Tony Lodge is the author of The Great Carbon Swindle – How the UK hides it emissions abroad, published by the Centre for Policy Studies.
Every student of economics knows that when demand is low then supply falls accordingly and prices normally follow. But this is not the case with Britain’s out of date, expensive and creaking energy system, which has been starkly exposed by the Covid crisis.
While the pandemic has very publicly destroyed jobs and businesses, the hidden task of keeping electricity flowing at this critical time has seen grid planners desperately trying to tackle their worst nightmare: how to balance the grid when electricity supply well outstrips demand. This challenge has been growing for some time and the lockdown has forced the issue, particularly as weather-dependent renewable power has soared and demand has slumped.
The problem is clear, but policymakers don’t yet have the solution and years of foot dragging and rushed execution are now there for all to see. Fixing it will be expensive and need a new policy for the transition to a new energy age. It has taken the Coronavirus lockdown to show that policymakers have been asking the wrong questions and thus getting the wrong answers for far too long.
As more electricity is being produced than is required, then National Grid has been forced to pay power plants to switch off so they don’t overload the system and cause blackouts. The bill is likely to come in at around £1 billion for this spring and summer alone, unless new services are successfully implemented, with implications for consumers, flexibility of supply and the low carbon transition.
Who pays this additional bill? Ironically, it is other generators who are asked to run during such times to help National Grid out of its mess. So how did it come to this and why have policymakers been supporting a route to net zero that adds significant risk to the UK’s energy system during the transition?
In the four days from Friday to Bank Holiday Monday, the costs of keeping the lights on spiralled to £51 million as National Grid had to pay wind, solar farms and other plants to switch off because they risked tripping the system. Grid has diplomatically called this a “very expensive weekend.” This is just one example of a huge policy failure whose costs will ultimately feed through to business and households at the worst possible time and is almost five times as high as the electricity balancing supply costs during the same period last year.
Coupled with this is news that National Grid is initially to pay a nuclear power plant an estimated £50 million to cut its output. This illustrates the extraordinary changes being forced on energy policy by the lockdown crisis; it also said it expected to spend £500 million more than normal keeping power flowing because of low demand this year.
It is starting to look as though the rush to build renewables, which have been the largest source of electricity in recent months, has weakened the UK’s energy system as it has changed the energy mix that Grid has traditionally been able to call on. The clear message here is that the UK needs to have the right back up supplies to support our growing use of weather-dependent renewable power. If we get this right then renewable growth can be better exploited and supported.
First, some key statistics. The last time UK power supplies saw demand so low (at the height of the lockdown) was in 1975, and the US has not seen demand depressed like this for 20 years as industry, businesses and transport networks slashed demand.
The spring’s sunny and windy days have seen renewables setting records supplying over 55 per cent of daytime electricity on many occasions. But reduced demand alongside increased renewable supplies presents both a challenge and an opportunity for policymakers.
When the Queen delivered her special televised lockdown address in April, it caused power demand across the UK to soar but solar supplies had stopped 30 minutes before the broadcast as the sun had set and wind speeds had also reduced. The Grid’s control room reported the spike in power demand; an approximately 600MW TV pick-up in the moments after the address which is the equivalent of 190,000 ovens switched on at once.
Demand dropped before the Queen’s speech as we stopped what we were doing to watch, then picked up dramatically afterwards as we collectively resumed where we had left off. With more of us at home, we will likely see the return of the pick-up effect, which has lessened in recent years because of on-demand TV.
The Grid therefore needs to build much higher flexibility into its operations in order to be able to ramp up other sources of reliable generation quickly when the sun sets or the wind stops. This is best done with highly flexible gas fired power plants which can react quickly to cover erratic renewable supplies. They are crucial. Nuclear plants are not flexible and have been a major part of the problem in recent months.
In 2012 the Coalition Government made the case for more gas plant back up. It stated, “Gas – as a flexible source of generation, which emits half the CO2 of coal, will be needed to help balance the relatively inflexible and intermittent low-carbon generation [renewables] our policies will bring forward. It will provide crucial capacity to keep the lights on and the economy working.”
National Grid is now having to pay additional money to keep the system stable, all of which will be passed on to others to pay, including eventually customers and taxpayers. Another key priority for the future will be new policies to support more renewable energy storage, particularly for wind energy, so that it is no longer discarded, wasted and compensated when it can’t be used in real time. More interconnectors to import electricity are not the answer; they result in offshored emissions and reduced energy security.
The challenge of supplying and balancing electricity supplies in these changed circumstances is now paramount as traditional peaks in demand flatten out and more and more power supply is dependent on the weather. Consequently, a renewed focus after lockdown on energy security will be crucial as it is key to our future prosperity, growth, ambitious carbon targets and stability.
Usefully there will be a new energy White Paper later this year when the Government can spell out its plan. It must re-examine security of supply as well as detailing the costs which will face the sector as well as customers and taxpayers.
The lockdown has exposed an energy system which is far too rigid and has been operating at the whim of vested interests for far too long. Having used considerable public money to encourage, build and subsidise vast renewable assets then it defies economic and political logic to now pay them to switch off.
We need more flexible generation alongside renewables so they can grow and flourish. Paying old nuclear plants to turn off because they can’t run effectively alongside them reflects a broken policy which puts the wider low-carbon transition at risk.
The fallout from Covid-19 allows for a British energy policy re-set in the national interest to deliver more flexibility, green power storage and security of supply. We must not waste this important and timely opportunity.