The Green Gas Support Scheme is due to launch in Autumn 2021. It will be funded by the Green Gas Levy, which will pay biogas producers, largely anaerobic digestion operators, over a 15-year period.

Government’s thinking is that suppliers will initially collect a flat-rate levy based on meter points, via a pence per meter per day charge. It may then move onto a usage-based levy in 2024/25 though is also working on alternative plans, given the challenges with fluctuating gas consumption and the extra risk management this would entail.

The Department for Business, Energy and Industrial Strategy (Beis) favours collecting the levy from suppliers on a quarterly basis, which may help to avoid fiascos encountered with the Renewables Obligation Buyout scheme. Collected annually, the RO fund has been left short by as much as £206m, due to late or non-payments, with a spate of failed or failing suppliers having spent the money trying to stay afloat.

Suppliers will also need credit cover for 100 per cent of the next quarter’s bill and Beis and Ofgem will work on an appropriate penalty regime. As well as the usual threat of loss of licence, this may include fines of up to 10 per cent of turnover, additional fines where turnover is low and automatic late payment interest set at a government determined rate.

Beis has considered tiering the costs based on industry consumption bands, e.g. households and microbusinesses; SMEs; large businesses. However, it said it couldn’t find a tiering structure that significantly cut bills for households without risking “disproportionate” cost increases for some businesses. As such, it favours the flat rate.

Per the consultation: “Whilst this means that domestic consumers will be paying the same as larger businesses, bill impacts are relatively low, and we will implement robust budgetary controls to ensure costs do not rise unexpectedly”.

Beis seeks industry input on its Green Gas Levy proposals. Details here.

The plan involves simultaneously connecting 4GW of British and Dutch offshore wind, providing an additional 2GW of interconnection capacity between the countries.

By developing a multi-purpose interconnector, rather than point to point links, the aim is to reduce cost and environmental impact.

Beis and Ofgem currently seek views on how to better co-ordinate offshore grids and whether regulatory change is required to facilitate them.

If National Grid and Tennet’s plan proves feasible, the TSOs hope to make the link  operational by 2029.

Details here.

The regulator’s framework regularly seeks such feedback, but this year’s review may be more interesting than most, given the events and challenges National Grid ESO has faced.

Since lockdowns in late March the ESO had to manage exceptionally low demand. In April it sought to clarify emergency powers to order disconnection of distribution connected generation, which Ofgem granted while noting that the legal text for which such urgent changes were sought had been in place for years.

The ESO also quickly launched a new footroom service, which it used over bank May holidays to pay people to help keep the system stable.

Meanwhile it struck and then extended a contract with EDF to halve the output from Sizewell B.

Despite unprecedented challenges, the ESO has kept the lights on.

However balancing costs have risen by hundreds of millions of pounds as a result. While not in scope for the first half review, suppliers are growing increasingly concerned at actions which seem perverse, such as the Capacity Market Alert issued last week, given EDF is still being paid to reduce Sizewell’s output and demand is virtually back to normal – for now at least.

As well as day-to-day running of the system, Ofgem seeks views on the ESO’s delivery of its broader remit.

The regulator seeks views by 16 October.

Details here.

With Ofgem seemingly set on frugal returns, the DNO hopes to be able to present the regulator with robust evidence to support spending plans that have been built around customer priorities.

Its new microsite gives customers 12 core areas to consider and asks them to ‘build their own network’ in terms of prioritising those areas – e.g. reliability, decarbonisation, customer service, connections.

Head of regulation and strategy, Jim Cardwell, said its ‘Emerging Thinking – Supporting Material’ document is informed by 3,500 customer engagements to date.

Over the next 12 months, the DNO aims to reach tens of thousands of stakeholders before submitting final spending plans to the regulator for the period 2023-28.

“The aim is to give them a voice to express their choices about how they want the network to run out to 2028 … while staying away from the regulatory dynamics and focusing on the customer angle, what it is they want from us,” said Cardwell.

“It’s not even a business plan yet, this is about informing a business plan. We’ve gone early to get as many voices involved as possible and have spent a good amount of time to ensure it is accessible,” he added.

Even uninformed customers will “get something out of it,” he suggested. “The key thing is about putting some prices tags on some of the proposals, demonstrating a range of options … and gauging which [aspects] customers favour to take into account when we build the business plan.”

Cardwell said the DNO is trying to “divorce ourselves from the industry insider mindset” and give people clear choices without resorting to “clutter and industry acronyms”.

Asked whether DNOs were concerned about Ofgem slashing returns as it has for transmission and gas distribution proposals, and what a ‘good’ level of return might look like, Cardwell underlined the importance of rewards and incentives rather than a headline rate of return on capital employed.

“We are a big supporter of incentive-based regulation. We would like a well evidenced (by us and the regulator), fair settlement that gives us a set of targets that we are held to account on, whether we out- or under-perform.”

Having “incentives in place for us to do the right thing for our customers is what success looks like,” added Cardwell.

