Weekend press round-up: Tideway seeks rise in water bills

In our latest review of sector coverage in the national newspapers, the company behind London’s super sewer is seeking to raise water wills to cope with an extra £233 million costs as a result of the pandemic. Meanwhile, an MP is pushing for all new homes and offices to be required to have electric vehicle charging points. The skills shortage in the heat pump market is also debated.

Thames Tideway seeks rise in water bills to cushion London sewer delays

Thames Tideway, the private company building the British capital’s new sewer, is seeking to raise Londoners’ water bills to cope with an extra £233m costs as a result of the Covid-19 pandemic.

Thames Water’s customers are currently paying for the £4.1bn cost of the tunnel through an £18 a year surcharge on their water bills, which could rise to between £20 and £25 if water regulator Ofwat agrees to the plans.

Construction of the tunnel, which will run for 16 miles under the river Thames and stop billions of litres of sewage from pouring into the river every year, is more than half way completed.

But the privately financed company developing the tunnel was forced to suspend work during lockdown last year, delaying completion of the project by about nine months to early 2025.

A consultation finished this week and a decision on the customer surcharge increase is expected by the autumn. Ofwat says it is investigating the impact of the pandemic, “which might mean a modest increase in cost”.

Tideway said that the £20 to £25 surcharge was within the range estimated for the project when it was agreed in 2015 “despite the significant impacts of the pandemic”.

The tunnel has become a test case for how the UK should harness private sector investment in infrastructure following the abolition of the private finance initiative three years ago. The government is planning to pass legislation in the autumn that would pave the way for a similar model to be used for a £20bn nuclear power plant at Sizewell in Suffolk.

Although the London tunnel is still being built, the developer is already receiving an income, paid for out of customer’s water bills.

Tideway has deferred £57.7m in interest payments to shareholders this year, recognising the uncertainties caused by the pandemic. Over the life of the project so far, investors have received £193.2m in interest on their loans as well as £54.5m in capital repayments on £1.3bn of equity and loans since 2015.

The Financial Times

Lower bills could open the way to greener home energy

Electricity bills could be made cheaper compared with gas to persuade people to use more green energy, the business secretary has signalled.

Kwasi Kwarteng said that ministers were looking at the “balance” of environmental taxes on bills as part of their drive to reduce carbon emissions.

He said in an interview with The Times that the government’s net zero strategy would examine whether consumers pay too much in levies on green electricity.

Kwarteng acknowledged that the disproportionate charges on electricity — of which more than 40 per cent was generated from renewable sources last year — needed to be examined again. “Clearly we’re looking at the balance,” he said. “There is a balance to be struck there. We’ve got a heat and building strategy, which is coming out, which I’m sure will initiate a lot of discussion about these very issues. I wouldn’t want to pre-empt that.”

Kwarteng said that the industries, such as steel, that are looking towards replacing fossil fuels with electricity were making similar arguments and suggested ministers were sympathetic to their concerns. “When you look at the steel sector and other sectors they do talk about the cost of electricity,” he said. “And it’s something that, you know, we have to think about.”

Proposals being discussed by senior government advisers would compensate lower-income households for planned increases in gas bills as part of the drive to cut carbon emissions.

The money would be paid regardless of an individual’s emissions. This means that those who continued to use gas would have any increase to their bill covered by the payment. However, those who switched to cheaper green energy would still get the full payment, meaning they could keep the difference.

The government had been due to publish its heat and building strategy next week but this is now understood to have been delayed, possibly until the autumn. At a meeting last week Boris Johnson was said to be concerned that it did not do enough to protect consumers and wanted further safeguards.

The full interview with Kwarteng can be found here (subscription required) 

The Times

Electric cars law change: Bid to make change for all new homes and offices

All new homes and offices will be required to have charging points for electric vehicles if a Tory MP succeeds in her bid to change the law.

Kensington MP Felicity Buchan argues that for electric vehicles to take off in the UK drivers must be sure that charging will “not be an issue”. With a ban on the sale of new cars wholly powered by petrol and diesel cars coming in 2030, Ms Buchan insists Britain must have the right charging infrastructure in place. She will introduce a Bill in the House of Commons on Tuesday in a bid to put the issue on the political agenda.

Arguing that the switch to electric-powered vehicles is essential if the UK is to achieve its goal of having “net zero” greenhouse gas emissions by 2050, Ms Buchan said: “The transition to net zero is critical for our country.  Transport is very important, accounting for 27 percent of emissions in the UK.

“Of that, cars make up 55 percent. [The] Government has brought forward the phasing out of the sale of new petrol and diesel car sales to 2030.

“To really encourage the uptake of electric vehicles we need to give consumers confidence that charging will not be an issue. An important way to do that is to have electric charging points mandated by law in all new build houses and offices.

