Last week was, well, almost normal. A kind of Lake Wobegon week, especially in comparison to this week’s turbulence. Perhaps this was because of the bank holiday and MPs still being away for the recess.
There were two areas where notable policy news was registered.
The first was around offshore wind. The closure of the sealed bid window for the CfD Auction Round 3 on 29 August, together with the announcement from BEIS of its expectation that it would announce the results on 19 September, should go a little way to settling investor nerves following the Banks Renewables legal challenge to the auction earlier in the month. It means the timeline has only slipped by a couple of weeks.
There was a further fillip for the offshore wind sector too. The Crown Estate confirmed last Wednesday that just shy of 3GW of new capacity across seven existing offshore projects will now progress to the award of rights stage for extension. The successful projects – totalling 2.8GW – were announced on 28 August. Applications for second phases of up to 317MW at Sheringham Shoal, 402MW at Dudgeon, 504MW at Greater Gabbard, 353MW at Galloper, 300MW at Thanet, 576MW at Gwynt y Mor and 400MW at Rampion have all been cleared to proceed. Four of these sites are off East Anglia, which is great news for the local supply chain. The only fly in the ointment was Orsted’s application to extend its 504MW Race Bank off Lincolnshire, which has not been allowed to advance.
In related news, the Carbon Trust also launched Stage 2 of the Offshore Renewable Joint Industry Project (ORJIP). Announced on 27 August, it will look to “provide a framework to identify, develop, initiate and conduct impactful, strategic research and development projects over the next four years”. The work is being designed to better inform consenting authorities and offshore windfarm developers on the environmental risk associated with planned and existing offshore wind projects. The programme is being funded by among others EDF Renewables, E.ON, Equinor, Innogy, Marine Scotland, Shell, SSE Renewables, The Crown Estate and Crown Estate Scotland.
The second area entailed (to put it mildly) a rather bad week for the domestic gas industry and fracking. This followed the suspension of activity by Cuadrilla at its Preston New Road fracking site on Tuesday after a 2.9 magnitude seismic event. In fact it was the third event above 0.5 in less than a week after work restarted mid-month.
The project has previously been forced to cease operations on several occasions due to nine seismic events breaching the UK’s admittedly very rigorous “traffic-light” monitoring system. This system rules that any seismic event above 0.5 must lead to the operator suspending work for 18 hours. But, on this occasion, the Oil and Gas Authority said that operations would remain suspended while it gathered data and considers carefully whether the operator’s Hydraulic Fracture Plan remain appropriate. Activity remains suspended at the site.
Ironically the suspension came less than two weeks after BEIS clarified its position on fracking. In a 15 August statement, a spokesperson had said that shale gas could be “an important new domestic energy source” where it could reduce the need for gas imports and create jobs. But it’s no surprise that Labour wrote to Business Secretary Andrea Leadsom after the latest tremor calling on the government to immediately ban fracking.
These are ominous days for the onshore gas industry. Research was also published the week before last week by the University of Nottingham, which suggested that national shale resources
could be lower – perhaps only 20% – than previously thought. It will be interesting to see what BEIS’ response will be now.
The stand-out market development was the new Co-op Energy and Octopus Energy partnership announced on 29 August, The latter is to take on management and supply of energy to more than 300,000 of the former’s customers. including customers of white labels of Flow Energy and GB Energy. (acquired in 2017 and 2018 respectively) when their fixed contracts end. Co-op Energy will continue to offer telecoms alongside its electricity and gas deals, but it will effectively become a white label. The combined entity will supply nearly 5% of the domestic retail market.
The two companies are also to establish a joint venture to develop the community generation market, in which they are both active. Co-op Energy’s community power tariff will still be available, and it will continue to purchase 100% renewable energy from the 80 community energy projects already on its books.
The partnership makes great sense between two of the most progressive companies in the GB retail market. And for Octopus Energy, this forms its fourth significant acquisition in just over a year, after adding IRESA, Affect Energy and taking over the white label supply of M&S Energy all in the second half of 2018.
And with the RO compliance deadline now passed, expect more corporate change and some distressed sales and failures in the sector. And with OVO still rumoured to be in discussion with SSE, and E.ON and npower merger seemingly still in the pipeline, the supply landscape is set for further significant change over the coming weeks.
On Smarter Norwich, I did of course issue my first formal monthly update last week, which is available in my previous LinkedIn post and up on the https://newangliaenergy.co.uk site. In another positive development, I have just passed 700 followers on twitter @newangliaenergy. Please follow if you don’t already.