The power generation market is awash with misconceptions.
Not least of which is the misconception about who “invented” electricity – noting of course that electricity is a form of energy and it occurs in nature, so technically it was never “invented”, but more accurately it was “discovered”.
Some give credit to Benjamin Franklin’s experiments of 1752, wherein he reportedly used a kite and a key in a storm, to establish the connection between lightning and electricity. But the truth about the discovery of electricity is more complex than a man flying his kite.
In about 600 BC, the ancient Greeks discovered that rubbing fur on amber (fossilised tree resin) caused an attraction between the two – the Greeks had discovered static electricity. In the 1930s archaeologists discovered pots with sheets of copper inside that they believe were used as batteries to produce light at ancient Roman sites. Although contested by some, it has been reported that similar devices were found in archaeological digs near Baghdad, suggesting ancient Persians may have also used an early form of batteries.
Ironically, in the context of Great Britain’s power generation market – once the envy of free-marketeers around the world – in 2019, we head back towards technologies that may have been deployed by the ancient Persians to support our electricity network and are surrounded by a kite-flying myth, which suggests 100% renewable energy is a reality today.
The climate change agenda
In January 2019, Sir David Attenborough, the 92-year-old British naturalist, delivered a compelling speech at the opening ceremony of the World Economic Forum annual meeting in Davos, Switzerland. In his speech he called on businesses and governments to find a “practical solution” to the issue of climate change, adding that without action on climate change, civilization would collapse, and it was up to humans to use their natural problem-solving skills to find a solution.
In April 2019, climate change protesters flooded the streets of central London, forming human blockades, bringing the road network and many of the streets to an eerie standstill. The protesters, dubbed the ‘Extinction Rebellion’, backed by many senior academics, politicians and scientists, prompted the UK’s Environment Secretary, Michael Gove, to state that “the UK has not done nearly enough; suddenly in the past few years it has been inescapable that we have to act. The time to act is now, the challenge could not be clearer, you have been heard”.
The wind of change, blowing more strongly than in any other previous generation, is upon us – and for all the right reasons. However, the concept of 100% renewables, today, in our modern society, remains very much like flying a kite, virtually impossible without a flow of wind.
The UK’s impressive low carbon journey
Wind – The UK is one of the best locations for offshore wind power in the world and is considered to be the best in Europe. The deployment of wind-powered generation has been a historic success and in 2016, for the first time, the UK generated more electricity from wind power than from coal.
Wind power delivers a growing percentage of the electricity of the UK and by the end of April 2019, it consisted of 9,702 wind turbines with a total installed capacity of over 20.8GW: 12,904MW of onshore capacity and 7,895MW of offshore capacity. This placed the UK as the world’s sixth-largest producer of wind power.
The deployment of UK wind power generation looks certain to continue, with experts predicting over 30GW will be available to generate by 2025.
Solar – Great Britain’s weather, not famed for outdoor barbeques, beach parties and blistering sunshine, has warmed to solar power.
Solar power represented a very small part of electricity production in the UK until the 2010s when it increased rapidly; because for most of that decade, new installations were subsidized with a feed-in tariff (FIT) and also because of the falling cost of photovoltaic panels.
As of 2019, installed capacity was over 13GW; however, peak generation is less than 10GW. As panels have a capacity factor of around 10% in the UK climate, average annual generation is roughly the installed capacity multiplied by 1,000 hours, being slightly under 13 terawatt-hours in 2018, and under 5% of UK electricity consumption.
In addition to wind and solar, the UK has an impressive line-up of renewable energy sources such as biofuels, hydroelectric, geothermal and tidal, all of which come together to position the UK as one of the leading countries driving forward the low carbon agenda. A position vindicated in 2018, wherein 33% of the UK’s demand was met by renewable energy alone.
The stalwarts of the UK energy system
Much like the contributions of the Greeks and Persians, whose efforts in discovering electricity have been overshadowed by perhaps a more illuminating but somewhat mythical version of events, it would be improper not to acknowledge the stalwarts of Great Britain’s generation landscape.
