Talk Of Flexible, Smart Energy Systems Misses The Point
By Paul Homewood
“Flexible” and “smart” are the new buzzwords when discussing energy.
“We need electricity to be our flexible friend”, says Richard Black.
“We want to move from a 20th Century energy system to a smart, clean system fit for the 21st Century”, says Greg Clark.
Smart meters, battery storage, demand side response. These are thrown up as examples of how we can manage the inherent intermittency of wind and solar power.
But just how much difference will they make?
Black’s ECIU has just published a report suggesting that the Supplemental Balancing Reserve (SBR) scheme has been a waste of money, as The Times reports:
A government scheme that paid £180 million to keep old power stations open as an emergency reserve to prevent winter blackouts has ended after never being used.
The Supplemental Balancing Reserve (SBR) scheme was introduced in 2014 when the closure of old coal plants and delays building greener replacements led to fears that Britain could run short of electricity in a cold snap.
Plants that might have closed received millions to remain on standby in case they were needed as a last resort, if plants operating in the normal market proved insufficient.
The scheme ran for three winters and had been expected to be called upon several times as other plants shut and the gap between peak supply and demand tightened.
It finished at the end of February after what National Grid described as two exceptionally mild winters.
In a report today, the Energy and Climate Intelligence Unit (ECIU) think tank suggests that the scheme was a waste of money. The fact that SBR was never used shows that “warnings of blackouts in the UK have been overblown, leading to potentially excessive spending on insurance policies to ensure energy security”, it argues.
Last winter was the most expensive period of the scheme, with £122 million spent to keep ten plants open. The plants were never needed despite what the report argues was “a tough winter”, owing to “a long spell of cold weather with low wind output, one of the cables connecting us to France broken by a ship’s anchor, and multiple French nuclear power stations out of action for safety checks”.
James Heappey, Conservative MP for Wells and an adviser to the ECIU, claimed that the scheme had been unnecessary. “Bill payers have spent £180 million on standby power stations that were not needed,” he said.
They have obviously never heard of insurance policies. Just because your house did not burn down last year does not mean that you should cancel your insurance.
In any event, I find it extraordinary that Heappey is worried about a cost of £180m over 3 years, when he is happy to accept subsidies to renewables of £8.7bn this year alone.
But on the deeper issue of standby capacity in future years, there is an implication that all we need is a flexible, smart system.
Unfortunately, the data does not agree.
If we look at rolling system demand during a typical week in January, we can see that demand ranged from 28517 MW to 50846 MW.
The average for the week was 40413 MW.
Let us therefore suppose that we could smooth this demand perfectly across the week, so that demand was a constant 40413 MW, something that would plainly be totally impossible anyway.
In the latest Capacity Market auction for 2020/21, the government has purchased capacity of 52430 MW.
So at the most, perfect flexibility would only reduce the need for this standby capacity by 12017 MW.
The auction clearing price was £22.50/KW, so the potential saving would only be £270 million. This is loose change, compared to the cost of subsidising inefficient renewables, which will amount to £12.6bn by 2020.
Whilst we persist with heavily subsidised renewables, there is no alternative to having some sort of system which guarantees standby capacity.
Currently most of this is contracted from existing coal, gas and nuclear plants, which can naturally undercut new generation plants.
This is something that Richard Black and his chums find distasteful.
In reality, however, we badly need a mechanism that brings forward new plants to replace the older ones due to shut in the next decade.
No amount of fanciful talk about smart, flexible energy systems can deny this inescapable truth.