Weekend press round-up: UK spent almost £500k on unused support scheme for energy firms

In our latest review of sector coverage across national media, the cost of an unused emergency scheme for energy traders is revealed. Meanwhile, it is claimed that under current home insulation plans it will take 300 years for the government to meet its own fuel poverty reduction targets. There is also coverage of water bosses being paid £14 million in environmental performance bonuses last year.

UK spent almost £500,000 on unused support scheme for energy firms

The Treasury spent almost half a million pounds on an unused emergency scheme for energy traders launched by Liz Truss that was quietly closed earlier this year.

The energy markets financing scheme (EMFS) was devised by the Treasury and the Bank of England as a £40bn government-guaranteed backstop fund to provide stability for energy and financial markets.

The scheme was designed to offer energy traders liquidity to deal with massive margin calls – demands from brokers to deposit further cash or securities to cover possible losses – but was shut in January as a sharp fall in wholesale gas prices earlier this year eased pressure on energy firms.

In response to a freedom of information request by the Guardian, the Treasury said it spent £465,000 on “external technical consultants to support the creation of the EMFS”.

It said that 11 commercial banks and 20 energy firms were invited to technical video calls with the Treasury relating to the scheme. Energy firms would have applied jointly with a bank but no applications were made during a window from October to late January.

FTI Consulting, the global management consultancy, received £400,000 for its advisory role, while the law firm Hogan Lovells received £65,000.

The government contract was originally worth up to £4.9m for FTI to provide market research and consultancy services, according to analysis by the data firm Tussell.

Truss announced the scheme in September as part of a package of measures to prevent the energy crisis causing further damage during the winter. The then prime minister also announced support for households and businesses, both of those schemes were later pared back to reduce the cost.

The Treasury said: “The scheme was introduced as part of a range of contingency measures to support the energy sector.

“Since the launch of the scheme prices in the wholesale gas markets have declined markedly and this has reduced some of the pressure facing eligible energy firms.”

It added: “Due to improvements in market conditions since the launch of the scheme, energy firms were able to access the necessary lines of credit from commercial lenders without the need for the government-backed guarantee.

“The EMFS was designed to supplement existing commercial financing where this alone was not sufficient with penal pricing and conditions upon drawdown set so it would only be used if commercial and competitively priced financing was unavailable on the market. It was not intended to replace commercial lending.”

The Guardian

UK insulation scheme would take 300 years to meet government targets, say critics

The government’s home insulation scheme would take 190 years to upgrade the energy efficiency of the UK’s draughty housing stock, and 300 years to meet the government’s own targets to reduce fuel poverty, according to industry calculations.

Critics of the Great British Insulation Scheme, which aims to insulate 300,000 homes a year over the next three years, have raised concerns that the plan does not go far enough to reach the 19m UK homes that need better insulation.

The Labour party added that it would fail to address the government’s “disastrous record on heating our homes”: the rate of energy efficiency upgrades is 20 times lower than under the last Labour government.

The UK Business Council for Sustainable Development has calculated that the pace of the new scheme, announced as part of a wide-ranging energy security strategy last week, would take almost 200 years to reach the homes in need of upgrades.

The scheme would take another 100 years to meet the government’s own targets for improving the home energy efficiency of households living in fuel poverty in England alone, according to fuel poverty charity National Energy Action.

“We simply don’t have that long to act,” said Jason Longhurst, chair of the UK Business Council for Sustainable Development.

Matt Copeland, head of policy at National Energy Action, said progress on energy efficiency in the UK had “been far too slow for a decade”, and that the new scheme was “not well targeted at fuel-poor households, who need the most support with their bills”.

He added: “Our own analysis from the most recent set of fuel poverty statistics for England found that it will now take approximately 300 years for the government to hit its statutory target for all fuel-poor homes to reach EPC C – far behind the 2030 deadline.”

A spokesperson for the Department for Energy Security and Net Zero said that “strong progress is being made to insulate homes” and that the government does “not recognise this analysis”.

The Guardian

UK and South Korea team up to bolster nuclear supply chain amid Chinese dominance

The UK will work with South Korea to build nuclear supply chains and share information on developing technologies such as small modular reactors, as it looks to limit China’s role in ramping up nuclear power generation.