As the UK’s aged coal-fired generation capacity heads towards exiting the system in 2025 – if not before – two forms of generation work with renewables to deliver the UK’s electricity demand, 365 days a year – whatever the weather.
Our reliance on nuclear and gas-fired capacity cannot be understated and, in many regards, both forms of generation have suffered from the lack of a clear, coherent energy policy and major underinvestment.
Nuclear – Back in 2006, then prime minister Tony Blair told Britain’s biggest business lobby that the country needed a new generation of nuclear reactors or it risked becoming dependent on imported fossil fuels while missing commitments to reduce greenhouse gas emissions.
“If we don’t take these long-term decisions now, we will be committing a serious dereliction of our duty to the future of the country,” he said in a speech at the Confederation of British Industry’s annual dinner.
Some 13 years later, just one plant is under construction – the Hinkley Point C project being built by EDF, France’s state power company, in southwest England. Other projects such as Moorside (developed by Toshiba) and Wylfa (developed by Hitachi) have been suspended and others still in the development phase such as Sizewell C and Bradwell B remain optimistic – but such optimism may be unfounded unless the UK government engages to provide meaningful financial support.
The cancellation of Hitachi’s 2.9GW Wylfa project recently prompted Laurent Segalen, a managing partner at Megawatt-X in London, who advises on financing wind and solar projects, to declare: “The UK nuclear renaissance is a zombie.”
To put the UK nuclear generation industry in context, one should remember that nuclear is a low carbon option and during 2018 it met 19.5% of the UK’s demand. The issue, of course, is that many of the nuclear plants are heading towards a well-earned retirement after supporting the UK well beyond their original design life, and the country has little by the way of a replacement.
Gas – Back in the early 1990s, under the premiership of Margaret Thatcher, the ‘Dash for Gas’ was the shift by the newly privatised electricity companies towards the generation of electricity using natural gas.
The key reasons for this shift were:
(a) political: The privatization of the UK electricity industry in 1990; the regulatory change that allowed gas to be used as a fuel for power generation;
(b) economic: the high interest rates of the time, which favoured gas turbine power stations, which were quick to build when compared with coal and nuclear power stations, which were larger but slower to build; the decline in wholesale gas prices; the desire by the regional electricity companies to diversify their sources of electricity supply and establish a foothold in the profitable generation market;
(c) technical: advances in electricity generation technology (specifically combined cycle gas turbine generators (CCGT) with higher relative efficiencies and lower capital costs.
An underpinning factor in the dash for gas was the development of North Sea gas.
In 1990, gas turbine power stations made up 5% of the UK’s generating capacity. By 2003, the new CCGTs made up approximately 30%. Ironically, one of the benefits we crave today, which was not publicised at the time, was the reduction of carbon emissions that materialised when switching from coal to gas, given CCGTs typically generate around 50% of the carbon of similar-sized coal-fired plant.
Today, in 2019, the UK has an excess of 32.2GW of installed gas-fired capacity – which is flexible and therefore well placed to balance demand with renewables. Indeed, as many industry experts point out, gas has enabled the deployment of renewables, as you cannot have intermittent forms of renewable capacity on the grid, such as wind and solar, without gas to replace it when the wind doesn’t blow, and the sun doesn’t shine.
In 2018, gas-fired capacity met 39.4% of the UK demand. Given the gas dominance and the fact it enables renewables to operate effectively means any suggestion of its demise in the short term is another one of the UK power market’s myths.
As with nuclear, much of the capacity is heading towards retirement and all of which is much less efficient than today’s modern counterparts. What is missing are the commercial incentives to encourage new-build capacity into construction and onto the grid.
UK generation ‘resilience’ strategy
Interconnectors – The UK has developed electrical interconnectors, providing the ability to import and export power to the European Union. At the end of 2018, the UK had 4GW of interconnectors with a further 13GW of capacity in planning.
In 2018 net imports from interconnectors met just 5.7% of UK electricity supply. These links, many of which were developed before the vote for Britain to leave the EU (Brexit), provide added flexibility for the UK system to cope with peaks in demand and surpluses of electricity.
