What is the Best Electricity Supply Mix?


This – of course – is another of those questions whose answer starts with it depends“…

In particular, one person’s definition of “best” will be different from another’s!

Among just some of the factors it depends on are:

  • The extent to which carbon emissions are a key driver (either politically or economically).
  • The electricity mix that exists now and how old that infrastructure is (which can impact efficiency, reliability, cost, urgency of change and more).
  • The sensitivity of the market to cost changes, which can include both the real affordability for businesses and consumers and the perception of cost (for example in markets where costs are subsidised).
  • The natural resources available within the market, be they fossil fuel resources or renewable one such as solar, wind or tidal (and the importance of energy security to policymakers and consumers).
  • The extent of grid connectivity and – where it doesn’t exist – the costs of providing it (vs. distributed or off-grid power).
  • Population density, distribution and the availability of land.
  • The patterns of electricity demand in the market.
  • And many more…

Which of these factors matter the most?

This is very much where policy (and politics, and lobbying) meets electricity markets and their planning.

  • For some people the “best” mix will be the least carbon-emitting.
  • For others it may be the most “dispatchable” (controllable and flexible) or the easiest to integrate with patterns of electricity demand.
  • For others it may be the cheapest to build with the least subsidy; or for others, the cheapest to operate long-term.
  • Some people may prioritise the mix that requires the fewest fuel imports.
  • Others may optimise mixes based on minimising visual impact or on creating (or not destroying) local employment.

In a few cases, it might be possible to create a mix that meets all these definitions of “best” – but that’s going to be rare (if at all).

Mostly, the goal of a future electricity mix, and the speed and choice of the steps taken to get there, requires a set of compromises. The evolution of supply will include different viewpoints as to what matters the most and the choices between different alternatives. Some of these choices will be driven by economics, but others will be driven by social or environmental considerations. (Arguably the latter could always be “costed” economically, but in reality policy and popular opinion doesn’t always work so tidily!)

Also bear in mind that decisions, particularly with regards to cost and technology, depend on the uncertainty of future forecasts.

  • What will happen to natural gas prices?
  • How much cheaper can solar PV or battery storage become?
  • Might alternative fuels such as Thorium, or new technologies such as smaller-scale reactors change the economics of nuclear power?

In the next lesson we’ll scompare the electricity supply options we have at our disposal – not by means of detailed technical descriptions of each, but by considering some of the key ways in which their competitive attributes differ.