We conclude our look back at the most significant stories of 2018 as we cast our (short) memories all the way back to November and the last few weeks of December, including that landmark ruling on the Capacity Market from the ECJ and Ofgem’s busy end to the year.
Capacity Market suspended following landmark ECJ ruling
The UK Capacity Market was hit by a shock suspension in mid-November following a landmark ruling from the European Court of Justice.
The ECJ ruling followed a challenge from energy tech firm Tempus Energy, essentially deciding that the European Commission had failed to properly consult on the scheme’s compliance with state aid guidelines.
This triggered the shock suspension of the scheme in entirety, meaning that not only could future auctions not take place, but that future payments would have to be withheld. And further still, the government could not confirm that payments already made would be protected, triggering anger and confusion in the industry.
The government and National Grid have both been quick to allay concerns. The most recent update from BEIS asserts that it continues to work with the European Commission in resolving the issue and an investigation is due to start early in the new year, but it’s an episode that has not exactly triggered confidence in the UK power market.
Engie takes majority stake in energy and flexibility firm KiWi Power
One recurring theme throughout 2018 has been the notion that markets no longer value capacity, but flexibility, and that rang particularly true with the news that France’s Engie had taken a majority stake in KiWi Power in late November.
KiWi Power confirmed that Engie had acquired the shares of co-founders Yoav Zingher and Ziko Abram, leading to the duo’s departure from the company. KiWi had established itself as one of the foremost flexibility providers in the UK, and Engie already maintained a stake in the firm having entered into a “strategic relationship” in 2015.
“This acquisition builds on this experience, with the aim of rolling out KiWi’s best-in-class technology across Engie’s global customer base, and strengthening the collaboration of the KiWi team with the Engie family,” an Engie spokesperson said.
Ofgem saves Targeted Charging Review and RIIO-2 announcements for year’s end
And it was a busy end to the year for Ofgem too, with the regulator unveiling its proposed changes under the Targeted Charging Review in late November and detailed proposals for RIIO-2 in December.
Headline-grabbing news under the TCR was the revelation that fixed charges are to be applied to all final demand network users – irrespective of their ability to reduce grid constraints – and that Embedded Benefits for smaller generators were to be cut entirely.
The news acted as a double-hit for the renewables industry, and the Solar Trade Association responded in kind, by arguing that the changes stood to reward the most profligate energy users while penalising those who effectively manage or reduce their end consumption.
The regulator’s proposals for RIIO-2 are unlikely to be any less controversial. In confirming a 4% cost of equity cap – around half the level under the current set of price controls – Ofgem immediately attracted the ire of National Grid which said it was “disappointed” with the proposals, and not just because the company’s share price dipped 4% in the wake of the news.
The formulation of both sets of policy will continue to be significant in the coming year.