“That is why I am introducing my Bill on Tuesday and I hope it may receive Government support as part of the transport decarbonisation plan.”

Britain has a long way to go before electric vehicles are the norm. According to House of Commons Library research, last year electric vehicles only accounted for 8.5 percent of registered vehicles – and just 1.8 percent of used car sales were “alternatively fuelled vehicles”.

The research found that the number of charging points per 100km of road in the UK has increased from 42 in 2011 to 570 in 2019. But it notes that the Committee on Climate Changes suggests 1,170 charging points per 100 km will be needed by 2030.

Daily Express

UK needs tougher policies, more public awareness to hit zero emissions, report says

Britain must introduce tougher policies to make residential heating more efficient and consumers need to cut energy usage to meet the nation’s target of net zero emissions by mid century, the National Grid (NG.L) said in a report released on Monday.

The National Grid Electricity System Operator (ESO), which distributes power around the country, modelled different scenarios in its report, with three showing how Britain could meet its goal in 2050 or sooner and fourth that misses it.

A cross-party group of lawmakers also said last week the government needed do more to engage the public and should publish policy plans on how it aimed to meet its net zero emissions target.

In the National Grid scenarios, Britain could by 2050 have up to 37.4 million electric vehicles on the road and road transport energy demand could fall by 60%. Britain could also have negative emissions from power generation by 2034, if carbon capture was included.

Green hydrogen — or gas made by splitting water via electrolysis using wind, solar or another renewable energy source — could play a role in achieving net zero emissions, according to scenarios in the report.

But the report said society also had to change.

In the most ambitious scenario, households in 2050 would turn down their heating thermostats by an average of 1 degree Celsius and more than 80% would be charging electric vehicles using off-peak power. The scenario also envisaged no natural gas consumption without carbon capture and storage after 2035.

“Consumers will need a greater understanding of how their power use and lifestyle choices impact how sustainable our energy system will be,” said Matthew Wright, head of strategy and regulation at National Grid ESO.

“Government policy will be key to driving awareness and change,” he added.

Reuters

Musk has ‘mesmerised’ UK over electric power, says JCB chair

Tesla founder Elon Musk has “mesmerised” UK government officials over electric power, blinding them to the potential of hydrogen as a way to cut carbon emissions, JCB chair Lord Anthony Bamford has warned.

The British industrialist said his company, known for its yellow diggers, had made a “major breakthrough” in designing combustion engines powered by hydrogen, which would be cheaper than batteries or fuel cells.

“We’ve achieved something that has not been done properly before by any other company. That is, to successfully make a hydrogen engine work to the extent it’s in a machine and done many hundreds of hours,” he told the Financial Times at the group’s engine innovation centre near Derby.

The group, which is no stranger to innovation after developing the engine that broke the diesel powered land speed record at more than 350 miles an hour, has made big advances on its hydrogen technology, while also developing diggers with batteries and fuel cells.

But Bamford, a Tory donor and Brexit supporter, said policymakers had written off cheaper and simpler ways to slash greenhouse gas emissions, such as hydrogen, because they are fixated on electrification.

He said electric power was a poor fit for construction machines and trucks.

“It’s not thought through by lots of people. We feel people, particularly a lot of officials, are mesmerised by Musk and ashamed of Volkswagen,” he said.

Electric vehicles running on battery power would need to be recharged regularly, unlike hydrogen powered combustion engines. This could pose a problem for electric diggers, which often operate in remote locations.

The batteries also become prohibitively expensive and heavy as the machines get bigger.

Tim Burnhope, chief innovation and growth officer at JCB, said batteries do not work well for heavy machinery because their energy demand is completely different to cars.

“Most cars take you to work and take you back. We do the opposite . . . we work all day.” he said.

A government spokesperson said “we fully recognise the revolutionary potential of hydrogen”. Boris Johnson’s government is planning to deliver 5 gigawatts of low carbon hydrogen production capacity by 2030.

The Financial Times

Octopus Energy prepares for air-source heat pump revolution

Hidden within a vast warehouse on the Slough Trading Estate in Berkshire, two properties are under construction that could help to kick-start Britain’s shift to low-carbon heating.

Over the coming weeks Octopus Energy will put the finishing touches to these three-bed semis, from fitting carpets to planting grass in their “gardens” and plumbing in gas boilers to provide heating and hot water. Then, later this year, it will begin inviting new recruits to come and learn how to safely disconnect those gas boilers — and install air-source heat pumps instead.

