UK energy price cap dips, but consumers still face rising costs

Ofgem, the UK energy regulator, announced that it would lower the price cap on consumer electricity by nearly $1,206 (£1,000), with the regulator announcing that bills will be limited to a maximum of $3,943.96 (£3,280) for an average household from April.

Since January 2019, the UK government has required Ofgem to set a maximum price that energy suppliers can charge per unit of energy, and the regulator is legally required to regularly review this price cap as energy prices fluctuate. This is designed to keep prices fair for consumers while allowing energy suppliers to make a profit.

The cost cap will fall to $0.61 (£0.51) per kilowatt-hour (kWh) for electricity with a $0.64 (£0.53) per day standing charge, and $0.16/kWh (£0.13/kWh) for gas. The cap on daily standing charges for gas will see an increase to $0.35 (£0.29) per day when the changes take effect.

Despite the cap falling, changes in government policy and the planned withdrawal of support for households mean that many will see their bills rise this spring.

Since October 2022, the Energy Price Guarantee (EPG) has limited household energy bill costs to an average of $3,006.07 (£2,500), with a $480.97 (£400) government support package for energy bills helping consumers further. However, from April, the government plans to raise the EPG to $3,607.28 (£3,000) and withdraw the household support package.

Commenting on the announcement, Ofgem CEO Jonathan Brearley said: “Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the Energy Price Guarantee. This means that, on current policy, bills will rise again in April. I know that for many households this news will be deeply concerning.”

The Essar Group to invest $2.4bn in UK hydrogen and decarbonisation

The Essar Group, an Indian multinational energy company, has announced a $2.4bn green investment programme in the UK.

The Essar Energy Transition (EET) programme aims to create “the UK’s leading energy transition hub in the north-west of England”, an Essar Group statement said. This includes investments in blue and green hydrogen, ammonia, biofuels, and the decarbonisation of refineries in the UK.

The EET will invest a total of $3.6bn in developing low-carbon energy transition projects over the next five years. Out of this, the company will invest $1.2bn in India and $2.4bn across its site at Stanlow, UK.

According to the company statement, the investments made through EET could support the offset of 20% of total industrial emissions in north-west England. It said the Stanlow refinery could achieve a 75% decrease in carbon emissions by 2030.

The Essar Group has also made EET investments in India to cater to the country’s growing hydrogen economy. The company announced $1.2bn to develop a cost-efficient global supply hub for India’s low-carbon fuels, such as green hydrogen and ammonia.

In November, the Essar Group announced plans for the construction of a carbon capture, utilisation and storage (CCUS) facility at the Stanlow refinery in the UK, with an investment of $430m. The CCUS plant aims to operate by 2027, capturing 0.81 million tonnes of carbon dioxide annually.

Tony Fountain, managing partner of EET, said: “EET’s ambitious investment plans will secure the long term sustainable future for Stanlow, creating highly-skilled job opportunities.”

RWE proposes the first hydrogen cavern storage facility

Germany’s RWE is looking to build the first hydrogen cavern storage facility in a re-purposed salt mine.

The utility company has submitted an operating plan to Arnsberg district government, in the state of North Rhine-Westphalia. If approved, two caverns will be constructed at RWE’s site at Kottiger Hook near the village of Epe. The project hopes to complete the building of the site by the end of 2026, and begin supplying hydrogen by the year 2027.

Epe has an extensive history of salt mining and RWE already uses old salt mines to store natural gas at depths of up to 1.5km. One of the natural gas caverns currently in place at the salt mine will be repurposed for the storage of hydrogen.

Contrary to original plans, RWE announced in October 2022 that a second cavern will be added to the facility. They have also drawn up an environmental assessment for the second cavern. After the first stage of construction, each cavern will be able to hold up to 28 million cubic metres of hydrogen.

The project will also act as a pipeline for hydrogen transportation and means of injecting and retrieving the gas. A meeting of local stakeholders will meet to discuss plans on the 28 March. The general operating plan submitted by the company includes an environmental impact assessment for the facility.

RWE started the approval process in April 2022, consulting various stakeholders. According to a press release from the company they have “involved the public at an early stage and on an ongoing basis” including local residents and general public members sitting in on various meetings.

Westinghouse and PEJ to launch nuclear programme in Poland

US-based energy firm Westinghouse Electric has signed a contract agreement with Polish state-owned utility Polskie Elektrownie Jądrowe (PEJ) to advance a nuclear energy programme in Poland.

The agreement aims to help Poland in its efforts to deploy multiple AP1000 reactors. Under the terms agreed, Westinghouse will be responsible for the front-end engineering, early procurement work and programme development.

The firm has already signed agreements with 35 companies in Poland and 75 across the region as part of this project.

It also plans to establish an engineering centre in Poland and make other investments in the region to help train and develop the country’s nuclear power talents, workforce and supply base.

