Following a case against the British Government brought by cleantech innovation company Tempus Energy, a groundbreaking ruling by the European Court has decided that £5.6 billion in subsidies for fossil fuels, paid for by UK taxpayers, is unlawful.
The case brought by Tempus Energy challenged a UK subsidy scheme, the Capacity Market, that allows fossil fuels to dominate the market. The ruling against the scheme by the European Court will now enable an overhaul of UK energy policy.
The UK’s National Grid caters for ‘peak demand’ scenarios via the Capacity Market established by the UK Government in 2014. Tempus Energy brought its challenge on the basis that the design of this market ensures profits for coal, gas and diesel generators, leaving cheaper, cleaner alternatives virtually unable to compete. Using billpayers’ money to finance fossil fuels without their consent - with several billion pounds committed so far - shuts out more innovative solutions for guaranteeing supply, which are actually cheaper for customers.
The ruling will potentially open the door to lower prices and cleaner energy for consumers.
“A customer revolution is on the cards” said Sara Bell CEO of Tempus Energy, commenting on the ruling. “This ruling opens the door for cheaper energy – greater use of demand-side innovation would change the way we use electricity in practice, and place customers at the heart of the energy system for the first time. Consumers know it pays to be flexible - we’ve been using off-peak trains for years. The energy system is exactly the same. Off-peak power should mean off-peak prices. This ruling should ultimately force the UK Government to design an energy system that reduces bills by incentivising and empowering customers to use electricity in the most cost-effective way – while maximising the use of climate-friendly renewables. Reducing our reliance on fossil fuels and increasing our use of renewables has the added benefit of delivering better air quality and bigger carbon cuts across the country.”
As the government seeks ways to fulfil energy demand and reduce CO2 emissions, ‘demand-side’ solutions have so far played far too small a role in discussions.
A recent study by Poyry Management Consultants and Imperial College found integrating new sources of flexibility – such as customer demand flexibility – to manage the energy system would save between £3.2 billion and £4.7 billion each year.
By streamlining their energy use, customers can participate too. As ‘demand-side’ energy providers, customers can earn revenue and make significant savings by avoiding using the grid at peak times. New, 'smart' technology allows customers to do this automatically and easily.
Ms Bell added that customers are not only footing the bill for this ill-designed scheme, they are also being prevented from accessing its potential benefits themselves.
Commercial customers are already taking advantage of the economic benefits of renewables and electricity storage. However, UK policy has not kept up with the way in which customers are using and generating clean, cost-efficient energy.
“If the Government is serious about decarbonising energy at the lowest cost to the customer, it must design a market that encourages, not stifles, environmental friendly technology” said Ms Bell. “The energy transition is about supporting smart technology and equipping the consumer to manage their own energy – not funding fossil fuels.”
Erik Nygard, CEO & Co-Founder, Limejump, commenting on the situation, said that as a result of the ruling, BEIS has now put the Capacity Market into a state of standstill until further notice. BEIS is working closely with the European Commission to aid their investigation and seek timely state aid approval for the Capacity Market.
BEIs have explained that the ruling does not change the UK Government’s commitment to delivering secure electricity supplies at minimal cost, or that their belief in the current Capacity Market auction system being the most appropriate method to supply this.
"While this result is not the scenario Limejump would prefer nor is the ideal methodology for change as this ruling will have an immediate impact on many of our customers with contracts and those who have been preparing for the next auction, we do see that this decision will force wholesale markets to embrace flexibility while increasing the adoption of innovative technologies" said Mr Nygard. "We also see this as potentially increasing the speed of which coal and gas generation is replaced with renewable resources and battery storage, which in turn could increase price volatility on the wholesale markets. Both of these results will benefit flexible assets in the long term".
In the latest statement released by BEIS, they have indicated that:
• BEIS will ask for a one-off T-1 auction and request the T-4 is run as a T-3 instead;
• National Grid will complete the Pre-qualification process;
• BEIS are considering the impact of non-compliance during the standstill phase and whether participants can withdraw; and
• At this stage, they will not be claiming back payments already made
Mr Nygard said that Limejump is in constant communication with National Grid and BEIS regarding this outcome as it develops and their plans moving forward to provide a swift and positive resolution to this process for all Limejump customers.
"As a lead developer in shaping the future of energy, we believe every opportunity brings the potential for positive industry change".