Weekend press round-up: Ministers have been ‘asleep at the wheel’ on securing UK energy supply

Our latest weekend press round-up includes an interview with former government energy adviser Dieter Helm who said ministers have been “asleep at the wheel” which has led to “significant failures” in securing the country’s energy supply.

Elsewhere a North Sea oil and gas producer has labelled the government’s windfall tax plans as “seriously flawed” and SSE boss Alistair Phillips-Davies has claimed that dozens of major investors are considering whether to ditch funding for green energy projects because of threats to extend the tax to electricity producers.

Ministers have been ‘asleep at the wheel’ on securing UK energy supply, expert says

A former energy adviser to Boris Johnson has accused ministers of being “asleep at the wheel”, which has led to “significant failures” in securing the country’s energy supply.

Sir Dieter Helm, a professor of energy policy at Oxford University who recently advised No 10 on energy, said the Government’s mishandling of its own energy supply will mean consumers “paying through the nose” in their energy bills.

His comments come after i revealed the Department for Business, Energy and Industrial Strategy had ignored calls to protect domestic energy supplies by extending the life of Hinkley Point B nuclear reactor until it was too late.

The decision has prompted fears that the country could be more reliant on expensive gas imports to replace the loss of nuclear power-generated electricity, which will push up bills again next year.

Sir Dieter, who published a major review for the Government on the cost of energy in 2017, said the Government’s historic inaction on reforming the energy market had left it exposed to shocks, such as that caused by the Russian invasion of Ukraine.

“I do think when it comes to securing supply there have been significant failures, and frankly people have been asleep at the wheel,” he told i. “There would not have been the energy security strategy from No 10 [in April] unless something had gone wrong. We had had all the policy documents on energy the previous winter.”

The Oxford professor added that the Government’s failure to secure its energy supply meant there was a danger that ministers will pay “whatever it takes” to energy firms to keep the lights on.

He said it was “in the hands of the Government” to secure the country’s energy supply, adding that Beis should have put together a strategic case as to whether existing nuclear reactors should be kept going or retired.

“We are going to pay through the nose for gas imports, certainly. And every chunk of nuclear that comes off is [electricity generation] that is not dependent on the gas price,” he warned.

i understands that the French operator EDF was waiting for a ministerial intervention to keep Hinkley Point B running beyond its decommissioning date next month. Business Secretary Kwasi Kwarteng is believed to have contacted the energy firm to discuss Hinkley late last month, but was told it was too late to keep the reactor running.

Shadow Business Secretary Ed Miliband told i: “This Conservative government has left working people exposed to rocketing energy bills by a failure to plan ahead, inadequate regulation of the energy market and the blocking of the cheapest forms of power, including onshore wind.

“It now appears that the Government has learned no lessons from its mistakes. Ministers must explain whether they passed up the opportunity of extending the life of zero-carbon nuclear power which could help with our energy security, and if they did so, why?”

A Government spokesman said: “These claims are utter nonsense. The UK has no issues with either gas or electricity supply, and the Government is fully prepared for any scenario, even those that are extreme and very unlikely to occur.”

i

Windfall tax ‘seriously flawed’, says North Sea oil and gas producer

The biggest oil and gas producer in the North Sea has labelled the windfall tax on energy firms “seriously flawed” as it lobbied the chancellor for last-minute changes to the levy.

Rishi Sunak last month announced a windfall tax on oil and gas firms making outsized profits during the energy crisis, which he hopes will raise £5bn to fund efforts to cut household bills.

In a letter to Sunak, seen by the Guardian, the Harbour Energy chief executive, Linda Cook, called on the chancellor to urgently revise the proposals for the energy profits levy (EPL). The government hopes to put draft legislation in place by early July.

Cook said: “While I appreciate the scale of the cost of living crisis in the UK, the EPL as currently proposed is, in effect, retrospective and disproportionately impacts the independent oil and gas companies which have recently invested the most to help ensure UK domestic energy supply.”

Cook asked Sunak for a “gateway approach” where the levy only applies to “companies who have actually realised windfall profits”.

Harbour, which pumps about 200,000 barrels of oil a day, was created from a merger of the private equity-backed North Sea operator Chrysaor and its heavily indebted peer Premier Oil.

Cook argues that the effect of the levy on smaller specialist exploration and production companies is “disproportionately large compared with the projected impact on major oil companies such as BP and Shell”.

Harbour’s share price had rocketed by more than 40% since the start of the year as investors bet on oil and gas firms. However, since April all of those gains have been wiped out as the windfall tax damaged investor sentiment.

Cook estimated the largest independent UK producers – including Harbour, NEO, Ithaca and Spirit – will pay out more than £2.5bn.

The levy will result in energy firms paying an additional 25% tax but Sunak has allowed companies to make tax savings worth 91p in every £1 on investments in the North Sea. The tax will be in place until “normal” oil and gas prices return, or by the end of 2025.

