Interesting article in the Daily Telegraph about the UK’s Energy requirements, short and long-term needs.
Over the last 15 years or so consectuive Governments have swept the thorny issue of power under the carpet. As there is no quick short-term solution it is much easier to leave the decisions to the next administration than bite the bullet and commit to an Energy Strategy.
Did you know that we are a net importer of electricity via cables with 4 GW of capacity and another 4.4 GW is under construction with another 9.5 GW planned? No nor did I. We need to ramp imports as we cut our coal from our power station and need to find capacity to bridge the gap.
Read the full article at Telegraph – Digital.
Renewable energy prices are falling through the floor and Britain is building more wind and solar farms than ever. This is good news for energy security and climate activists – but there’s a catch. Britain is also importing more electricity than ever and, despite our pretension to green credentials, we have no idea how it’s generated.
A new paper for the Centre for Policy Studies by Tony Lodge and Daniel Mahoney highlights that Britain’s electricity imports increased by 52pc in the three years to 2016, and they are only headed in one direction.
Insofar as the Government has an energy policy, it involves increasing reliance on foreign supply. Back in 2012, imports were expected to account for just 6 terawatt hours of supply per year. But four years later, the projection had radically changed. The 2016 forecast sees Britain’s electricity imports rising from 21 terawatt hours to a peak of 77 in 2025 before declining to 67 in 2030. That’s close to a fifth of supply.
There are two sides to this story. One of them is positive. Recent years have seen rising investment in the capacity of undersea interconnect cables that bring power to Britain. Currently, these cables have a capacity of 4 gigawatts, but there is another 4.4GW under construction and last year, the Government announced plans for another 9.5GW. Having a more developed, interconnected and flexible grid is a positive for UK electricity markets. It has allowed Britain’s under-investment in energy storage to go almost unnoticed and aided the integration of intermittent renewables. There is also nothing inherently wrong with importing some of our power, just as there is nothing wrong with importing bread. But relying on international electricity markets for up to a fifth of our total electricity at a time when European supply is expected to tighten is a recipe for rising prices and volatility.
The truth is that Britain’s rising imports are, in the short-term, an easy way out for a government that has failed to deliver the investment in new gas plants that it promised. Back in 2012, the coalition government had plans for a new generation of gas-fired plants that would be easy to switch on and off to accommodate the sporadic nature of renewable supply. It estimated that Britain would need 26GW in additional gas generation capacity by 2030 to plug any potential gap left by cloudy, windless days. On current trends, however, the UK is on track to build just 12GW by 2030.
For now, buying in power is a reasonable option, because prices are low. But electricity generating margins on the Continent are expected to shrink. Both France and Germany are reducing their reliance on nuclear power (in Germany’s case, to zero) without knowing what will replace it.
EU policy to combat climate change and air pollution could also accelerate the shutdown of generating capacity across the Continent.
All of this means that importing power is likely to get more expensive, not less. And yet the way in which Britain allocates access to the electricity grid continues to discourage building new gas plants. The per-hour price of electricity generated by new gas plants is eye-wateringly high because they remain idle for much of the time when renewables are in operation. That means these new projects cannot compete with the prices offered by interconnect upgrades, which boost import capacity instead.
Interconnectors also get an additional competitiveness boost from the fact that power producers on the Continent don’t have to contend with Britain’s carbon price floor. That means they can undercut British production even if their power comes from dirty coal-fired capacity. So instead of cutting carbon emissions, the UK might well just be offshoring it.
In a more logical world, the Government would be able to prioritise new gas projects in spite of the current cost advantage enjoyed by imports. But under EU state aid rules, the Government isn’t allowed to have a bias towards projects that actually increase the UK’s domestic supply, rather than those that just increase our capacity to import supply. Britain’s energy policy needs a reboot. It isn’t delivering security of supply or reliably competitive prices. Lodge and Mahoney suggest that the Government look at separating responsibility for management of the grid from National Grid’s current incentive to talk down domestic production and increase imports. But it would also be worthwhile for the Government to take another look at policies that might have been better suited to another age. The carbon price floor, for example, has mostly achieved its aim of phasing out UK coal production.
Our energy investment priorities also need to shift. The rise of renewables makes it imperative that power storage technology improves. Costs are already falling at breakneck speed, but until they are competitive enough to assuage Britain’s growing use of imports, it might be wise to limit our reliance on intermittent forms of power.
The use of new nuclear, in the form of small, modular reactors, which is due to get government approval for investment this week, could also improve Britain’s energy mix, though it is still years away from being viable. It’s also theoretically possible for the UK to start building large nuclear reactors much more efficiently, but the political economy of doing so might make it uneconomical.
Renewables have undergone a technological revolution, but it is now time for energy policy and infrastructure to catch up.