The agreements were signed in the presence of the US Ambassador to Poland, Mark Brzezinski.

In October last year, Westinghouse Electric was awarded a contract to build the first nuclear facility in Poland, which aims to phase out coal and reduce the country’s carbon emissions. The contract came after Poland had been seeking partners to develop 6GW to 9GW of nuclear capacity.

Westinghouse president and CEO Patrick Fragman said: “Today’s great progress enables PEJ and Poland to move forward with deploying the most advanced nuclear technology available to deliver affordable and clean electricity, while reinforcing Poland’s energy security.

Price of EU carbon exceeds $100 for first time

The price of permits on the EU’s carbon market has hit $106.57 (€100) per tonne for the first time, reflecting the increasing cost companies must pay for pollution.

The benchmark EU Allowance (EUA) contract rose to a record high of $107.59 (€101.25) per tonne on 22 February. It traded at $106.79 (€100.49) euros per tonne by 15:59 GMT due to increased demand for EUAs.

Emissions contracts launched in a trial phase in 2005, with almost all pollutant credits being given to companies for free. In 2006, the price of carbon credits plunged from a high of $31.87 (€30) to around $8.50 (€8), before peaking again in 2008 at nearly $31.87 (€30). After falling to below $10.62 (€10) in early 2009 due to oversupply of credits, prices peaked in 2018 to a decade-high of $26.56 (€25), followed by an almost record-high of nearly $31.87 (€30) in mid-2019.

EUAs are the main currency used in the EU’s Emissions Trading System (ETS), an aspect of the EU’s climate change policy. Each of these ‘carbon credits’ represents a license to emit one tonne of carbon dioxide-equivalent gases.

The periodic reduction in the availability of these then forces manufacturers, power companies and airlines to pay for each tonne of carbon dioxide they emit. Companies can buy and trade these with each other to allow them to produce more carbon emissions without being fined.

The EU ETS is a key tool in the bloc’s efforts to more-than-halve its greenhouse gas emissions by 2030 and meet its target of climate neutrality by 2050.

ArcLight Capital Partners sells Great River Hydro platform

ArcLight Capital Partners and its affiliates have sold the Great River Hydro project in the US to an affiliate of Hydro-Québec for around $2bn.

The sale of the renewable energy infrastructure platform closed on 10 February, according to ArcLight. Hydro-Québec subsidiary HQI US Holding agreed to purchase the Great River Hydro in October last year.

Great River Hydro owns 13 hydroelectric generating stations with a combined capacity of 589MW along New England’s Connecticut and Deerfield rivers. The platform also has co-located battery storage and solar development projects, representing the largest conventional hydroelectric portfolio in New England.

While owned by ArcLight, it supplied fossil-free energy to the region’s electricity market. A portion of clean energy was also sold to utilities and regional municipalities under long-term supply agreements signed over the past two years.

In addition, ArcLight increased Great River Hydro’s power generation capacity to 29GWh a year through enhancement projects.

ArcLight managing director Andrew Brannan said: “Our 2017 investment was based in part on the growing importance of the role the company plays in transitioning electricity markets.

“We were excited to support the development of a standalone renewable energy infrastructure platform in New England through investment into co-located solar and battery projects, and the execution of long-term contracts with leading regional suppliers in New England, while continuing to maintain and operate its large-scale portfolio of hydroelectric supply.”

Cost of EDF’s Hinkley Point C nuclear project rises to $40bn

French energy company EDF’s Hinkley Point C nuclear project will likely cost more than its last budget estimate, with inflation pushing costs to almost $40bn (£33bn), EDF documents via Reuters show.

In a results presentation on Friday, EDF executives that the cost of the plant could reach $40bn (£32.7bn) based on inflation indices as of 30 June 2022. This marks an increase from a May 2022 cost estimate of $31bn-33bn (£26bn-27bn), when adjusted for inflation in 2023.

The company is building the plant in the south-west of England, as well as financing the majority of its costs. China’s General Nuclear Power Group (CGN) holds a 33% stake in the project.

Since its initial announcement, the project has been subject to a series of cost increases and delays. Originally, EDF set a budget estimate for the plant at £20.5bn. By the time the project had been confirmed in Autumn 2016, this had risen to $24.8bn (£22.6bn). In 2022, estimates rose again by over $3.6bn (£3bn).

The project has created significant controversy since it was first announced. Worries over potentially high base prices of electricity produced at the plant, environmental safety, national security, and financial risk both to investors and taxpayers have plagued the project.

Under the companies’ agreement, the higher costs mean that EDF can ask CGN to pump more capital into Hinkley. But a spokesperson for EDF said: “The probability that CGN will not fund the project after it has reached its committed equity cap is high.” If CGN did withdraw funding, EDF would have to shoulder the additional costs incurred, a potentially difficult ask after the French company last week posted a record net loss of $13.5bn (€12.7bn) for 2022.