The Anonymous Widower

Ofgem Enables National Grid To Make Early Payment Of Interconnector Revenues, Helping To Reduce Household Bills

The title of this post, is the same as that of this press release from National Grid.

These are the first three paragraphs.

National Grid has offered to pay £200m of interconnector revenues ahead of schedule rather than at the end of the standard five-year review period to play its part in reducing household energy bills.

Interconnectors, which are subsea electricity cables connecting the UK and Europe, enable the import of cheaper, cleaner energy from European neighbours, supporting security of supply and reducing carbon emissions.

It’s estimated that National Grid’s interconnector portfolio will help the UK avoid around 100 million tonnes of carbon emissions by 2030.

Ofgem has approved National Grid’s request to make early payments.

These are my thoughts.

What’s In It For Consumers?

National Grid is making a payment early, so they are not getting anything, they won’t eventually get.

But they are getting it early!

What’s In It For National Grid?

As National Grid is making a payment early, they are forgoing interest on the £200 million.

In New Electricity ‘Superhighways’ Needed To Cope With Surge In Wind Power, I talked about National Grid’s plan to build new North-South interconnectors, that would handle all the extra wind-power.

National Grid currently owns all or part of these operating or planned interconnectors.

National Grid would appear to have a substantial interest in the UK’s interconnectors and is the £200 million payment to ensure they get the contract to build and operate any new UK interconnectors? I’m not saying it’s a bribe, but it’s just operating the interconnectors in a manner that is an advantage to the UK and its electricity customers.

Surely, if the ultimate customers are happy, there will be less calls for the break-up of National Grid.

What Is A Cap And Floor Regime?

The press release explains a cap and floor regime like this.

Ofgem’s cap and floor regime sets a yearly maximum (cap) and minimum (floor) level for the revenues that the interconnector licensees can earn over a 25-year period. Usually, revenues generated by the interconnector are compared against the cap and floor levels over five-year periods. Top-up payments are made to the interconnector licensee if revenues are lower than the floor; and similarly, the licensee pays revenues in excess of the cap to consumers.

Ofgem’s approval enables National Grid to make payments of above cap revenues significantly earlier than originally planned, which will contribute to reducing consumer energy costs over the next two years. National Grid is now working with Ofgem to explore how to ensure the early payments can have the most impact for consumers.

I wonder if Ofgem and National Grid feel that a cap and floor regime is not only good for them, but for electricity consumers as well.

Cap And Floor Regimes And Energy Storage

There has been talk that cap and floor regimes should be used for energy storage.

This article on Current News is entitled Cap And Floor Mechanism The ‘Standout Solution’ For Long Duration Storage, KPMG Finds.

These are the first two paragraphs.

A cap and floor regime would be the most beneficial solution for supporting long duration energy storage, a KPMG report has found.

Commissioned by Drax, the report detailed how there is currently no appropriate investment mechanism for long duration storage. Examining four investment mechanisms – the Contracts for Difference (CfD) scheme, Regulated Asset Value (RAV) model, cap and floor regime and a reformed Capacity Market – it identified cap and floor as the best solution.

I also suspect that if the operator does a National Grid with the revenues, a cap and floor regime, must be even better.

I would not be surprised to see schemes like Coire Glas pumped hydro operating under a cap and floor regime.

Effect On Other Energy Companies

Wind farms seem to be operated under the Contracts for Difference scheme in many cases, but will we see cap and floor regimes being used in this market?

I can certainly see a new regime emerging, that is better for investors, wind farm builders, consumers and the Treasury.

In some ways keeping a happy relationship between the investors, Government and consumers is most important. So as National Grid, the Government and consumers don’t seem to be jumping up and down about their cap-and-floor regime, it must be working reasonably well!

Conclusion

Get the right regime and quality investors could be flocking to the UK’s energy generation and supply industry.

National Grid by their actions in paying up early, have thoroughly endorsed the system.

May 12, 2022 Posted by | Energy, Energy Storage | , , , , , | 10 Comments

Sustainable Marine Delivers Floating Tidal Power To Nova Scotia Grid

The title of this post, is the same as that of this article on Renewable Energy Magazine.

This is the first paragraph.

Ocean energy pioneer Sustainable Marine has successfully harnessed the enormous tidal currents in Canada’s Bay of Fundy, delivering the first floating in-stream tidal power to Nova Scotia’s grid.

This Google Map shows the Bay Of Fundy.

Note.

  1. The hydrology of the Bay of Fundy has the highest tidal range in the world of sixteen metres, against a worldwide average of about a metre.
  2. According to the Renewable Energy Magazine article, Nova Scotia has allocated circa 30MW of capacity via demonstration permits.
  3. The article also indicates that up to 2.5 GW of clean and predictable energy for Canada could be generated.
  4. By comparison Hinckley Point C nuclear power station will generate 3.26 GW.

The Bay of Fundy would be the largest tidal power station in the world.

But this list in Wikipedia gives these proposed tidal power stations.

There are another two Russian proposals and a South Korean one.

Note.

  1. There are some large numbers.
  2. There are also some huge ambitions and massive budgets.

But will we ever see large scale tidal power stations?

 

May 12, 2022 Posted by | Energy | , , , , | Leave a comment