Archive for August, 2016

Hinckley: to B or not to B?

Posted: August 24, 2016 in Uncategorized

The seemingly never-ending saga of the Hinckley B nuclear power station seems no closer to resolution… after 3 years edging closer to a signed contract the EDF board finally gave approval in July, only for the UK Government to decide more time was needed to review the deal.

While the pretext may have been to ensure the small print was all OK, the real reasons are more obscure. Many focused on Prime Minister Teresa May’s apparent concern about handing over the financing and development of a key national infrastructure asset to China, while the 35 year strike price of £92.50 p/MWH is increasingly thought to be over generous at a time of wholesale prices in the £40-45 range.

The ongoing lull in wholesale energy prices makes Hinckley look on the (very) pricey side, which means advocates of mandatory LED installation and other energy efficiency measures, along with offshore wind and solar generation are gaining traction as quicker and cheaper means of meeting the UK’s long-term energy needs.

With the UK’s energy policy in a state of flux (along with much else after the Brexit vote) the decision on Hinckley will set the UK’s energy policy direction for the next few decades.

 

 

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Organisations that exceed their assigned available capacity on half-hourly electricity supplies will be penalised under new measures being introduced by Ofgem from 1 April 2018.

These distribution costs make up between 25-30% of overall electricity costs so it’s important that they’re at the correct level.

At the moment if you exceed the available capacity suppliers only charge the standard kVa available capacity charge, which is often minimal so gives no incentive to reduce consumption or increase the capacity.

From April 2018 the excess charge could be over three times the standard rate. The exact penalty will vary by region and voltage – in areas with high capacity demand (such as London) the costs could be higher.

The good news is that there’s plenty of time to review your available capacity levels to ensure they’re aligned to your needs through analysis of historic capacity demand and understanding of likely future demand:

  • if a site exceeds the set capacity level then either take measures to reduce demand to avoid penalties, or apply for increased capacity (which can take several months to agree)
  • if capacity demand is constantly well below your set available capacity (and no demand growth is expected) savings could be made by reducing your capacity level
  • if you’ve moved to a new site be sure to check the capacity levels as they will have been agreed with the previous occupier who may have used significantly more/less power than you

Not sure if your capacity charges match your organisation needs? Contact me for help.

What is Available Capacity?

The Available Supply Capacity is the maximum electricity you can draw from the grid at any one moment. The local Distribution Network Operator (DNO) is required to make this capacity available, so if you use significantly more than your agreed kVa it’s important that an application for increased kVa is submitted. Available capacity is measured in Kilo Volt Amperes (kVa) and charged on a monthly basis per kVa.

 

The Competition and Markets Authority (CMA) recently proposed a number of measures designed to increase competition and reduce energy costs for small businesses, including…

  • ending automatic rollover contracts
  • enabling rival suppliers and energy brokers to access customer details so they can target them with cheaper energy offers
  • moving all small businesses to half-hourly settlements
  • requiring suppliers to publish all tariffs on their website to increase transparency

According to the CMA suppliers make twice the margin on small business customers than they do in the domestic market, and four times the margin compared to larger industrial customers.

It also found that small firms were paying around one-third more on rollover contracts for electricity and about 25% more for gas. Those on out-of-contract or deemed rates are paying at least two-thirds more for both electricity and gas than those on contracted rates.

Half-hourly settlement would improve invoicing accuracy and mean businesses could pay less by using energy outside peak times, although those who have no choice but to use power in the expensive morning and evening peak periods may end up paying more.

It’s not clear if or when the CMA’s proposals will be implemented, but it’s likely that half-hourly settlements will be introduced at some point by Ofgem (already underway for some customers), while pressure on suppliers to improve customer service, transparency and pricing from the CMA, Ofgem and others is set to continue.