assume that Britain will receive no imports of gas from “interconnectors” in the Netherlands and Belgium as both countries face their own emergencies.

The shortages would force Britain to implement its own gas emergency plans, which would lead to the closure of gas-fired power stations. Heavy industrial users of gas would also be told to stop using it.

The closure of the plants would lead to a shortage of electricity, forcing the government, in effect, to ration. It would be turned off on weekdays at peak times in the morning, between 7am and 10am, and in the evenings, between 4pm and 9pm. Gas supply to homes would be unaffected.

Officials are also said to have drawn up an even bleaker strategy in the event of Russia cutting off gas entirely to the EU. It suggests that energy blackouts could start in December and last for three months, with blackouts both on weekdays and weekends.

The government is in talks with Centrica about reopening a natural gas storage facility off the east coast of England, with more than £1 billion of subsidies. It was closed in 2017 after being deemed too costly to maintain.

The Times

National Grid in emergency talks over crucial gas supplies

National Grid is holding emergency talks with energy companies to ramp up gas pipeline capacity after it was forced to turn away crucial shipments of liquified natural gas (LNG).

The Grid has pledged to address industry concerns over lack of capacity on its network so it can deliver the supplies needed to tackle the European energy crisis.

The company has kick-started talks with LNG importer South Hook Gas to make sure it can handle a higher level of cargoes next year. It is also planning to discuss the network’s capacity issues at an industry workshop on 9 June.

Gas companies have seen the move as a sign National Grid is willing to consider ways to ramp up capacity in 2023.

National Grid has been forced to dramatically reduce the amount of capacity it offers at ports in Milford Haven in Wales this summer over fears it is running out of space for the fossil fuel required to replace Russian gas on the continent.

It has also cut back on supply so it can push ahead with maintenance work on the pipeline.

National Grid is now weighing up plans to increase the pressure in the pipes in its gas network ahead of summer 2023, although talks are at an early stage. National Grid has not made any firm commitments in discussions so far.

The gas network is currently unable to handle a large uptick in deliveries over the summer months owing to a decline in demand from British households.

National Grid will also conduct maintenance on its gas network this summer to prepare for deliveries in the winter months, although there are no plans to make major investments.

Sunday Telegraph

Quarter of UK households look to improve energy efficiency as bills surge

A quarter of UK households are looking at improving the efficiency of their homes in response to the surging cost of energy, according to official statistics, that also found almost half were struggling to pay their electricity and gas bills.

A survey by the Office for National Statistics covering the two weeks to May 22, found that 26 per cent of respondents were looking at ways of improving the efficiency of their properties, up from 19 per cent last autumn.

Nearly half of households reported difficulties in affording their energy bills, which have soared since April when Ofgem the regulator raised the price cap in April by £693 to £1,971 a year on average.

More than one in five respondents had to increase borrowing as a result of the rising cost of living, the highest proportion since November, the ONS found. Almost 90 per cent said their cost of living had risen over the past month, up sharply from 62 per cent who responded to the same question in November.

Improving insulation, switching energy suppliers and installing solar panels were named as the most common energy-efficiency measures being considered, the ONS found. Other options, including installing a smart meter or replacing the source of heating.

Mike Brewer, chief economist at the Resolution Foundation, said that it was “encouraging” to see more people thinking about ways to better insulate their homes. This was “a key part of our net zero transition, and the long-term solution to lower energy bills,” he added.

But the survey also found that more than a third of people said cost was a big barrier to making these changes. This was a particular issue facing low-income households, with almost three-quarters in homes that need energy efficiency improvements. Another 15 per cent said they felt improving energy efficiency would not offer value for money.

“Government support is crucial to making this home insulation drive a reality, but it will require a step change in approach given that the number of roofs and walls being insulated today is down 90 per cent on a decade ago,” said Brewer.

The Financial Times

‘BP plans to invest £18bn in Britain – but we need a stable environment to do more’

Louise Kingham did not have an entirely welcome start to the professional world. She recalls being told in her early days that she would be “seen and not heard”.

It did not sit well. “I’m quite resilient, I’m not the type of person that’s going to heed that guidance or that instruction,” she says. “I’ll take it and try and turn it into a positive.”

The now 51-year-old has done just that: Kingham was chief executive of Energy Institute, the industry’s professional body, for 21 years in total, before last year moving to BP as its UK head of country and senior vice-president for Europe.

It comes amid a major long-term strategic shift at the FTSE 100 oil and gas producer under chief executive Bernard Looney, who took over at the start of 2020 after working his way up under predecessor Bob Dudley.

The company is undergoing a major shift towards greener energy production, pushing social issues such as mental health and diversity up the company’s agenda, and cutting ties with Russia in the wake of its war on Ukraine.

Amid all the change, however, BP along with the rest of the industry is currently engaged in an age-old tussle over profits, fairness and social licence to operate.

