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Ofgem fine Power Generators & other News

Power Generators fined for CESP Failures

Ofgem today imposed a record fine on an energy generator for failing to meet its CESP obligations. CESP was a target on both energy generators and retailers so for the first time companies like Drax were introduced to an energy saving obligation without having a domestic customer base to market the offer to. Drax had a target of just over 895,000 tonnes of CO2 savings but delivered only 332,000, a shortfall of around 63%.

Ofgem imposed a fine of £28m on Drax which consisted of a £5m cash fine coupled with a requirement to undertake £23m of energy saving works to mitigate their shortfall. In response to the fine CEO of Drax Dorothy Thompson said “Oh bugger.” which is not the official statement but I think it is a safe bet it was something along those lines. Drax are apparently in discussions with the NEA to deliver these savings so I would imagine the NEA are a tad excited about the opportunity and best of luck to them.

Another casualty of the fine, some say, not me for legal reasons, is Carillion. It was widely reported in 2013 that Drax was suing Carillion for failure to deliver the CESP target which at the time was reported to be a contract worth £17m. So £17m divided by 895,000 tonnes of CO2 = £19 per tonne. For those of you delivering CESP you will have some pity for Carillion inheriting this contract from EAGA given that CESP rates went through the roof and were at least 3 times that rate by the end of the scheme. Having seen sight of the Drax tender at the time it was issued, there is a good chance that Carillion may be in line to pay the fine under a penalty clause, but again for legal reasons I should point out that the matter is currently a legal dispute between the two parties. Still, a £28m penalty for a £17m contract, I wonder what the CEO of Carillion would say about that?

Intergen missed its target by 93.6%, hardly a close shave, but they did make an actual effort in early 2013 and by May had delivered 61.2%. As a result their fine was much smaller at only a mere £11m which again is intended to be spent on helping to save energy in homes. Further announcements are due to be made by Ofgem regarding SSE, BG, GDF Suez and Scottish Power who are also reported to have missed their CESP target by the end of 2012 but who did take mitigating actions to redress in early 2013.

 

RHI cuts from January

DECC has announced the details of the next degression of the biomass RHI as of 1st January 2015. Firstly the domestic biomass tariff will be cut by 10%, which was not unexpected but is a significant reduction so quickly after the domestic RHI was launched. The rate from 1st January will therefore be 10.98p. Good news on the commercial front though, the industry was expecting a 20% cut to the small commercial biomass (up to 200kw) tariff but a cut of only 10% will go ahead after DECC reduced their load factor assumptions (whatever that means?).

Anecdotally, one of the largest free commercial biomass finance providers, Lombard, have now pulled out of the market completely. If this has affected your business please get in touch as we have funding available for commercial biomass.

 

CSCO funding available

Happy Energy has CSCO Urban and Rural funding available for completions up to the 31st December. Installers able to submit at least 2,000 tonnes a week will be offered preferential rates. For more details please email us at mail@happyenergy.co.uk

 

DECC ECO steering group update

Smith Commission

As part of the Smith Commission review into the devolution of Scotland, it has been announced that ECO will fall under the full powers of the Scottish Government. Details are scant at present but this is likely to mean that Scotland could raise funds and spend monies for ECO in a different way to the current GB wide scheme throwing further disarray and uncertainty into the supply chain covering Scotland. On the one hand this could mean more work for installers north of the border but on the other you may see suppliers pulling back their delivery to south of the border until some certainty on the likely dates for change becoming clear.

GDHIF update 

In summary, DECC can say very little except they will make an announcement “soon” and that they will give the supply chain some pre-warning of the new rules to enable them to gear up before the scheme is re-launched.

 

Ofgem update

CSCO checker

Ofgem gave a demonstration of their onl ine CSCO checker which has some natty features including the ability for installers to upload a spread sheet of addresses and validate which of the properties are CSCO eligible. A map search enables installers to highlight an area and find out which properties to target and the advance search has a powerful facility to allow you to export all postcodes for a county, postcode sector or local authority area with details about which CSCO category they are eligible for. Well done Ofgem top job!

Find the checker here.

Consultations

ECO 2 hasn’t even started yet and already we are on to consultation for ECO 2.2. This consultation will start next week, end on the 21st January and will cover the following 7 specific questions:

  1. How to deal with district heating schemes where the cavity walls are not able to be insulated
  2. Ditto above but for lofts that can’t be insulated
  3. Further clarification on qualifying boilers and what is defined as ‘not working’
  4. Further clarification on a qualifying storage heater and how it can be defined as ‘not working’ or being beyond economical repair
  5. Technical monitoring processes
  6. Lifetimes for multi fuel district heating systems
  7. Loft insulation – how to protect against the dreaded virgin loft dodgy dealings

The response to the separate 2.1 consultation will be out by the 15th January.

Finally, Ofgem are issuing a new ECO toolkit next week which is aimed at helping installers to understand and remain compliant under ECO.

 

DECC ECO brokerage consultation

DECC are undertaking a short consultation on changes to the current ECO brokerage contract. If you would like to contribute and have your say on the proposed changes please contact the email below.

ecobrokerage@decc.gsi.gov.uk

 

Happy at the NIA

Happy Energy will be exhibiting at the National Insulation Association Conference this coming Thursday. If you would like to meet up with Russell, Damien, John or myself at the event, please drop us an email or pop along to our stand.

RCS-team-centre

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