The Government is committed to making sure consumers have secure, affordable and clean energy now and in the future.

The Capacity Market secures the capacity required to meet peak demand, including demand for electric vehicles, in a range of scenarios through auctions held four- and one-year ahead of delivery. Although currently in a standstill period, the Capacity Market has already procured the bulk of the electricity capacity we need up to 2022.

In addition, the Government has taken powers in the Automated and Electric Vehicles Act 2018 to mandate that charge points sold or installed in the UK must be smart enabled – allowing demand for charging of electric vehicles to be shifted, where appropriate, to off-peak times.

Finally, Ofgem regulates network companies to ensure that they deliver a safe, reliable network whilst investing for the future and providing value for money for consumers. This includes ensuring that networks can reliably deliver the energy that consumers need, including for charging electric vehicles.

Between 2005 and 2010, industrial electricity prices rose by 64 per cent. Including taxes, industrial electricity prices rose from 4.77 pence per kWh in 2005 to 7.84 pence per kWh in 2010.

The steel sector has received more than £295 million in compensation since 2013 to make energy costs more competitive, including over £53 million during 2018. In addition, between 2017 and 2019, the Government has introduced policies that provide eligible steel producers with an 85% reduction in renewable energy policy costs in their electricity bills. Last year we announced the Industrial Energy Transformation Fund worth up to £315 million to support businesses with high energy use to transition to a low carbon future and to cut their bills through increased energy efficiency.

Between 2010 and 2017, industrial electricity prices (including taxes) have risen from 7.84 to 9.79 pence per kWh, an increase of 25%.

Ofgem’s Targeted Charging Review is seeking to ensure all parties connected to the electricity network make a fair contribution to its fixed costs. As was outlined in the ‘After the Trilemma’ speech of 15 November 2018, it is important that we develop an energy system that discourages free riding and ensures a fair distribution of such costs.

Network charging is a matter for Ofgem as the independent regulator, and decisions on its Targeted Charging Review (TCR) are for it to make. However, Government is working to understand the policy implications of Ofgem’s review proposals across a broad range of interests. The analysis published by Ofgem as part of a consultation which closed on 4 February 2019 shows that its proposals could affect the deployment of a number of technologies, but with a low likelihood of affecting measures already taken. It is important to understand that no final decisions have been taken on timing or other aspects of the TCR, and Ofgem is currently considering the views and evidence provided in response to its consultation.

Ofgem’s Targeted Charging Review is seeking to ensure all parties connected to the electricity network make a fair contribution to its fixed costs. As was outlined in the ‘After the Trilemma’ speech of 15 November 2018, it is important that we develop an energy system that discourages free riding and ensures a fair distribution of such costs.

Network charging is a matter for Ofgem as the independent regulator, and decisions on its Targeted Charging Review (TCR) are for it to make. However, Government is working to understand the policy implications of Ofgem’s review proposals across a broad range of interests. The analysis published by Ofgem as part of a consultation which closed on 4 February 2019 shows that its proposals could affect the deployment of a number of technologies, but with a low likelihood of affecting measures already taken. It is important to understand that no final decisions have been taken on timing or other aspects of the TCR, and Ofgem is currently considering the views and evidence provided in response to its consultation.

National Grid (Electricity System Operator) published their 2018 Future Energy Scenarios on 12 July (attached) and previously produced a bespoke note on the electricity system impacts of electric vehicles (attached). The level of impact that National Grid presents is manageable by the electricity system and shows the benefits that can be provided through smart charging of electric vehicles. Therefore, the Government has taken powers in the Automated and Electric Vehicles Act to mandate that all charge points sold or installed in the UK must be smart enabled, and we are planning to consult on secondary regulations this year. In addition, the Government has established an Electric Vehicle Energy Taskforce, made up of representatives from across the automotive and energy industries and consumer groups, in order to consider these issues, alongside the wider integration of electric vehicles into the energy system. The Government is confident it will be possible to manage additional demand from greater uptake of electric vehicles through adjustments to the level of capacity secured in Capacity Market auctions.

In terms of transporting the power, network companies (including transmission operators) are regional monopolies regulated by the independent energy regulator Ofgem. Ofgem regulates the companies using a price control process called RIIO. As part of this process companies are expected to run a safe and secure network whilst adequately investing for the future and ensuring fair costs to consumers. This process ensures the network infrastructure can transport the power to where it is needed.

We recognise that electricity storage technologies, including pumped hydro storage, provide an important source of flexibility to our energy system. We currently have around 3GW of storage capacity on our system, of which the vast majority is pumped hydro storage. The Electricity System Operator estimates that, by 2050, there could be 12-29 GW of total storage capacity on our system.

Our 2017 Smart Systems and Flexibility Plan and 2018 Progress Update set out a range of actions to remove barriers to storage and ensure flexibility is fairly valued in our energy markets. Pumped storage hydro is able to access the Capacity Market in the same way as other technologies, though a number of issues were raised in the recent Capacity Market review “Call for Evidence” which we will be considering.

The rate charged for and the difference between day and night units is a commercial decision for individual companies to make as long as suppliers set their rates within the limits of the price caps.

In order to produce a statement of solar panel electricity units used in a premises as a percentage of total usage, a premises would require multiple meters: a meter to record the amount of electricity generated by on-site renewables; and at least one meter to record the amount of electricity exported from the premises to the grid and the amount of electricity imported from the grid to the premises.

Most traditional meters are not able to measure the amount of electricity being exported so it would be necessary to have at least three separate meters to produce the required statement.