Companies are not allowed to reduce the tax with losses made in previous years or money spent on decommissioning North Sea oil platforms.

Cook asked Sunak to “allow the offset of tax losses from past investment. Not doing so makes the levy, in effect, retrospective and penalises those who invested when commodity prices were lower.”

She added: “Do not exclude decommissioning spend for EPL purposes. We are legally obligated to undertake decommissioning at the required time, and funding this alongside the EPL results in less capital available for investment.”

Cook asked Sunak to consider changing the sunset clause to the end of 2023.

A string of smaller players have built up North Sea businesses by buying ageing assets from big oil companies including BP and Shell in recent years.

The BP chief executive, Bernard Looney, has been blamed for pushing the government into introducing the tax by admitting the levy would not hurt investment, a key argument originally made by ministers against its introduction.

Since Sunak announced the plan, BP and Shell – whose profits have soared this year – have warned that the tax could hit investment.

Harbour said it had invested £8.5bn into the North Sea, including on the Tolmount gasfield off the Yorkshire coast, during the past five years and had plans to invest an additional £2.5bn between 2022 and 2024.

Cook said Harbour’s hedging arrangements meant “we do not realise the full benefits of the recent high prices, unlike major oil companies who typically do not hedge and who have large trading organisations”.

The Guardian

Major investors considering whether to ditch funding for green UK energy projects because of threats to extend windfall tax, according to SSE boss

Dozens of major investors are considering whether to ditch funding for green UK energy projects because of threats to extend the windfall tax, according to the boss of SSE.

The Government has pledged to raise around £5billion through a one-off levy on oil and gas companies whose profits have soared following spiralling energy prices.

Money raised will go towards helping families struggling with the cost of living crisis.

But SSE chief executive Alistair Phillips-Davies warned that Treasury threats to widen the tax to electricity producers have made major investors reconsider funding commitments – even to renewable energy schemes.

Phillips-Davies said the tax could hamstring efforts to build the large-scale green energy projects that will help wean Britain off gas imports. He said: ‘We have heard from many clean energy investors recently who are now asking whether the UK remains a good place to deploy capital.

‘The irony is that the more difficult and expensive we make it to build the big projects we need, the longer the UK will be dependent on expensive imported gas.’

Although it earns some revenue from gas-fired plants, SSE is not part of the group that will be targeted by the Energy Profits Levy unveiled by Chancellor Rishi Sunak last month.

But the Government has said it is consulting with the electricity generation sector – which includes SSE – as certain companies have also seen ‘extraordinary profits’ due to record gas prices.

SSE could be targeted after it last month reported a 23 per cent rise in full-year profits to £1.2billion.

Last week the Perth-based group, which is worth £17billion, revealed Phillips-Davies received a pay packet worth £4.5m in 2021.

Although the UK is a hub for renewables projects, these need large external funding because of their huge development costs.

It is this cash that is most at risk at a key time when many schemes are trying to get off the ground.

SSE plans to invest £24billion in renewable and energy transition projects this decade.

This Is Money

Energy crisis: US firm strikes major UK deal to slash waste and power thousands of homes

KORE Power, a major US-based battery firm, has signed a deal with British energy companies to help build a battery storage facility that could also power over 60,000 homes.

As the UK increases its investment in renewable energy, experts have warned that the country needs to rapidly scale up its energy storage systems, in order to prevent the power generated from effectively going to waste.

The battery manufacturer will supply batteries for a 10MW/20MWh battery storage project that is under development between ABB and energy supplier Ecotricity.

This facility, known as the Battery Energy Storage Solution (BESS) will be installed at Ecotricity’s existing 6.9 MW wind farm in Gloucestershire in 2023.

Speaking to Express.co.uk, Lindsay Gorrill, CEO of KORE Power, said: “The batteries have enough capacity to power more than 60,000 UK homes for one hour.”

Mr Gorrill continued: “We founded KORE to power the energy transition with advanced battery technology.

“We know that battery storage is the foundation of scalable clean energy. “Grid-scale batteries can smooth the peaks and valleys created by renewable generation, respond instantly to stabilize the electric grid, and make a clean, efficient, and affordable electric system possible.”

This deal comes amidst growing collaboration between the US and the UK in developing renewable energy technologies, in a bid to end the energy crisis and reduce reliance on fossil fuels imported from Russia.

Following a meeting with US diplomats last month, Business Secretary Kwasi Kwarteng said: “The UK and US are determined to utilise the strength of our unique relationship through the Energy Dialogue to help European countries end their reliance on Russian oil and gas, and to strengthen collaboration on new nuclear power and clean energy technologies.

“We also discussed the role British and American companies will play in investing in growing our economies and steps we need to take to ensure secure supply chains and critical minerals.”

Express

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.