MONTHLY HEADLINES

Cost of battery storage forecast to fall further as demand rises
Investment in energy storage is forecast to grow in the next couple of decades as a rise in demand is expected to cut the cost of lithium-ion batteries in half. According to Bloomberg, this is on top of the 85% cost reduction already seen between 2010 and 2018.

Greg Hilton starts as Partner within the Infrastructure & Energy team
Carter Jonas has welcomed Greg Hilton as Partner within the Carter Jonas Infrastructure and Energy team, based out of our Cambridge office. Greg works with landowners, developers, investors, and businesses to provide strategic advice and development services on a range of energy infrastructure, including solar PV, flexible gas generation, battery storage, biomass and anaerobic digestion.

The PPA market shows signs of rising in recent weeks
Power Purchase Agreement (PPA) prices have been choppy in recent months, but we have started to see some rise in export prices. We will, therefore, be looking at contracts renewing in September and October in the next few weeks and will be in touch.

Industry News

Short term energy prices saw a surge in the first two weeks of July on the back of low renewable output and a tightening gas supply. Power prices traded up close to £50/MWh, its highest level since early April, having dropped to near two-year lows at the start of the month. Wind output dropped to less than 2% of supply while solar output also fell due to cloudier weather conditions.

The latter half of the month saw short term markets turn bearish as gas prices dropped and renewable generation, particularly from wind, increased sharply. However, this run was relatively short-lived as prices once again found support from a sharp drop in wind output at the end of July.

Cooler and wetter weather than normal is forecast for much of August, which could limit consumption and therefore stabilise short term energy prices.

Long term energy markets followed a similar trend to short term prices in July. Rallying carbon emission allowances, and oil and carbon markets provided the support. Carbon prices hit a new 13-year high of EUR 29.73/ tonne, bolstered by a reduction in the volume of allowances in the August auction. If prices can break the Euro 30/ tonne resistance barrier they could well rise further.

Meanwhile, oil markets also initially spiked up to $67/barrel in the face of escalating tensions between Iran and the West along with tropical storms disrupting US oil output. Throughout the month, prices remained volatile, torn between ongoing concerns over a slowdown in global economic growth and large falls in US oil stockpiles.

  • New figures show that sales of electric vehicles (EVs) soared by 61% in June compared to the same month last year. Along with the price of EVs going down, the rise has been attributed to the rapid expansion of charging points across the UK, which has begun to reduce concerns over range.
  • More than half of the UK’s power needs were met by renewable energy for the first time, on the 30th June, according to data from Drax. The sunny and windy conditions, along with low demand, helped the UK’s electricity system operate at its lowest ever carbon intensity.
  • RWE is to close its Aberthaw B coal-fired power station in March 2020, taking the UK’s coal fleet down to four. RWE cite ‘challenging’ market conditions as making the closure necessary, along with their plans to become a renewable powerhouse.

An often overlooked requirement of the Renewable Heat Incentive (RHI) is the need to have planning permission, so much so, that many developments have gone ahead and secured RHI without giving planning a thought.

Ofgem has a history of carrying out audits of various technologies receiving incentives and, as of May 2018, they have turned their attention to the RHI. This impacts all assets which claim payments, e.g. biomass installations. Recently, there has been a rising number of incidences where asset owners have been asked to present evidence of planning permission. If this evidence cannot be provided, payments will be suspended until confirmation is made.

  1. Should planning permission not have been acquired for a development, an asset owner currently has three options:
    Apply for planning permission. Pursuing planning permission would take in the region of 8-12 weeks and should be applied for as a matter of urgency to avoid any disruption to cash flow.
  2. Acquire ‘deemed’ planning permission, if the installation has existed for over 4 years. Should this be the case, Ofgem would accept this as sufficient evidence.
  3. If the development is under a certain size (usually boilers under 45kW) it could come under permitted development. If this is the case, then planning permission may never have been required. However, as with all of these scenarios, appropriate evidence must be provided to avoid disruption.

It is important to note that, should planning permission have been required but not obtained, this would count as an illegal use of the land, presenting an issue should the individual wish to sell the land or farm.

Should you or anyone you know be impacted by the audits, the energy team at Carter Jonas has a wealth of experience dealing with Ofgem and local planning authorities. If operating without the necessary planning permission, it is vital to act as a matter of urgency, contact the energy team and we can assist.

Electric Vehicle Charging Points – The installation of EV charging points is a great way to future proof your site as the market is set to soar over the next decade. Securing grid capacity early is key as this could restrict future deployment. Return on investment can be sought through the owning and operation of charging points, or the lease of a site to an operator for an EV charging service station. Download our brochure here.

Solar PV – Carter Jonas is actively site finding and advising clients on the development of over 50 sites that will enable the development of over 750MW of subsidy free solar schemes across the UK. For high energy users, self-development options are also still available beyond the closure the FIT scheme in March 2019.

Battery Storage – The market for behind-the-meter battery storage and Demand Side Response (DSR) is evolving quickly. The income streams are becoming more uncertain, but the possibility of tying in batteries with Solar PV is making the financial model more favourable, particularly for energy-intensive industries with an annual electricity spend of higher than £100,000.

Gas and Electricity Brokerage – Volatility in wholesale markets, combined with rising non-commodity charges, could force energy prices up 50% by 2020 compared to 2016 prices, according to recent figures. Carter Jonas can help manage these risks by working with businesses to produce an energy strategy and ensure they are not only getting the most competitive price through our brokerage service, but also taking advantage of other potential income streams. Find out more here.

Agency & Investment Opportunities Carter Jonas has advised on over £45m of energy agency transactions over the last 12 months. Whether you are seeking energy investment opportunities, have assets to sell, or would like advice on the marketability and potential valuation of sites or operational assets, our Energy Agency team would be delighted to assist. 

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@ Helen Melling
Helen Melling
Senior Energy Specialist
0113 426 9868 email me about Helen
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Helen is an Energy Specialist based in our Leeds office.

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