On Thursday, the Government bowed to months of pressure and hit North Sea oil and gas producers with a windfall tax. Surging oil and gas prices, worsened by Russia’s war on Ukraine, led to record profits for producers and record energy bills for households.

The new tax won’t affect BP’s or others’ profits made before last Thursday, but from then the overall tax rate increases from 40pc to 65pc. It will last until December 2025 unless oil and gas prices return to “normal” levels beforehand.

The policy aims to strike a balance between encouraging investment and raising money for households, with tax breaks on investment in North Sea extraction as concern over energy security heightens amid Russia’s war.

But it triggered an immediate pushback from the industry warning it would deter investment in the long-term.

BP had previously said plans to invest £18bn across UK energy this decade would be unaffected by a windfall tax. On Thursday it said it would review how the new regime would affect its North Sea plans. The tax was not a “one-off” but a “multi-year proposal,” it said.

Analysts estimate it will add $100m (£79m) to BP’s tax bill this year and $800m next year. The company made £5bn in profits over the latest quarter.

Kingham says: “The best way to get investment is to have stable fiscal regimes, stable environments in which to make those key decisions to bring investment forward.

“This is our home, we’re committed to Britain, we’ve said that we’re backing Britain. And we’ve also been really clear and said that’s not somehow contingent on whether or not there’s a windfall tax.

“But in a stable environment, that’s a great place to put your money down. In a less stable one – you have to factor that in. And we have said we don’t think that’s helpful.”

The proportion of BP’s spending going to the UK is also increasing, from 10pc-15pc to 15pc-20pc, she notes: “We can do more, there is more that could be done. But it needs a stable environment for us to be able to invest and do that.”

The planned £18bn investment amounts to £640 invested for “every home in the land” says Kingham, but agrees “what it doesn’t do is bring bills down tomorrow and  of course that’s the frustration…It will do in time, but it can’t solve that crunch that we’ve got with inflation and with energy pricing.”

Help of another kind may be in the works, she suggests. “We did things in the pandemic to provide additional support to try and help. We are having discussions at the moment about what we could do in this particular crisis. Like everyone, I’m sure, we hope that this is not a prolonged situation, so we’re looking to see what more we could do.

“We’re a responsible British business, we want to try and help. It’s not always easy for us to do but we are running a number of ideas at the moment inside the organisation. We’ve talked about charitable help, we’ve talked about the provision of fuel, we’re talking about support for food-bank operations, and some other ideas as well for how you best support the most vulnerable. […] So watch this space.”

Sunday Telegraph

Offshore windfarms pay out just £150k to local coastal communities

Scotland’s six offshore wind farms have paid just £150,000 to nearby communities in the last 12 months, it can be revealed.

Holyrood energy minister, Michael Matheson, revealed the figure in response to a written question by Scottish Labour MSP, Monica Lennon, who told The Ferret she was “astonished” by the “measly” sum.

The Scottish Government encourages wind farm developers to make an annual payment to local areas impacted by the building of a new project. This is paid directly by the wind farm’s owner to the community which hosts the turbines and is used to support local projects.

The payments — known as community benefit funds — are often viewed as a form of compensation for the visual impacts on environments that wind farms have, as well as the disruption experienced by nearby residents throughout the construction and operation of the farm.

They are also considered to be a way of ensuring that part of the wealth produced by Scotland’s energy resources is locally owned and used to benefit local people.

Scotland’s offshore wind farms — which are valued at £889m — are responsible for only 0.7 per cent of community benefit payments, despite making up nearly ten per cent of wind energy capacity.

Campaigners argued that the figures added to the “overwhelming evidence” that Scotland’s offshore wind has been “exploited not for national benefit, and certainly not for the benefit of coastal communities, but for the benefit of corporations”.

But the renewable sector told invetsigative journalism co-operative The Ferret that focusing on community benefit payments would be “doing a disservice to an industry which is about to transform the fortunes of Scotland’s coastal communities forever” through investment in supply chains.

Initiatives supported by community benefit funds include refurbishments of community halls, befriending programmes, bursaries for further education, and energy efficiency schemes.

The Herald

Nuclear safety warning threatens to derail Johnson’s energy revolution

Boris Johnson’s plans for a nuclear energy revolution are facing a fresh hurdle after the Austrian government officially raised concerns about the safety of a new reactor design.

In a letter to the Business Department, Austria’s energy ministry raised the spectre of “severe accidents with high releases” at the Sizewell C plant to be built in Suffolk.

The warning, made under the Espoo convention in which nearby countries are allowed to comment on nuclear projects, raises the prospect of legal action to derail Sizewell and will be considered by the Government as part of a planning decision in coming months.

Austria is a longstanding critic of Britain’s nuclear programme and tried to block the construction of its Hinkley Point C plant at the European Court of Justice on the grounds that it violated state aid rules.

