This week’s issue of Current± Price Watch – powered by Enact – explores a £9.7 million fine to SSE Generation for breaching their generation license, the Institute for Public Policy Research’s (IPPRs) warning that planning delays will lead England to miss its onshore wind target and the government accepting legislation to change Ofgem’s mandate to have regard to Net Zero laws
Day ahead: Cheaper energy prices hindered by English planning system
Day ahead prices for last week reached a high of £103/MWh on 11 June and a low of £16.5/MWh on the 10 June, when wind generated the largest share of the UK’s electricity mix at 38.9%.
On Saturday #wind produced 38.9% of GB electricity followed by nuclear 20.7%, gas 18.0%, imports 9.8%, solar 9.5%, biomass 2.6%, hydro 0.5%, coal 0.0%, coal 0.0% *excl. non-renewable distributed generation pic.twitter.com/w9HLjAyqx8
— National Grid ESO (@NationalGridESO) June 11, 2023
Regarded as one of the cheapest forms of energy generation, the increase in wind energy in the UK has resulted in a welcome break from higher energy prices.
At the beginning of 2023 the wind generation record was once again broken, having been exceeded multiple times towards the close of 2022. This saw lower energy prices over the Christmas period continue throughout the beginning of January reaching a low of £0/MWh twice between 9 and 15 January.
These energy cost savings are threatened however, by a “not fit for purpose” planning system in England, according to a new report by the Institute for Public Policy Research (IPPR).
According to the IPPR’s report, the UK Government’s restrictions on the development of onshore wind generation sites means that it will take “4,700 years for England to reach the onshore wind capacity called for by government advisers.”
Highlighting the urgency of the issue, the IPPR noted that only 17 new onshore wind farms have been built since 2015, generating just 6.7MW of power.
To remedy this, the report called for a reduction in development restrictions for onshore wind and for local authorities to be compelled to identify land suitable for onshore wind generation sites.
Maya Singer Hobbs, IPPR senior research fellow and lead report author, said: “None of the failures of the English system are inevitable. The de facto ban on onshore wind, the lack of coherence in environmental regulations and the lack of good quality housing are all solvable by reforming the system.”
Slowing down the development of new onshore wind generation sites will block the energy savings made available through the production of cheap wind power as covered in previous price watch features. Delaying the introduction of cheaper power will mean that day ahead prices will not fall as quickly as they have the potential to.
Intraday: Ofgem’s ‘principle objective’ to meet net zero targets
Intraday prices rose during the week from a £39.25/MWh minimum and £95.39/MWh maximum on the 5 June to a high of £143.33/MWh max and low of £87.11/MWh on the 12 June. The lowest price fell on the 10 June to £8.05/MWh while the mid and high prices remained steady.
On 6 June the government announced that they would accept a Lords amendment to the Energy Bill giving Ofgem a legal duty to meet Net Zero targets.
Ofgem said it welcomed the amendment to the Energy Bill, which it said will “restate Ofgem’s principal objective to protect the interests of existing and future gas and electricity consumers.”
Trade body Solar Energy UK said that the change should result in a faster rollout of grid-scale solar projects, helping companies to get faster grid connections which are currently suffering from a backlog and significant delays.
This in turn would help to lower energy costs for consumers, Solar Energy UK added. The group said that Ofgem’s “objective of keeping bills low has slowed the pace of investment by electricity network operators into new lines, transformers and switchgear.”
The change was welcomed by groups like Greenpeace, and former government minister Chris Skidmore, who chairs the Net Zero Review.
Delighted that @ofgem will now be given a net zero duty. This was a key recommendation of the #NetZeroReview #MissionZero and a policy I’ve continued to campaign for along with many others who made the case during the review https://t.co/7rvq7xeEBq
— Chris Skidmore (@CSkidmoreUK) June 6, 2023
Increasing the speed of grid connections for renewable projects should lead to a fall in intraday prices in the long term. As decarbonisation efforts lead to a rise in consumer demand for electricity (e.g. and increase in heat pump installations and electric vehicles) renewable electricity supply needs to increase at the same pace to keep up with demand.
Giving Ofgem a mandate to refer not just to prices but also to net zero legislation should speed up the supply of renewable energy which will bring down intraday prices.
Imbalance: Ofgem proposes SSE Generation fine as prices gradually rise
Imbalance prices saw a max price of £215.78/MWh on 12 June and a minimum price of £-8.1/MWh on 10 June.
On 6 June, Current± reported that Ofgem had proposed that SSE Generation pay £9.78 million due to a breach of its Generation Licence. The project accountable for this was its 300W Foyers pumped storage power station situated next to Loch Mhor in the Scotland highlands.
The fine was a result of the energy generator securing excessive payments from National Grid ESO during ‘transmission constraint’ – when the electricity transmission system is unable to transmit power to the location of demand due to congestion.
Despite this, SSE Generation has qualified for a discount for settling the investigation early. If it had not done so, then the firm would have been ordered to pay £11.58 million.
The investigation found that in May 2020, SSE “took the decision to make the bid prices it charged National Grid ESO to reduce Foyers’ output significantly more expensive – including in periods of transmission constraint”.
According to Ofgem, this was to bring Foyers in line with what it believed was the market practice of other pumped storage operators to increase profit. Following the change, SSE’s prices were then set with reference to the prices of selected other generators frequently bid down due to a constraint, rather than the costs and benefits of being bid down.
“Protecting consumers is a priority for Ofgem, and we will continue to monitor the wholesale energy markets in Great Britain and ensure their integrity on behalf of energy users,” said Cathryn Scott, director of enforcement and emerging issues at Ofgem.
“This enforcement action sends another strong signal to all generators that they must put in place controls to ensure that their bid prices are set in a way that ensures that they do not obtain excessive benefits during transmission constraint periods. If they fail to do so, they will face significant consequences.”
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