Month: November 2019

Is the UK ready for the Energy Transition?

Is the UK ready for the Energy Transition?

A recently released report from Global Market Insights has projected that the PSH market will hit $400 Billion by 2026. Recent CO2 commitments from major governments across the world plus the electrification of heat and transport will create further growth in sustainable technologies such as wind and Solar. This by its very nature will increase the need for energy storage.

National grid in the latest future energy scenarios document have estimated we will need as much as 37GW of energy storage in the UK by 2050, a 9-fold increase to our current amount of 4.3GW.

This poses a problem for the UK highlighted in a Renewable Energy Association(REA) report released last week. This showed the UK second from bottom in preparedness for the switch to a flexible grid that can manage an increased number of intermittent generators, when compared against France, Germany, Norway, Ireland, Denmark, Sweden, Finland and the Netherlands. Only France was less prepared.

They said “Decarbonising power means delivering flexibility; in a world of very low-cost variable renewable electricity, grids need to be organized differently and some services which were once taken for granted need to be actively procured,” the REA’s chief executive Nina Skorupska said.

“Crucially, as renewable power prices fall around the world every country will be experiencing the same shift. If Britain becomes a flexibility pioneer, then a whole world of markets for exporting our products and services opens up. Whilst this index shows we’re lagging behind, there’s still time to bounce back.”

A lack of visibility on returns and technical challenges to connecting to the network have been highlighted as the major factors to this performance, underpinned by regulatory uncertainty. Lack of short-medium term frameworks around EV networks, Energy storage, and compensation structures are particular policy concerns.

This is further highlighted in their “REA General Election Manifesto 2019” where they propose extending the Regulated Asset Base (RAB) funding model, currently being considered for Nuclear by the Government, to include large scale flexibility technologies such as Pumped Storage Hydro.

The RAB model helps companies raise private financial by providing a secure payback and return on investment for developers. This has been used to good effect in the past in the water industry (Thames Tideway Tunnel) to get high capital, critical infrastructure projects off the ground.

As a Pumped Storage Hydro developer, we are acutely aware of these challenges: regulatory uncertainty coupled with high capital costs. If we want to make good on our climate change commitments, a reduction in these perceived risks would be welcome.

The reinstatement of the Capacity Market is of course welcome, along with the commitment to new build contracts of 15 years for projects that meet a CAPEX threshold – this should help get new PSH moving. 

Regulatory changes like these and others proposed will be crucial in preparing the UK for the Energy Transition, making sure we are ready and able for the drive to Net Zero.

Keeping the Lights on: The Renewable Energy Dilemma

Keeping the Lights on: The Renewable Energy Dilemma

As the UK continues on its inexorable path to a carbon free energy world, the questions around how this is achieved and the paths that should be taken become ever more pertinent. With the continued closure of large, dirty coal plant, coupled with the drive towards the electrification of transport and heat, the UK’s peak electricity demand will be rising at exactly the same time as base load is coming offline.

So, how do we overcome what could potentially be a very big problem and keep the lights on?

As we’ve seen in August this year Blackouts can still happen in the 21st century and unless we can increase flexibility and have a good mix of technology within our energy market these could become more frequent.

Last month provided an important milestone for renewables, after it was confirmed that renewable energy produced more electricity than fossil fuels across a quarter for the first time. Whilst this is great news, the ever greater rise of intermittent renewables within the energy mix does present its own challenges.

Energy storage will play an important role here, as can other technologies such as interconnectors.

The case for interconnectors is an interesting one: whilst there are compelling benefits through the linking of our networks (there are three major proposals in the pipeline to France, Germany & Norway), and the additional security and flexibility this can bring, along with some potential price benefits (wholesale electricity prices are cheaper in Europe), there could be unintended consequences. If we are going to be bringing in cheaper electricity from Europe, for instance from Norway’s numerous hydro plant, it could affect investment into projects within our own borders. With these interconnector projects benefitting from a cap and floor regime, we could somewhat perversely find ourselves subsidising renewables projects in Europe to the detriment of our own.
Which brings us to energy storage. The discourse on this in recent times has been very much dominated by batteries. Whilst these will play a very important role in the future energy mix, one tried and tested large scale storage solution has been somewhat drowned out (pardon the pun!): pumped storage hydro (PSH).

2018 marked the 75th anniversary of the Hydro Electric Development Act, which kick-started major hydro developments across the country, and today we have four operational PSH plant across the UK.
The benefits this tried and tested technology can bring can be easy to forget within the maelstrom that is the energy revolution and its cutting edge technology.
The concept of PSH remains alluringly simple: take two bodies of water with a sufficient height difference, and pump up and release the water between them. Very large amounts of energy can be stored within them and they can provide a great deal of flexibility to our future energy markets.

Importantly, this flexibility could result in lower costs for consumers. In a report commissioned by SSE, Baringa found that Coire Glas, a consented PSH plant in the Scottish Highlands, would deliver about £70 million per annum benefit in social welfare and a reduction in consumers’ bills of about £215 million per annum.

As is the case with major infrastructure projects, a large investment is required at the front-end but, once developed, PSH plant have a very long operational life.

With a few adjustments, such as longer lead-in times for development we believe the existing mechanisms in the Capacity Market could give the PSH market the kick-start it needs in this country and help to secure the investment required to get new projects moving.  

If we provide the support now for PSH we believe we will look back in many years with the satisfaction of knowing that the path well-trodden was indeed the right one to take.

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