The landscape for the energy market is changing, with new rules and legislation being due to be implemented in 2018. In light of recent news about the SNAPS consultation and the MCPD (Medium Combustive Plant Directive) rule, we thought we would summarise what the new legislation means for the UK energy outlook and consumers.
The SNAPS consultation, which took place last July, highlighted three main issues in the UK energy market:
- Too high a number of products which providers could tender for,
- The poor clarity over what each product was attempting to address,
- Poor clarity with regards to contracts.
The National Grid showed a positive response to this in their promise to streamline the entire procurement process. Whilst the actual proposal from the National Grid is not expected until later this year, this change is expected to be a big boost to renewable energy providers and innovative solutions.
The initial indication from the National Grid suggests that the system is going to be more transparent, which will allow providers to make better long-term decisions without needing to go through a complex and confusing process to obtain contracts. Furthermore, The National Grid has also agreed to remove the out-of-date products currently in the system, and even to stop actively procuring certain types of products.
A more transparent system allows for a more level playing field when it comes to procuring contracts, which is why we expect a more diverse range of products enter the market – especially renewable energy providers. In turn, this should allow for more competitive pricing – potentially a big win for consumers!
This new legislation is coming at a time where the demand for clean and renewable energy is on a dramatic rise. The public is becoming far more conscious about clean energy and the environment, and we already have record high levels of contribution to our energy mix from renewables. The issue has been that the Grid is struggling to cope with the more frequent fluctuations of demand, because the older products can’t respond well enough. The legislation is therefore going to be very beneficial to products that provide better demand response, such as battery storage systems.
On the whole, we can expect this change in market regulation to kick start a rise in the number of clean energy products being brought to market and being used by the National Grid. With increased competition and demand, we can hope that more and more innovative products will help drive this clean energy movement and give the National Grid a big boost in efficiency.
MCPD – Medium Combustion Plant Directive
Earlier this year, the UK government passed legislation which will place new limits on emissions for mid-sized generators, with the aim of excluding nitrogen oxide emissions and diesel engines out of the capacity market. The legislation addresses the lack of limits for this size generator, as both large plants (Industrial Emissions Directive) and smaller products (Ecodesign Directive) already have regulation in place.
The new legislation will place emissions limits on plants with a thermal input of 1-50MW, and will begin to be enforced from December 2018 (with some exemptions for existing plants). The intention behind this new directive, according to the Environment Minister, is to “further reduce emissions”, and “minimise the impact on energy security costs to business”, however, there is concern about the effect that this legislation will have on small generators.
This move seemingly undermines the potential for Demand Side Response (DSR) technology, as back-up generators are only excluded from the legislation as long as they are used for back up purposes only. So, companies or people that currently use back-up generators for DSR could face heavy charges. An example of this would be hospitals. We estimate that the new legislation could cost the NHS up to £27 million per year – this is not a great outlook for the NHS who are already on a stretched budget as it is.
Whereas the SNAPS consultation appears to be promoting innovation and decentralisation, the MCPD rule looks like it is going to discourage these advancements. Aggregators are going to have to look at different ways to tackle DSR. The majority at the moment is done by generation, but we foresee that this will have to be done by load now (i.e. turning supply on and off). Essentially, this prevents back-up generators from making money and having a competitive advantage.
It’s not all doom and gloom, however. The decision by Defra (the Department for Environment, Food, and Rural Affairs) to make a sudden shift in policy may appear risky, but it will certainly keep suppliers and aggregators on their toes. The new rules will hopefully see a boost in the type of clean energy being harnessed by DSR, as aggregators will need to work harder. There is a clear timetable laid out now for generators to become compliant, and there is technology available to help them do this. The legislation will also hopefully promote public health, air quality, and help the UK meet its environmental commitments as soon as possible.
The bottom line is that, whilst this new legislation may not be immediately popular amongst all parties, the end goal remains the same – a green future. Defra is trying to shake up the market in the hopes of changing how energy in the UK is consumed and produced. Both SNAPS and MCPD want a future where our energy comes from renewable, low carbon, sources and we hope that both sets of legislation will promote innovative, clean, and flexible technologies that can keep up with the ever changing demands of not only consumers, but also regulation.
If you would like to know more about how these new sets of legislation will affect you, or would like to know more about how Kiwi Powered is helping clients benefit from SNAPS and MCPD, please get in touch with us!
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