All-Energy insights – new markets and policy critical to the energy transition

Many of our colleagues attended the All-Energy Conference in Glasgow last week, and, in this first blog of our two-part special, we look at some of the common themes running through the conference and the trends in the sector more generally. Our second blog will spotlight some of the exciting technologies in the sector that are set to play a role in the green transition.

1. Despite the challenges, the sector is teeming with activity

With 10,000 attendees, 600 speakers, 250 exhibitors, and one 'giant networking event', All-Energy was the epicentre of the UK energy sector last week. There was a tangible buzz on the show floor, in the meeting spaces and during the sessions, with attendees lining aisles and queuing out the door for oversubscribed presentations.

It lived up to its colloquial billing of "the renewables AGM" by promoting a smorgasbord of technologies and attracting a diverse mix of companies, organisations, and individuals.

The energy trilemma facing the country – affordability, sustainability, and security – is incredibly complex and multi-faceted. The fact that opinions conflict on how to deal with these issues was underscored by three separate protests in the opening plenary session, but the attendees and presenters showed a strong desire to tackle the challenges head on. 

2. Companies turning to power purchase agreements in pursuit of ESG goals

Power purchase agreements (PPAs), in which generators sell electricity directly to an offtaker instead of trading directly in the electricity market are a fundamental part of the revenue stream of most renewable generation projects.

These PPAs are predominantly with utility companies – over 30 utility offtakers are currently active in purchasing renewables via PPAs – but many companies such as Apple and Amazon are also getting in on the act as part of a move towards more sustainable operations. Companies are usually willing to provide a fixed price for electricity making corporate PPAs the preferred alternative to CfDs. Most recently, Brookfield Asset Management and Brookfield Renewable entered into a $10 billion deal with Microsoft contracting 30% of Brookfield's renewable capacity growth between 2026 and 2030. The renewable energy capacity will be used to power Microsoft's data centres.

Panellists on the "PPA Market Outlook Event", including Lindsay McQuade, EMEA Director of Energy at Amazon, listed the main priorities for parties to a PPA. From the demand side, project delivery confidence and obtaining the best deal financially were key. From the generator side, the duration of the arrangement, investment costs, credit worthiness and certainty were most important. 

3. Insights on electricity market reform

The second consultation on the Review of Electricity Market Arrangements (REMA) has now been published. While the UK Government's response to the consultation is due in the summer, any changes will have to be made by the next Government.

Simon Dawes from DESNZ set out the principal reforms being considered in the Second REMA Consultation. Keith Patterson, Co-Head of Renewables at Brodies, and the other panellists discussed different proposals for reform including the introduction of zonal pricing which would create different wholesale electricity prices for different regions and reform of the CfD. One of the industry members on the panel supported the introduction of zonal pricing believing it would result in the better location of batteries and energy storage. The majority of the panel members took the view that the introduction of zonal pricing would risk the investment needed to enable the electricity system to achieve net zero by 2035, as it would make forecasting revenues less predictable.

4. Ongoing reform to tackle grid queue backlog

The title of one of the sessions "Connections, Connections, Connections" put bluntly what is on the mind of most renewables developers. The grid connection queue is currently resulting in wait times of up to 15 years and is due to surpass 800GW by the end of the year.

Reform has been in enacted in the last six months, including: Queue Management Provisions, under which projects lose their place in the queue for failing to meet milestones; and the Grid Connections Action Plan, which will introduce a two-stage process to obtain grid connection known as gate 1 and gate 2, in a move away from the current "first come, first connected" to "first ready, first served". Gate 1 requires letters of authority from all landowners consenting to the use of their land while gate 2 will require developers to demonstrate land rights for the proposed location and planning consents.

The panel touched on the legal implications of applying these proposals retrospectively, including challenges from developers who are pushed back in the queue because other projects are able to demonstrate that they are ready to move to gate 2.

Further reform was debated, including whether a moratorium on grid queue applications would be necessary or a higher and more stringent bar for grid connection applications, as is the case in Spain and Northern Ireland respectively. 

5. Climate targets and regulation prominent in government discussions

A common thread through the sessions and panel discussions was the need for more urgent government activity, including more consistent regulation and higher investment.

Màiri McAllan MSP, Cabinet Secretary for Net Zero and Energy, confirmed that the Scottish Government's Energy Strategy and Just Transition Plan would be published this summer, along with a Green Industrial Plan that will list Scotland's primary investible opportunities centred around one investment window to better connect projects with a variety of funding options. In light of the Scottish Government dropping its climate targets, she also called on the UK Government to utilise its levers of power to promote the energy transition, particularly in relation to carbon capture, usage, and storage (CCUS).

6. Renewed focus on supply chain decarbonisation

With the opportunity for CfD applicants to apply for additional funding through the Sustainable Industry Rewards (SIRs) from Auction Round 7 onwards, there was a keen focus on decarbonising the supply chains, one of the criteria for the SIRs. The production of steel and the reuse of materials ran through many of these supply chain conversations.

A colossal weight of steel is required to reach net zero, but producing it is highly carbon intensive and amounts to 7% of global emissions. Discussions are underway to develop an electric arc furnace in Scotland that would use constrained renewable electricity to fuel the melting of scrap steel, bringing jobs to Scotland and decarbonising the supply chain. Linked to this, a Zero Waste Scotland presentation homed in on the need to reuse materials in renewables manufacturing, for example by implementing new upcycling processes to strengthen glass fibre. While the presenter cited some hesitation in the insurance industry around material reuse, the use of data to create asset passports was presented as a viable solution.

If you would like to discuss any of the matters discussed in this article, please get in touch with Sarah-Jane McArthur, Keith Patterson or your usual Brodies contact.