Energy security and net zero secretary Grant Shapps has travelled to capital Seoul to meet Dr Lee Chang-Yang – Minister of Trade Industry and Energy for South Korea, and signed a joint statement of co-operation on the energy transition.

Details of what aspects of the supply chain and which information they will share remain sparse, but both countries agree that nuclear energy has an essential role to play in creating secure and affordable energy.

Their plans includes developing ‘robust and resilient’ nuclear supply chains and sharing developments in advanced civil nuclear technologies.

As it stands, China are world leaders in nuclear expertise, with expansive global supply chains and stakes in Western projects including EDF’s Hinkley Point C – the latest upcoming nuclear plant in the UK set for completion this decade.

The government has looked to boost domestic investment in power plants through the Nuclear Financing Bill – which enables taxpayer funds to be used for initial stages of construction before pension groups and investment firms join projects.

Meanwhile, the government has bought China General Nuclear Power Group’s (CGN) holding in Sizewell C – which awaits a final investment decision.

City AM

Surging costs to hit offshore wind projects, expert warns

Supply chain constraints, higher raw material prices and a jump in the cost of capital will leave Britain with a larger bill for the next round of offshore wind projects, the government’s industry expert has warned.

Tim Pick, Britain’s first offshore wind champion, has told ministers not to expect a further price drop at the next auction below the £37.35 per megawatt-hour at which some operators last year agreed to sell their power.

Under the government’s contracts for difference (CfD) regime, via which developers are paid an index-linked flat rate for the electricity they produce over 15 years, the price for offshore wind has continued to fall. It was down 5.8 per cent last year on the lowest bid in 2019.

However, with the fifth auction round looming, Pick used his first report on the industry to say that the government “should recognise that as a result of supply chain constraints as well as increasing costs of capital, CfD strike prices for fixed bottom offshore wind are unlikely to continue their downward trajectory”.

In his report, published last week, Pick said offshore wind had been a “major UK success story”, with 13.8 gigawatts of fixed capacity already installed, including the “world’s first, second, third and fourth largest” farms. Britain has the largest fleet outside China. The UK also has a further 6.4 GW under construction and 12.6 GW with planning consent.

He warned, however, that government plans to have 50 GW by 2030 were under threat unless Britain sped up planning and dramatically improved connections to the electricity grid. “If I had to sum up in one sentence where we stand today,” he said, “I couldn’t use words better than those of a European developer with investments across the UK: ‘The UK is long on seabed leases, but short on timely grid connections’.”

He said there was an “urgent need” to “upgrade our national grid” and that the government “should recognise that grid constraints are becoming a significant brake on wider economic activity, not just on offshore wind farms”.

The Times

See Utility Week’s coverage of the report last week

Water companies argued against key pollution target

Water companies argued that a government target to clean up a key source of river pollution would drive up water bills and push many households into “water poverty”.

Effluent released from sewage treatment works is the biggest source of phosphorus in England’s rivers. Excessive levels of the nutrient can lead to algal blooms that reduce oxygen levels and choke fish and plants.

However, when the government recently consulted on its new Environment Act target of cutting phosphorus releases from sewage plants by 80 per cent by 2037, compared with 2020, it received a strong resistance.

South West Water told officials that the target was “demanding” and would cause “disproportionate costs”.

The company, whose number of sewage spills has drawn fire from Thérèse Coffey, the environment secretary, warned of “a significant increase in the number of households in water poverty and struggling to pay their bills”.

Thames Water said the drive to reduce phosphorus was “likely to materially increase customer bills”.

The government’s Plan for Water last week said there was four fifths less phosphorus in rivers than in 1990, but it wanted to go further. Coffey’s department said it had already required companies to invest £2.5 billion for further reductions by 2025.

While large sewage works have been upgraded to strip out a certain amount of phosphorus, many smaller facilities do not remove any of the pollutant.

The Times Clean it Up campaign has been calling for greater and faster investment by water companies to tackle phosphorus pollution, as well as greater incentives for farmers to curb their releases of the pollutant.

