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The Government's recent consultation on the future of agricultural policy in England outlines the intended reform of Common Agricultural Policy (CAP) following our departure from the EU. So what does this tell us?

The Secretary of State for Business, Energy & Industrial Strategy (BEIS) confirmed this week the latest energy statutory instrument which will allow Distribution Network Operators (DNOs) to start charging for processing electricity grid connection offers.

The Electricity (Connection Offer Expenses) Regulations 2018, which come into force on 6 April 2018 require the applicant to pay the reasonable expenses relating to a grid connection application that have been reasonably incurred by the electricity distributor, the DNO.  To date this instrument has not been available to DNOs with the result being that developers, speculators and promotors of energy infrastructure development have effectively locked up grid capacity for up to 12mths whilst the offer is kept open, often stopping other more viable schemes coming forward.  In 2016/17 Western Power Distribution had almost 8GW of generators waiting to connect schemes to their network resulting in connection offers not being made or if they were being conditional or time constrained.

Under the new regulation, DNOs will be able to recover reasonable costs incurred in assessing impacts on the distribution and transmission systems, designing the connection and processing the application itself.  DNOs will however be required to justify the charge, provide notice to the applicant of the charge and specify when and how payment must be made.

The question is will this pricing mechanism result in market forces unlocking latent grid capacity for new energy development to come forward.

The provisional results are out for the auction of the 50 GW of capacity required to provide balancing services to National Grid from the winter of 2021/2022. Compared to the last such auction, in December 2016, there has been some dramatic changes, with the most striking being the clearing price dropping to £8.40 per kW/yr, compared to £22.50 for the year 2020/21. This indicates that there has been a fundamental change in the type of generation that has been successful. The majority of the capacity (86%) procured was for existing generation plant, compared to only 1.5% for new build generating capacity. In addition, the greatest proportion of this capacity is to be filled by one year contracts for existing gas powered combined cycle gas turbine plant (46%), with nuclear plant making the second greatest capacity awarded (16%). In light of these results, it is difficult to see how new build generating capacity could be competitive and therefore successful in future auctions of this type.

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An archive of our 2018 Environment Matters Newsletters