Flexibility in (UK) Electricity: What are the Options?


I recently had a conversation with a (non-energy-industry) friend of mine who lives in Suffolk, on the east coast of the UK. It’s an area that’s seeing a big increase in offshore wind capacity, with a number of GW-scale projects in progress and planned there. It’s also an area that’s experiencing the challenges in getting another low-carbon electricity source – nuclear – from planning to reality (Sizewell C).

He asked me a perfectly reasonable question:

“If we build massive amounts of offshore wind, is nuclear needed to fill the gap when it’s not windy; and, if not, what is?”

 

Below is my very brief answer, summarising what should in reality be a very, very lengthy discussion!

(Of course, if you do want a longer discussion on any of these topics, including the policy, business risk and market opportunity aspects that exist around them, I’d love to hear from you).

 

Nuclear:

The current raft of struggling-to-get-investment nuclear projects in the UK don’t really contribute to the flexibility of a future system containing tens of GW of offshore wind. Regardless of technical flexibility, the economics are that there’s simply too much sunk fixed cost to start turning these multi-GW sized, £10s of billions plants up and down to balance the wind. Once built, paying back that capital means running all the time.

On the plus side, they are low-carbon, so they do contribute to meeting commitments in emissions-reduction.

 

Gas:

In the UK, natural gas is the biggest source of flexibility to balance electricity supply and demand now. It will certainly continue to be so for a fair while yet. It’s much cleaner than coal, though not low-carbon.

On the plus side it can be very flexible, in particular exemplified by the recent trend towards small containerised (shipping container) generator sets. These can be set up very quickly, very cheaply and in places in the grid system where it makes sense. With this low fixed cost, modular approach, the economics work much better if you are basically backup capacity: it doesn’t cost so much to just sit there and capacity can be built to react quickly to the market.

On the down side, small gas plants are less efficient and clean than big ones (for example combined cycle). However the latter are proving hard to invest in: who’ll pay for a big plant that’s likely to be called on to generate less and less as we supply more electricity from wind? Especially so since capacity market contracts have declined recently in value (and are even suspended currently through a legal “state aid” challenge). We also have declining domestic gas, so a reliance on imports (though electricity is dwarfed by heating demand for gas in that respect). Maybe that last point is why the UK government are so keen on fracking, despite vocal and widespread opposition? At least it would be a domestic source.

 

Storage: 

Battery costs have been reducing very quickly and they will certainly be deployed on a bigger and bigger scale to solve short timeframe energy shifting and many grid support services. Like small gas, they have the advantage that they can be put where it makes most sense (even including with the end-user). But they still have higher capital costs than gas and are certainly not scalable any time remotely soon to solve the problems of “hardly any wind for three days” or summer vs winter (big differences in both demand and wind supply). 

But batteries aren’t the only way to store energy. A trendy one at the moment (in terms of talk more than deployment) is hydrogen: i.e. use excess wind when its windy to split water and store hydrogen for when its not windy. Then feed the hydrogen through a fuel cell to (re)generate electricity. On the plus side, long-duration storage becomes more feasible. On the down side, electrolysisis is expensive and currently very small scale (a few MW is considered very large). And the end-to-end efficiency is very low (<50%?). (More efficient would be to use excess wind to produce hydrogen, then burn that directly to subsititute for gas usage in heating – but then that doesn’t answer the electricity balancing question…). 

Then there’s pumped storage (hydro). Nothing’s been built here in the UK for over 20 years, but there is renewed interest. On the plus side, it’s currently the proven way to store large amounts of energy for long times. On the down side is the problem of finding sites, getting planning approval and making an economic case (pumped storage is a long-term payback, not a quick investor win – perhaps it needs to be a strategic government investment?). There are some interesting projects going through permitting in old quarry sites, plus at least one big new conventional project awaiting final investment decision up in Scotland.