Energy Storage – The UK energy storage market has demonstrated significant growth in recent years with infrastructural and regulatory developments showing both private and public commitment to increasing the role of storage on the UK electricity grid.
In the last T-4 capacity market auction, pumped storage accounted for 2.5GW, equating to around 0.7% of the UK’s electricity demand in 2018.
Battery storage is anticipated to increase dramatically in the short to medium term, evidenced in the volume of planning applications being submitted. Back in 2012, applications to install battery storage totalled just 2MW; by contrast, in 2018 that figure soared to a cumulative total of 6,874MW.
In addition, the capacity of each battery storage project is increasing: in 2016 they averaged 10MW per project, whereas in 2018 that grew significantly to over 27MW – noting that 92% of planning applications for storage projects are approved first time by planning authorities.
Mind the gap
“Please mind the gap” is a term used frequently on Great Britain’s railway system to highlight the risks when alighting from trains – but in recent times, a term used all too often to describe the tightening capacity margins on the UK’s power generation landscape, which is set to worsen.
Capacity margins are expected to tighten to less than 7% in 2020, with further pressure materialising as the coal, nuclear and aged CCGTs enter retirement. To put this into a global context, the average capacity margins in other countries are forecast as follows for 2020: Japan 10%, the US 11-16%, Germany 18%, China 27% and Singapore 40% plus.
Experts predict without any new build development – above those already in construction – the UK security of supply could be compromised as early as 2025, at which point we could see negative capacity margins. The immediate answer to meet this challenge, but unlikely to be desirable by everyone, is the new build of CCGT plants.
Such plants can now be built within four years, incorporating carbon capture storage facilities, and be used to balance out the intermittency of renewables such as wind and solar.
Longer-term, nuclear power provides the obvious answer to providing the most reliable baseload capacity, in a low carbon manner.
The 100% renewables myth
During the climate change protests which brought the streets of London to a halt for two weeks in April 2019, many voices in the crowds called for the immediate cessation of the use of fossil fuels, and the shutdown of coal and gas-fired power plants across the UK, adopting a 100% renewable power generation mix.
The ‘Extinction Rebellion’ activists hailed their protests as a huge success after data suggested they caused a five-fold increase in the number of online searches for ‘climate change’, and the awareness of what they termed “an unprecedented global emergency”.
Of course, rhetoric can often be used during a protest, but many of the protestors were calling for the exclusive use of renewable forms of energy and the immediate closure of the UK’s fossil-fuelled power plants. This request, based upon the electricity sources that met the demand of 2018, equates to the immediate withdrawal of 46.1GW (coal 13.9GW and gas 32.2GW) of installed capacity, resulting in the removal of 47.4% of the UK’s power generation capacity.
Such a course of action would also generate mass protests as it would cripple our way of life and economic survival. Perhaps more importantly, it could also put at risk the general public’s support for tackling climate change.
The wind of change
As we head down our journey of combining the objective of reducing carbon emissions and serving the increasing power demands, it seems we need to accept two basic principles:
• The deployment of renewable energy must continue, and it must continue in the knowledge that moving towards a lower carbon generation mix will take investment. We must all make that investment and accept together the affordability challenges and the repayment of that investment, with the full knowledge that not to do so would be unforgivable.
• We also need to be cognisant of the fact that gas-fired generation and nuclear generation are not the enemy. Gas is a prerequisite to support the long-term, large scale deployment of renewables into our energy system, as it fills the gap when weather conditions do not support wind or solar generation. Nuclear power, whilst it has affordability challenges, offers the most practical, low carbon solution to provide the most reliable form of baseload capacity.
It appears the time for flying kites in the face of Great Britain’s low carbon future is at an end, and informed action (not tainted by misconceptions) needs to be enacted without delay.
What is required is a coherent government intervention that provides the policies, the incentives and a framework from which to support the development of new gas, nuclear and renewables generation capacity – before the capacity margins tighten further and challenge the grid’s ability to meet the country’s increasing power demand.