United Utilities, recently revealed as the worst sewage spiller in England, raised concerns that the phosphorus target would have a “sizable impact of the proposed targets on the affordability of water bills”.

Despite a water industry chief telling companies not to blame other sectors for river pollution, United Utilities complained that it was unfair agriculture had to cut phosphorus pollution by only 40 per cent. It said a “greater emphasis is needed on agricultural pollution” to get cleaner rivers.

South West Water called for a phosphorus equivalent of the EU’s carbon trading scheme, which could in theory allow water companies to “buy” reductions in phosphorus releases by farmers and other sectors instead of upgrading sewage works.

Anglian Water also bemoaned the focus on upgrading sewage works, which it warned could “incentivise significant investment” into “environmentally irrelevant point sources [places where pollution is released]”.

The Times

Water bosses get ‘environmental bonuses’ in £14.5m pay packets despite 300,000 sewage spills

Water bosses in England and Wales were paid bonuses for their environmental performance in pay packets of more than £14m last year, despite discharging sewage into rivers and seas more than 300,000 times.

The total pay for chief executives at the 10 English and Welsh combined sewage and water businesses was £14.5m in the 2021-22 financial year.

Of that, more than £10m took the form of bonuses, long-term incentives, benefits and pension contributions.

Campaigners said the figures showed an “obscene bonus culture” at the heart of the water industry, coming at the cost of customers and the environment.

Last week, Ofwat, the financial regulator of water companies, and the Government pledged that bonuses would be tightly linked to performance and would be “recovered” where measures such as environmental targets are not met.

Water company accounts analysed by i reveal bosses are currently being paid thousands in bonuses specifically for environmental performance, despite regularly releasing sewage into rivers and seas.

Wessex Water gave its chief executive, Colin Skellett, £61,548 for the company’s environmental performance, out of a total benefits package of £189,500. In 2022, the company oversaw almost 29,000 sewage spills and in 2021 it dropped from a four-star Environment Agency (EA) rating to just two stars.

Severn Trent linked 12 per cent of its chief executive’s bonus to environmental performance and is set to link a further 8 per cent in 2022-23. Its CEO, Liv Garfield, is the best paid executive in the industry at £3.9m, including bonuses. She received 81 per cent of her total possible bonus in 2021-22.

While the company has a maximum four-star rating from the EA, it still discharged sewage nearly 45,000 times in 2022.

Other companies said environmental performance was already included in the Ofwat performance indicators they used to judge remuneration. United Utilities takes this approach. Its chief executive, Steve Mogford, received a £727,000 bonus as part of a £3.2m pay packet.

The company also has a four-star EA rating, but is the worst performer for sewage discharges with 69,245 in 2022. The company argues that it serves a larger and significantly rainier area than other water companies.

iNews

Four new wild swimming sites in England open for summer season

Wild swimming fans will be able to enjoy access to four new sites in the UK that are being designated as bathing waters ahead of summer, the government has announced.

The sites in Rutland, Devon and Suffolk will receive bathing water status from next month, meaning they will soon benefit from regular water-quality monitoring.

Sykes Lane Bathing Beach and Whitwell Creek at Rutland Water, Firestone Bay in Plymouth and a section of the River Deben at Waldringfield in Suffolk will be officially designated ahead of the 2023 bathing water season, taking the total number of official bathing waters across England to 424, the highest recorded.

The government said the proportion of bathing waters assessed as good or excellent has increased from 76% to 93%, while 72% are considered excellent, compared with 51% in 2010. This is despite classification standards for bathing waters being made stricter in 2015, it claims.

The water minister, Rebecca Pow, said: “These popular swimming spots will now undergo regular monitoring, starting this May, so bathers have up-to-date information on the quality of the water. The regular monitoring also means that action can be taken if minimum standards aren’t being met.

“We now have more bathing waters than ever, and we’ve worked hard in recent years to boost their status – with an incredible 93% now classed as good or excellent – and our new Plan for Water will help us go further and faster on our targets.”

The Environment Agency will take regular samples at the newly designated sites during the bathing season, which runs from 15 May and 30 September. It will assess whether action is needed to cut pollution levels and work with local communities, farmers and water companies to improve water quality at the sites.

The Guardian

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.