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.

Comments are closed.
WordPress SEO