Hence stepping up its customer engagement programme. “It enables us to have that conversation with Ofgem about the design of the next price control. We hope it will help set the framework,” said Cardwell.

“Ofgem should expect to see well-evidenced, justified plans. This is a key part of how we are generating that evidence and justification.”

Details here.

Microsite here.

Tudor was technology & strategy director at Centrica Innovations and has covered similar ground for BP Ventures, QinetiQ and CG Innovation Partners.

Government launched the fund last May, seeding it with £20m. That was matched by CCLA, the public sector and charity investment manager.

Tudor said the fund “has sparked a huge response from clean tech businesses from across the UK, as well as interest from institutional investors”. He relishes “the difficult but enviable task of investing in the most promising companies that offer our current and future investors a good return, and deliver long-lasting benefits to UK plc.”

Clean Growth Fund managing partner, Beverley Gower-Jones, who worked at QinetiQ at the same time as Tudor, said his venture capital experience on both sides of the Atlantic “will be invaluable as we invest in companies and secure new investment in the Fund”.

She added: “The work of the Clean Growth Fund is even more important as the UK emerges from Covid. A vibrant and dynamic clean-tech sector will deliver a stronger and more sustainable, low carbon economy.”

She will join the board on 1 January 2021 and assume the role of chair after a transitionary period of less than 12 months.

Reynolds is currently non-executive director at General Electric in the US and senior independent director of BP plc. She is also a non-executive director at BAE Systems plc but will step down from that role by the end of the year.

“Paula brings a wealth of board level experience leading global companies in the energy and financial sectors,” said National Grid’s CEO, John Pettigrew. “Her experience within international and US companies and insight into strategic and regulatory issues will be an asset to the Board and I look forward to working alongside her.”

The ratings agency also cited Ofgem’s draft price control, which proposes deep cuts to transmission operator returns.

“While the final determination, which is due in December 2020, may be different from the draft determination, Moody’s expects these settlements will weaken key credit metrics of the regulated subsidiaries and consequently the wider SSE group,” it stated.

The financial hit from Covid-19 and a potential two-year lag in recovering network revenues also factored in Moody’s decision.

In response SSE suggested the negative outlook is not currently relevant, as it is “unlikely to be requiring significant financing activity in financial markets for the next 2 years”.

Even if it does require additional funds, a Baa1 credit rating “compares favourably to peer companies and allows the company to secure funding at competitive rates”, said FD Gregor Alexander.

He added: “SSE is well-placed to deliver on its £7.5 billion low carbon investment programme over the next five years and has a strong balance sheet, financial discipline and a commitment to credit rating ratios comfortably above those required for an investment grade credit rating.”

Moody’s decision here

SSE’s response here

The fine relates to disclosure around a Black Start contract with National Grid. SSE signed non-binding terms with the transmission system operator on 22 March 2016 to provide grid restart services from any of three units at Fiddler’s Ferry from 1 April that year. Previously it had announced the units were to close from that date.

Ofgem said that given Fiddler’s Ferry had a capacity equivalent to 3 per cent of peak demand, its closure or otherwise would affect wholesale prices.

The regulator stated SSE’s non-binding agreement and decision to retain the rights to use the transmission system made the same day “reversed the likelihood that the three units would close. Consequently, the agreement was likely to have a significant effect on wholesale prices, and was therefore inside information”.

SSE did not publish that information until 30 March 2016 when it had finalised the contract. Ofgem said that resulted in four days trading where the market did not know there would be more generation available than previously thought, which is likely to have led some people paying more for power than they should have paid.

Ofgem said its investigation found SSE did not act in bad faith. It said the new market rules (REMIT) were relatively new obligations at the time and guidance was limited. It originally fined SSE £2.6m, but discounted it by 30 per cent as the supplier admitted the breach and settled early.

However, it said future fines for REMIT breaches would be higher.

SSE Energy Director, Martin Pibworth, said:

“SSE takes its market disclosures extremely seriously and acted in good faith, publishing details of the ‘Black Start’ contract for Fiddlers Ferry power station once signed, in line with our interpretation of the REMIT regulations at the time.

“We subsequently understood that Ofgem’s interpretation required disclosure to the market at an earlier stage. We admit that our approach was not in line with this requirement.

“SSE did not benefit from disclosing only once the contract was signed and remains committed to clear and transparent rules for all market participants. We will be pressing regulatory authorities for additional guidance for market participants going forward.”

Details here.

First published on our sister site, The Energyst.

“Walney has been a good financial investment for SSE but we see it as a non-core asset as we are not the principal operator,” said SSE finance director Gregor Alexander.

SSE set out plans in June to disposed of £2bn of non-core assets. It will use the money to build out other wind projects as part of a £7.5bn investment plan. These include Dogger Bank and Seagreen offshore, and the Viking project onshore, where it is the principal developer.

The two firms know each other well. Gresham House recently acquired the 41MW Bloxwich battery from Arenko, which the firm developed and operated to refine its optimisation software platform.

The projects, Monet’s Garden and Lister Drive, will connect directly to the transmission system. They are expected to be commissioned in Q1 2022.