• New study casts further doubt over Ofgem’s Targeted Charging Review. A new study, conducted by Economic Consultant Oxera, found that Ofgem’s controversial Targeted Charging Review (TCR) risks undermining renewable investment and could even result in higher consumer bills. The study calls for Ofgem to further assess the proposals before they are fully implemented, which Carter Jonas agrees with.
  • Large-scale subsidy free solar on the rise in 2019. The Carter Jonas Energy team has seen a significant increase in the number of approaches for large-scale, subsidy-free solar in 2019. We are now dealing with a portfolio of over 750MW across the UK.
  • Capacity Market T-1 auction set for next month. The Capacity Market T-1 auction has now been set for June 2019, after being postponed from January. This comes despite the suspension of the scheme by the European Commission, back in November 2018.
  • Changeable UK weather conditions feed through to energy prices. Changeable weather conditions have led to fairly volatile UK energy prices over the last month. However, as we head into the warmer season, any clients with gas or electricity contract renewals coming up in the next 6 months should be looking at locking these in now.

Industry News

Short-term energy markets swung throughout April on changeable weather conditions. Prices continued to trend downwards at the start of the month before rebounding sharply on the back of unseasonably high demand in the face of an extended cold and windless spell of weather. However, prices were quickly pushed back down in light of warmer and windier conditions, particularly over the Easter weekend. Since then, prices have rallied by as much as £7/MWh on colder forecasts and low wind generation.

Long-term prices were largely supported by rallying oil, carbon and coal markets. Oil prices hit $75/barrel as the US said it would not extend Iran oil sanctions past 1st May, while carbon allowances continued to trend upwards around the €27/tonne mark, amid late compliance buying before the end of April deadline. However, both markets witnessed downward pressure at the end of April, which filtered through to lower UK energy prices.

Great Britain broke another coal-free record over the Easter weekend, operating for nearly 92 consecutive hours. The largest contributors to electricity supplies during the period were gas (42%) followed by wind (12%), solar (11%) and nuclear (2%). This, combined with low demand levels, pushed short term prices back down to 20-month lows.

The first half of May saw a drop in temperatures and reduced renewable output which has helped to support short-term prices, however prices were pressured back down toward the middle of May as temperatures and renewable output increased.

  • A new report has shown that the UK will need to replace its old onshore wind turbines if it is to hit carbon targets, as over 8GW of onshore wind is set to be retired in the next ten years; this amounts to almost a fifth of the UK’s renewable energy output.
  • There was a surge in the installation of solar PV in Q1 2019 ahead of the Feed-in Tariff closure at the end of March. Almost 242.5MW of PV was installed, which more than doubles the next highest quarter of deployment under the scheme – 102,411kW in Q4 2018.
  • Electric Vehicle charging developer Fastned has opened the UK’s first 350kW charging station in Sunderland. All the electricity for the charging station will be sourced from solar and wind power. Meanwhile, two of the biggest companies in the UK have committed to installing electric vehicle charging points; RBS will install 600 charging points by 2030, while Landsec will fit chargers at all its retail and leisure properties.
  • One third of the world’s power capacity is now provided by renewable energy following a 171GW increase in wind and solar installs during 2018, according to figures from the International Renewable Energy Agency (IRENA).

On the 8th May, National Grid ESO announced that Great Britain had officially gone a full week without coal; the first time since coal power was first launched back in 1882. This follows the previous record of 90 hours straight without generating any coal power which occurred over the Easter weekend.

Coal has historically been the cornerstone of the UK’s electricity mix but the first three months of 2019 saw the grid clock up 650 hours of coal-free generation; more than was achieved during the entirety of 2017.

The UK government plans to phase out the UK’s last coal-fired plants by 2025 to reduce carbon emissions. This has resulted in an 88% reduction in the amount of electricity generated from coal between 2012 and 2018 and a further 25% decrease occurring from 2017 to 2018 alone (as shown in the graph). On the back of this, the UK has halved electricity generation emissions since 2013, according to the Committee on Climate Change (CCC).

The Changing Face of Electricity Generation in the UK

As more renewables come on to our grid system, coal-free runs like the one witnessed during the first week of May are likely to be an increasingly common occurrence. As the graph shows, the significant rise (+13.8%) in wind and solar generation from 2017 to 2018 has played a key role in supporting the grid as coal is phased out. The technologies also often work hand in hand; for example, last summer, solar generation hit record highs while the nations wind turbines lay idle, and gas-fired generation was utilised to meet demand. During the first week of May, the burning of natural gas still made up 46% of the UK energy mix, which highlights how much this is still relied upon to support the grid. However, with carbon emission almost half that of coal plants, it remains, for now, an important feature of the UK energy mix.

This all highlights the requirement for a blend of energy sources to power the country during different periods of the years and also the need for continued growth in the renewable sector if we are to bridge the gap and hit carbon targets.

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. 

@ Helen Melling
Helen Melling
Senior Energy Specialist
0113 426 9868 email me about Helen

Helen is a Senior Energy Specialist based in our Leeds office.

I can provide advice on:

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