Less than 40,000 heat pumps are installed in Britain each year — a tiny number compared with the 1.7 million gas and oil boilers replaced or installed annually. But by 2028 the government wants heat pump installations to increase to 600,000 a year. While a political row continues over how to drive demand and pay for heat pumps, which can cost £8,000 to £12,000 per home at present, there are also concerns over whether Britain has enough skilled workers to install the devices, and whether it can secure the manufacturing spoils from making them.

Industry estimates suggest that Britain has only 1,200 accredited installers, while as many as 10,000 could be needed by 2025, and close to 40,000 by 2030. Heat pump manufacturers such as Vaillant are calling for “an urgent increase of support for installers in the industry to expand their skills to accommodate heat pumps if the government’s target is to be met”. Mark Wilkins, director of technologies and training at Vaillant, warns that it will be a “massive challenge” to get enough gas boiler engineers to retrain to fit heat pumps, especially with “an ageing workforce and declining numbers”.

“The main obstacle is that reskilling costs time and money which is precious for the sole trader installer [who needs] to go off the road and invest the time in retraining,” he says.

Greg Jackson, chief executive of Octopus Energy, insists a lack of installers “is not an impediment” to the switch to heat pumps and there is no need for government “handouts” for retraining. “A lot of people say a shortage of workers is going to hold us back. It’s the opposite, which is a shortage of volume means we’re not creating the workers. We don’t have to train 1,000 people before we can build a heat pump industry — what we need to do is build demand for heat pumps.”

It’s a similar story with manufacturing. Less than a third of the heat pumps installed in Britain in 2019 were made here; an EY report notes that to meet forecast demand “there will have to be a significant increase in capacity if the UK is to avoid relying on global manufacturing capacity”. But for UK manufacturers, “it just doesn’t make sense to switch a production line over from gas combi boiler assembly to heat pump assembly at the moment”, John Szymik, chief executive of Octopus Energy Services, says. “Creating the demand is the most important thing.”

The government is considering options to encourage manufacturing, including obliging boiler manufacturers to start making heat pumps too. Some are already seeing an opportunity to jump before they are pushed: Vaillant last month announced a £3 million expansion of its boiler factory in Belper in Derbyshire to start making heat pumps from next year.

Even without clarity on policies, it says it expects British heat pump demand to double this year. Octopus is also exploring plans to assemble its own heat pumps in the UK.

The Times

Macron’s battle to rewire EDF

Jean-Bernard Lévy has developed a remarkable level of patience in his role leading utilities giant EDF. The French state-controlled company oversees some of the longest-running infrastructure projects in the world, operating 73 reactors globally.

But even Lévy is bound to have grown frustrated by the lack of progress in the French government’s effort to improve the company’s prospects. In what has been code-named Project Hercules, France wants to overhaul competition rules and separate EDF’s costly nuclear power arm from other areas of its business.

It is hoped the move could allow EDF to double its growth target in renewable energy to 100 gigawatts (GW) by 2030 and help it manage its debts. Brussels must first give approval for EDF’s reorganisation, but talks appear to have stalled and time is running out before France’s general election in April.

From EDF’s Parisian headquarters, Lévy is waiting for the two sides to make their way through thorny issues such as fair competition, state aid concerns and France’s civil nuclear might. “Without Hercules, we risk becoming a second-tier utility,” he told L’Express magazine earlier this year.

“We will be overtaken by the oil majors who are now pushing into the electricity sector, and we have already been overtaken by several European utilities such as Spain’s Iberdrola and Italy’s Enel.”

EDF argues it is disadvantaged by rules in France allowing competitors to buy a quarter of the electricity generated by its nuclear fleet at a fixed price of €42 per MwH, to make up for its monopoly in the market. The price is too low and inflexible, EDF argues.

In February, Lévy called the rules “an unjustifiable poison, which inevitably puts EDF in greater debt”.

Reform to those rules, currently set to run to 2025, is another key part of the talks between France and the European Commission.

The possible changes involve the nuclear side of the business being taken fully into state hands, while the renewables, distribution and retail side would still list a minority stake.

It is hoped the new structure could help attract more of the cash moving towards wind and solar power as countries around the world seek to cut carbon emissions.

Reform could “unshackle EDF” says Elchin Mammadov, a senior utilities analyst at Bloomberg. “Unlike its peers, EDF is very constrained in how much it can invest,” Mammadov says. “Reform is urgently needed but politicians have been kicking the can down the road.”

Delay looks likely to continue, however, with Brussels and France failing to come to an agreement.

The European Commission is reportedly keen to make sure the nuclear arm, benefiting from state aid via pricing regulation, does not subsidise other parts of the business. France, however, faces opposition from the country’s powerful unions to anything that looks like a split of EDF, due to fears over jobs, privatisation, and sidelining of the nuclear industry. It comes as France is looking to reduce the proportion of nuclear power from about 70pc to about 50pc.

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.