The Energy Transition | Ofgem's new rules for the non-domestic energy sector

This week we look at Ofgem's new rules for the non-domestic energy sector, battery storage's potential to cut curtailment costs by 80%, a new report on the suitability of English land for onshore wind and solar farms, and more.

Ofgem announces new rules for non-domestic energy sector

On 5 April 2024, Ofgem announced new changes aimed at giving organisations in the non-domestic energy sector fairer treatment, increased support in resolving disputes and greater transparency on brokers' fees. The changes will apply to organisations such as business, utilities, charities and public services such as sports centres and village halls.

Ofgem states that the changes will ensure that energy suppliers improve their customer service offering for such non-domestic customers. This includes increasing the availability of alternative dispute resolution schemes and transparency around costs for businesses, including fees paid for third party services such as energy brokers.

The earliest changes will take effect from 1 July 2024, and include:

• expanding the remit of the Standards of Conduct so that they apply to all businesses of any size, rather than just micro-business consumers; and
• the introduction of a new supply licence rule for non-domestic suppliers, requiring them to signpost Citizens Advice to micro-business consumers as a source of support and advice when they have an issue.

From December 2024, in line with the government's proposed new "Small Business Consumer" definition taking effect in legislation, Ofgem will also:

• update its complaints handling standards to put in place suitable complaints processes for small business consumers and to point them to the Energy Ombudsman when customers do not feel their issue has been resolved; and
• implement a requirement for suppliers to only work with third-party intermediaries such as energy brokers that are members of a redress scheme when securing small business contracts.

Ofgem will continue to consult businesses of all sizes as these rules come into force, with the aim of making sure they are being followed and adhered to.

Battery storage could cut curtailment costs by 80%

According to analysis which was recently published by Field Energy (a battery storage developer), grid capacity limitations cost bill payers £920 million in curtailment costs in 2023 due to the inability to transmit excess energy from Scottish wind farms to areas of demand throughout the country. It is predicted that this figure could rise to £3.5 billion by 2035.

Curtailment involves a deliberate reduction of generation output to below what could have been produced in order to balance the grid. Due to the constraints of transmitting cheaper wind power generated in Scotland to the South, it can often result in the practice of firing up gas power plants in England and Wales in order to compensate for the power which was unable to be transmitted.

Most of this £920 million cost can be attributed to a single pinch point on the Scottish-English border called the B6 boundary, which typically does not have a utilisation rate of more than 50%.

It has been suggested that this figure could be cut by 80% through the more efficient use of battery storage consisting of more "intertrip services" for the National Energy System Operation and also additional "Grid Booster" batteries. On the B6 boundary specifically, it has been suggested that 10GW of energy storage could reduce curtailment costs attributable to that area by almost 90%.

The CEO of Field Energy, Amit Gudka, commented that: "Storing cleaner energy, to then use it when and where it’s needed the most, will help us run our grid more efficiently and more cheaply – helping us bolster the UK’s energy security and achieve a net zero power sector by 2035."

New report demonstrates how England can produce more onshore renewable energy fast

A recent report from energy consultants AtkinsRéalis has said that the slow build rate for low-carbon electricity generation over recent years now means 15.5 GW of new capacity is needed each year until 2035 to meet the government's low carbon targets.

A new report from Friends of the Earth and the University of Exeter promotes the development of onshore wind as a source of low-carbon electricity generation that is fast to build and can be easily located where the electricity grid already has spare capacity.

The researchers adopted a "conservative" approach (which excluded, among other factors, national parks, areas of outstanding natural beauty and higher-grade agricultural land) and identified 2,198 km² of land most suitable in England for onshore wind (1.7% of all land) and 2,950 km² most suitable for solar farms (2.3% of all land). This totals 374,900 hectares equalling 2.9% of all land in England (due to overlap where land is suitable for both) which has the potential to generate 95,542 GWh of onshore wind energy and 130,421 GWh of solar energy per year.

If fully optimised, it is estimated that this land would produce 13 times the current onshore wind and solar electricity generation in England. The results of the report are also available to view via an interactive renewable energy potential map which shows how much energy new wind and solar PV could generate in each local authority.

The research also highlighted the UK's potential to become a green energy superpower which can export clean, affordable, low-carbon electricity to other countries. At maximum capacity, electricity generation under this model would be equivalent to over 2.5 times the electricity currently required to power all households in England.

Supplementary to this research, Friends of the Earth recommended several policy changes to boost onshore renewable energy in England, including:

• opting for a more positive approach to planning assessment of onshore wind projects. In particular, the removal of footnote 58 of the December 2023 National Planning Policy Framework is recommended as it states that the impacts of new wind energy developments are assumed to be unacceptable (and as such a planning application should be rejected). This assumption will apply unless development is in an area identified as suitable or it can be shown that the proposal has community support;
• the removal of the statutory pre-application requirement for more than two turbines and any turbines which have a hub height of over 15 metres; and
• a presumption in favour of development for applications in certain areas identified by the UK government as being most suitable for renewable energy.

ESO releases Summer Outlook 2024 Report

The 2024 Summer Outlook was published on 11 April 2024 and sets out the Electricity System Operator's (ESO) view of the electricity systems and expectations for the electricity network for the upcoming summer period.

The ESO is confident that it has the operational tools to manage the electricity system, with sufficient supply to meet demand, to such an extent that it expects to support exports to neighbouring European countries.

Despite predicting an increase in volume of balancing actions, the ESO also expects balancing costs to be lower than the same period last year. This is a result of offsetting costs by falling wholesale prices and efficiency measures. The ESO has also forecast a reduction in operational costs of £65 million a year.

The ESO expects higher demand for the seasonal normal minimum transmission system with a higher predicted minimum demand of 13.5 GW and a peak of 29.2 GW. Additionally, the ESO expects the minimum available generation to be 34.1 GW, sufficient to meet the expected higher demand.

The ESO predicts that the 2024 summer will present similar operational challenges as the previous summer, and is already preparing its analysis for winter 2024/25.

This article was written with the assistance of Khushal Thobhani, Jessica Sawford, Charlotte D'Arcy, Luke Hopper and Hannah Bradley, trainee solicitors, and Domingas Uare, work experience student.