The energy transition | Energy price cap rises and £100m for nuclear power plant


This week we look at Ofgem’s announcement of a 54% increase in the energy price cap by April, the announcement of £100m public funding for the Sizewell nuclear power station C, HSBC’s $100 million investment in Breakthrough Energy Catalyst, and more.

Ofgem announces energy price cap will rise by 54% from April

Ofgem has announced the new maximum rate suppliers can charge domestic customers from April 1; customers on a default rate paying by direct debit will see a £693 increase from £1,277 to £1,971 per year, while prepaid customers will see a £708 increase from £1,309 to £2,017. The hikes represent a 54% increase and have sparked a wave of concern over rising costs of living.

Behind the increased price cap is a record rise in global gas prices in recent months, with Ofgem reporting that wholesale prices have quadrupled over the past year. Similarly, research by EnnAppSys found that average overnight electricity prices – which reflect price movements in the spot market – increased by 235% in 2021, due to a combination of factors such as increased demand and lower wind generation.

It is hoped that Britain’s reliance on volatile fossil fuel markets can be eased somewhat by diversifying its energy sources and expanding its renewables portfolio. Other investments, such as the Government’s recent announcement of £61m for innovative offshore wind technologies, will go some way to achieving this.

Jonathan Brearley, Chief Executive of Ofgem, said: “The energy market has faced a huge challenge due to the unprecedented rise in global gas prices, a unique event in 30 years, and the role Ofgem’s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas. Ofgem is working to stabilize the market and, in the longer term, to diversify our energy sources, which will help protect customers against similar price shocks in the future.

£100m government funding for nuclear power station

The government has announced £100million to support the continued development of the Sizewell C project in Suffolk. Negotiations between EDF, developer of the Sizewell C project, and the government have continued since last year. The government says the nuclear plant will produce 3.2 GW of electricity, which will power around six million homes and provide increased long-term energy resilience. This will build on the 2020 Energy White Paper and is also part of the Prime Minister’s ten-point plan for a green industrial revolution, which includes the provision of new and advanced nuclear energy.

The £100m option fee will help the project reach maturity, attract investors and move into the next phase of negotiations. In return for this investment, the State will be granted certain rights to the land of the Sizewell C site and to EDF’s shares in the company Sizewell C. This will allow the government to continue to provide nuclear or energy infrastructure low-carbon alternative to the Sizewell site should the project fail. This is in line with the government’s aim to support at least one large-scale nuclear power plant during this legislature, subject to value for money and other considerations.

Business and Energy Secretary Kwasi Kwarteng said: “[t]The funding announced today will further support the development of Sizewell C during this important phase of negotiations as we seek to maximize investor confidence in this nationally significant project,” and that “[i]In light of high global gas prices, we must ensure that Britain’s future energy supply is bolstered by reliable, affordable and low-carbon energy produced in this country.”

The announcement comes after the passage of the Nuclear Energy (Funding) Bill through Parliament, which will enable a regulated asset base funding model framework for new nuclear projects. This story was reported in a previous energy transition update.

HSBC invests $100 million in Breakthrough Energy Catalyst

HSBC announced $100 million for Breakthrough Energy Catalyst, an initiative that aims to unify public and private sector investment to advance the most promising climate technologies to global commercial scale. The initiative currently focuses on: direct air capture, clean hydrogen, long-term energy storage and sustainable aviation.

HSBC joins a list of organizations committed to accelerating these technologies and also takes its place on the Board of Breakthrough Energy Catalyst. This position will allow HSBC to offer its expertise on transition opportunities in some of its largest markets, such as Asia and the Middle East. This initiative will also help HSBC achieve its own net zero climate impact target by 2050.

Bill Gates, the founder of Breakthrough Energy said: “[t]To achieve net zero emissions, we must reduce the cost of clean technologies so that they can be deployed at scale and become more affordable and accessible to everyone. The only way to achieve this is through close collaboration between the public and private sectors – no country, company or individual can stop the progress of climate change alone. »

As noted in a previous energy transition update, the Catalyst initiative has also seen at least £200m of investment from the UK government.

UKPN to install low-carbon heating in social housing

UK Power Networks (UKPN), a distribution network operator, has announced a new low-carbon heating trial which will see ‘clean heating’ installed in social housing in the South East.

The “Right to Heat” project will involve the installation of hybrid boilers, which use both gas and electricity, as well as solar panels and batteries in up to 25 homes. Hybrid heating systems will automatically switch between gas and electric based on factors such as fluctuating energy costs, and mean residents will use less natural gas overall. Residents will also consume less energy from the electricity grid, as they will benefit from renewable energy captured by solar panels and stored in batteries.

The trial will run until March 2023 and it is hoped that it will both reduce household emissions and lower energy bills for residents. Ian Cameron, Head of Client Services and Innovation at UKPN, said: “Right to Heat is about creating a scalable model for social housing so that no one is left behind in the fight against the climate crisis. We are committed to making the transition work for all of our customers, regardless of their circumstances. »

This project builds on other UKPN green initiatives, which last year included Project Shift – a trial run alongside Octopus Energy to get EV drivers to ‘shift’ charging to hours peaks and reduce demand on the network.

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