In contrast, all SMETS compliant electricity meters are capable of recording any electricity that is exported to the grid from on-site renewable generation sources, such as solar panels, net of the electricity from on-site renewables which is used within the premises. By combining two SMETS compliant meters in one premises – one operating as a generation meter for the on-site renewables and one to measure the import and export of electricity to and from the grid – it would be possible to produce the required statement. In each case, the smart meters would also be capable of recording generation and consumption on a half-hourly basis and the data would be available remotely.

BEIS’s 2017 Energy Emissions projections outlines that 11GW of electricity storage could be deployed in Great Britain by 2035 under the Reference Scenario. Up to 2020, the reference scenario reflects current power sector policies. Beyond 2020, the reference scenario includes assumptions that go beyond current Government policy. The results do not indicate a preferred outcome and should be treated as illustrative.

Both SMETS1 and SMETS2 smart meters are compatible with microgeneration, including solar panels.

All SMETS compliant electricity meters are capable of recording any electricity that is exported to the grid from onsite renewable generation sources, such as solar panels.

In the Smart Systems and Flexibility Plan, published last July, the Government and Ofgem said that measures should be taken to limit the ownership and operation of electricity storage by distribution network operators. This is to prevent competitive activities being carried out by monopoly network operators, which would inhibit fair competition in the market. Ofgem subsequently consulted on limiting the ownership and operation of storage by distribution network operators in October last year, and we expect Ofgem to finalise their position in the coming months.

In our Smart Systems and Flexibility Plan, published last July, the Government committed to define electricity storage as a distinct subset of generation in primary legislation, when parliamentary time allows. This will improve regulatory clarity for electricity storage – in particular, its treatment for licensing and planning purposes.

The regulator is also taking steps in line with this commitment. In October last year, Ofgem launched a consultation on proposals to modify the generation licence to include electricity storage. A response to this consultation will be published in due course.

The decision to change the basis for calculating the Capacity Market Supplier Charge from being based on net demand to being based on gross demand was published on 22 March 2017 in the Government’s response following its consultation on various proposed amendments to Rules and Regulations that govern the Capacity Market. An assessment of the impact of the change from net to gross was contained in an Analytical Annex to the Government Response.[1]

[1] https://www.gov.uk/government/consultations/capacity-market-proposals-to-simplify-and-improve-accessibility-in-future-capacity-auctions

In 2016 the Government commissioned a study into the benefits of a smart, more flexible energy system, which found that the UK could save £17- 40 billion across the electricity system to 2050 by deploying flexible technologies. These include demand side response and a range of storage technologies. Long duration storage can provide additional security of supply benefits over those provided by short duration storage, and we have recently amended the Capacity Market rules to reflect this.

Long duration storage, in the form of pumped hydro, accounted for just under 3GW capacity in GB last year. National Grid, as System Operator, takes a technology neutral approach to securing services that meet the needs of balancing the electricity system, and is in the process of setting out future needs through their System Needs and Product Strategy.

Our 2016 call for evidence on a smart, flexible energy system sought views on how to define electricity storage in legislation and other regulation. A large number of respondents agreed that the definition developed by the industry group, the Electricity Storage Network, provided the best basis for this. Very few respondents suggested basing the regulatory definition on that used for interconnection. In the Smart Systems and Flexibility Plan, published in July 2017, the Government committed to define electricity storage in primary legislation using the Electricity Storage Network’s definition as a basis, when Parliamentary time allows.

The strike price for Hinkley Point C (HPC) is fixed at £92.50 (2012 prices, rising with CPI inflation) for each megawatt hour (MWh) generated over the first 35 years of operation. The strike price is made up of a combination of wholesale market prices and a levy on consumer energy bills and ensures that consumers will pay no more than this for electricity from HPC during the contract period. When wholesale prices rise above the strike price the developer will need to repay the difference. When shared across consumers (households and businesses), payments under the Contract for Difference will amount to around £12 of the average household bill over 2026 – 2030 (based on 2012 prices).

This Government is committed to tackling fuel poverty. In line with our commitment to upgrade fuel poor homes to band C by 2030 we are taking action to support households in fuel poverty. The Warm Home Discount provides over 2 million low income and vulnerable households each year with a £140 rebate on their energy bills, including this winter. Since April, 70% of the £640m per year Energy Company Obligation has been focused on low income households through the Affordable Warmth part of the scheme. It will upgrade the energy efficiency of over 300,000 homes per year, tackling the root cause of fuel poverty. We are also safeguarding the competitiveness of those energy intensive industries particularly exposed to the additional costs arising from the Contract for Difference by exempting them from a proportion of these costs. An exemption scheme allows for real-time changes in energy use to be taken into account and provides certainty to business.

Network charging is a matter for Ofgem as the independent energy regulator, and Government does not hold the requested data. Ofgem has published an ‘Infographic: The Energy Network’ which shows that network costs fell by 45% following privatisation. There was then a planned increase in network costs from around 2006 to around 2015 to pay for network upgrades, with network costs remaining broadly flat since then. Network costs are still around 17% below levels at the time of privatisation due to improved efficiency, and have remained at around 25% of the average dual fuel bill for some time.

Network charging is a matter for Ofgem as the independent energy regulator, and Government does not hold the requested data. Ofgem has published an ‘Infographic: The Energy Network’ which shows that network costs fell by 45% following privatisation. There was then a planned increase in network costs from around 2006 to around 2015 to pay for network upgrades, with network costs remaining broadly flat since then. Network costs are still around 17% below levels at the time of privatisation due to improved efficiency, and have remained at around 25% of the average dual fuel bill for some time.