(And yes, you’ll read about zillions of other – but unproven – proposed storage technologies: involving anything from railroad cars to cranes & concrete blocks to giant iron pistons in old mine shafts).

 

Interconnection:

More connections to other grids means more sources of supply when needed (or sources of demand if we have too much wind). A new one was opened recently, to Belgium. Many GW of others are in the planning pipeline, though with usual caveat that “pipeline” doesn’t equal approved or funded! It’s not clear, at least to me, if or how Brexit may impact cross-border trading: but it presumably adds unwanted uncertainty when trying to raise investment.

A bit like nuclear or pumped hydro, interconnectors aren’t a quick win: they involve years of planning and construction. However greater connectivity is undoubtedly a good thing if available, though there must be plenty of uncertainty over what supply/demand will look like if and when future interconnectors come online: it’s not just a question of UK supply/demand, but of whether there be supply avaible from Europe when the wind is quiet here, and how much it will cost. 

 

Demand response:

This is often – and unfairly – painted as “telling people to turn down their usage” when electricity supply is squeezed. It’s much better described as incentivising people to turn down – and why not pay someone to do that if that’s a cheaper and cleaner option than turning supply up? In many cases, we won’t need to pay people, we can just make it cheaper to use electricity when it’s plentiful and make it much more expensive when its not. Doing that is all tied in with a variety of subjects: smart meters, “smart home” (IT-meets-energy) and potentially electric cars too; when there are enough of them to add up to a sizeable source of demand (and storage, since they are effectively batteries on wheels). 

I’ve read some reports suggesting there’s enormous scope for varying demand (GW’s worth). Most predictable – and contractable – demand response capacity will come from the commercial/industrial side in the short/medium term.

A bit like batteries, I’d suggest demand response can play a big role in terms of day-to-day supply/demand balancing – for a few hours here and there – but it doesn’t address the long-duration, “few days without wind” or seasonal challenges.

 

Summary?

As always, the reality will be some combination of the above!

In particular, there is no “risk free” or “perfect” solution – they all have pros and cons, timescales over which they can realistically scale and challenges in being paid for.

One problem is that some voices in the debate have job-related feet in one or other “camp”, rather than a system-wide view: this can bring a tendency to work on the basis that their solution is the “best” one (or even the only one).

At present, my personal view is that the day-to-day, few-hours-here-and-there variability of wind will – for the foreseeable future – be handled through a combination of flexible gas (valued more and more by capacity as it becomes used less and less), increasingly substituted by the growth of storage at a variety of scales and by smarter demand (controlled by clever IT and pricing/incentives). 

It’s longer duration variations in wind supply that will be more problematic. For the time being, we will almost certainly have to accept paying conventional generating capacity to stay open and be ready for those inevitable periods of calm weather. As coal closes, gas will be our key guarantor of supply. I won’t be surprised if some due-to-be-decomissioned nuclear capacity has its life extended, particularly if new nuclear can’t create an investable business case.

At the same time, despite its low efficiency, we should look to progress solutions like hydrogen for long-term storage (along with easier-permitted, brownfield-site pumped hydro). In the short and medium term growing hydrogen will certainly mean subsidies or other supports, because the economics aren’t there yet: we face the usual chicken-and-egg situation that growth is needed first to reduce costs, so that then these lower costs can drive growth. (Incidentially, the same is true of another technology: small modular nuclear, which in the long-run claims to potentially offer the kind of low-carbon, economic and flexible supply that its current big brother can’t).

So there it is, a very brief and simplified answer to a simple question which turns out to involve a very complex set of linked market, technology and policy issues! Alert readers will notice that I’ve focused on the challenges of lack of wind, since that was the nub of my friend’s question. I haven’t even touched on the related issue of over-generation and curtailment…

The question was framed for the UK, but similarly inter-linked issues and challenges certainly arise elsewhere.

 

As always, I’m happy to hear other views and to discuss further. And if you want me to help you understand the market issues discussed, or help you with business strategy advice, get in touch!

 

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