The week that was (w/c 9 September): Dealing with disruption

·     No surprises in NG ESO 9 August report

·     Ovo agrees to take on SSE domestic retail customers in ￡500mn deal 

·     Wholesale markets spike on winter supply fears

·     Steady progress continues with my local market initiatives

Even without parliament, there’s still been a fair bit happening.

On Tuesday, NG ESO published its eagerly awaited full technical report into the power disruption on Friday 9th August. Building on the interim report a couple of weeks ago, the second report covered, amongst other things, an analysis of the generation performance of Hornsea and Little Barford, the (mis)use of demand disconnection, the tripping of embedded generation and the delivery of frequency response.

It largely confirmed the headlines from the interim report and explained why the incident had been dealt with according to the book, and that “processes and procedures generally worked well”. But it also flagged areas for further work:

·       processes and protocols should be reviewed to support timely and effective communication in any future event

·       the list of facilities connected to the low frequency demand disconnection scheme should be reviewed to ensure no critical infrastructure or services are inadvertently placed at undue risk of disconnection, and

·       the settings on the internal protection systems on electric trains should be reviewed to ensure they can continue to operate through ‘normal’ disturbances on the electricity system. 

The report suggested areas where a wider review of policy, processes or procedures may be appropriate. This includes: 

·       a review of the security standards to determine whether it would be appropriate to provide for higher levels of resilience in the electricity system. This should be done “in a structured way to ensure a proper balancing of risks and costs”

·       assessing whether it would be appropriate to establish standards for critical infrastructure and services (e.g. hospitals, transport, emergency services) setting out the range of events and conditions on the electricity system that their internal systems should be designed to cater for, and

·       a review of the timescales for delivery of the technical protocol that deals with risks of inadvertent tripping and disconnection of embedded generation, as GB delivers more of this generation.

But, despite the dry tone, one cannot be help feel that there is an element of finger pointing going on, especially at frequency response providers for exacerbating the problems and at distributors for the rather blunt use of disconnection without regard to those impacted. 

Ofgem released the report with minimal fanfare. Media coverage, which had been dense around the interim report on 20 August, was surprisingly muted reflecting the absence of any obvious surprises. But one issue that did seem to gain some traction – surprisingly in my opinion – was an intervention by new energy minister Kwasi Kwarteng, that suggested that ownership of NG ESO might be rising up the agenda. Given the very robust regulatory structure and ring fence around the ESO, this is clearly nonsense and can only be seen as playing to the gallery. 

I hope this doesn’t distract from the technical follow up, which needs to be taken forward swiftly as we move into winter. And as I write this review, it is already becoming clear that some of the issues that played out have been flagged during the disruption before, so the issue of timely response to learnings, governance and enforcement is not going to go away.

The report will now feed into Ofgem’s own investigation, which is focussing on whether participants complied with licences and rules and whether responses were appropriate, and also that of the government’s E3C.

A different type of disruption continued to work through the energy retail market last week. SSE agreed to sell its household supply business to independent Ovo Group in a ￡500mn deal.This is roughly twice the amount some City analysts were expecting, but still only puts a value on each customer at less than ￡90.The takeover move by the smaller rival is expected to be finalised later this year or early in 2020.It paves the way for SSE's exit from the retail market and catapults Ovo into second place in the league table of British power suppliers more than tripling the size of its customer base with around 5mn customers.

The sale comes after SSE said it would seek "an alternative transaction" for its energy services business after pulling out of the proposed merger with npower late last year. It also comes hot on the heals of Octopus taking on Coop’s 800,000 customers, and with the likely merger of the EON and npower retail business shows the shake-out in the sector is proceeding apace. 

The traded markets too were also distinctly out of sorts last week, even before the drone strikes on Aramco’s Saudi oil installations. Winter wholesale prices had already surged earlier in the week following reports of supply problems from Netherlands, Belgium and France causing near-term prices to increase 5-10% across the spectrum. This triggered a quick retraction of fixed price deals and offers from a range of suppliers. But markets have since softened as the fallout in Saudi seems less severe than initially thought and on easing French nuclear concerns.

On the local front, I have begun conversations with local authorities, Norwich Community Solar and Sunrise Energy about developing an eco-café information and support service, and we continue to populate the Smarter Norwich engagement groups. Plus there is lots of social media activity on twitter @newangliaenergy to help you stay on top of the deepening low-carbon agenda.