Hinkley and Sizewell, which are due to come online in 2027 and the 2030s respectively, use a new reactor design called EPR that is meant to be cleaner and more efficient than existing models. It is widely regarded as safe by experts and was cleared for use by British regulators after a five-year application process that cost £35m.

But the Austrians said that it is “questionable” whether the Sizewell design could guarantee that radioactivity will be retained within the reactor’s core.

They warned that the high power of the EPR reactor reduces the time available for an operator to react to any fault and prevent a major accident, and added: “At this time, it cannot be proven beyond doubt that severe accidents with high releases cannot occur.”

Daily Telegraph

The £1.2billion power grab

Foreign-owned energy giants facing the prospect of a windfall tax from Chancellor Rishi Sunak have siphoned £1.25billion from their UK operations over the past two years, The Mail on Sunday can reveal. The payments from Spanish-owned Scottish Power and German giant RWE were made through the pandemic and as British households confronted rising energy bills.

Revelations of the bonanza, paid in dividends to overseas parent companies, come just days after Sunak unveiled an emergency £15billion support package for families struggling to cope with an unprecedented cost-of-living exacerbated by soaring energy prices.

Sunak said the package would be part funded by a £5billion windfall tax on North Sea oil producers such as Shell and BP – part of what he described as a ‘significant set of interventions’ to help offset the impact of rocketing inflation. He said the oil and gas sector was making ‘extraordinary profits’ as a result of ‘surging global commodity prices driven in part by Russia’s war’ in Ukraine. Demand also spiked as manufacturers and other companies ramped up activity sharply as global lockdown measures eased.

But Sunak also signalled energy generators were in the firing line and he was ‘urgently evaluating’ the scale of their excess profits.

The Mail on Sunday can reveal that the bulk of the bumper dividend payments overseas was made by Scottish Power to its Spanish owner Iberdrola. It has netted a total of £2.2billion from Scottish Power since 2016. This includes a peak payout of £860million in 2020 and £56million last year.

The highest paid director at Scottish Power received £1.35million in 2021, up £200,000 on the previous year. Analysis of accounts also found that RWE’s UK power generation arm paid a total of £330million in dividends to its German parent in the last two years. Energy campaigners reacted with fury to the revelations. Simon Francis, coordinator of the End Fuel Poverty Coalition, said: ‘The Mail on Sunday’s investigation has uncovered truly jaw-dropping findings. Even after the windfall tax introduced this week, we were told there is not enough money to fully compensate households for the recent astronomical energy bill price rises.

‘All the while, energy firms have been laughing all the way to the bank, handing over billions in dividends. Rather than focus on profitability, while millions of their customers are in abject fuel poverty, these firms need to have a sharp lesson in what meaningful social responsibility looks like and how they can help customers in their time of need.’

The Mail on Sunday analysis specifically focused on foreign-owned firms in the period through the pandemic and subsequent energy price rises.

But for years, energy firms have been paying out vast sums to shareholders. SSE, the London-listed power company, last week announced an annual dividend of £862million. That took the total paid to shareholders since 2018 to more than £4.5billion.

Its shares fell on fears it too could be hit with a windfall tax.

Shares in British Gas-owner Centrica were also weak – it has not paid a dividend since 2019.

Among other foreign-owned energy giants, EDF Energy said no payout has been made from the UK to its French parent company since 2017. But analysis shows the Paris-based group paid £1.8billion in dividends last year, almost half of the group’s total net profits. E.ON also said its UK division had not paid a dividend to its German owner in recent years. The parent group, based in Essen, plans to increase its £1billion payout by up to 5 per cent a year to 2026 as part what it calls an ‘attractive’ dividend policy. Energy suppliers have been vocal in urging the Government to do more to tackle rising fuel poverty after energy prices ballooned in the wake of Russia’s invasion of Ukraine.

Mail on Sunday

Electric blankets save customers £300 on their energy bills revealed Octopus Energy

Customers using electric blankets have cut their energy bills by nearly a fifth this year, revealed Octopus Energy.

The UK’s fifth biggest supplier launched the Octopus Electric Blanket scheme in January, and its latest data shows customers taking part have saved up to £300 per year compared to other energy users on its books.

Octopus analysed the smart meter data of the 4,190 customers who opted into the scheme, and discovered that customers who received electric blankets reduced their energy bills by 19 per cent compared to the control group of consumers who did not use blankets.

Electric blankets are a highly effective way to heat a person, without the expense of heating an entire home.

Currently, it costs less than 3p an hour to keep a person warm with an electric blanket, while heating a whole home could cost around £4.70 a day.

So far, the supplier has sent out 7,000 free electric blankets to customers, with distribution based on need, prioritising people who are struggling the most.

The scheme has been open to all Octopus customers and can be accessed via an online tool which asks a series of questions about their financial situation.

This winter’s scheme has closed, but Octopus has announced it will extend the scheme again next winter.

City AM

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.