No compromise on energy security. That’s the message from secretary of state Amber Rudd and all her ministers at the Department of Energy and Climate Change (Decc). But she has failed: this winter there have been lots of blackouts.
She has been looking at the wrong measure of security and spending money in the wrong place.
Decc ministers are fixated on making sure there is generation in place to cover every kW of power we would ever want to use, or export across our interconnectors, and they are willing to pay almost any price to do it (albeit set by auction). But this winter we have seen the lights go out – temporarily – in large areas of the UK. That’s not, as feared so often and so publicly, because we don’t have enough capacity on the system – we have so much that prices are hitting rock bottom. It’s because floods and storms have damaged the network.
That’s not a criticism of network companies and their contractors, whose preparation for winter is extensive and whose staff have to brave those same storms and floods to get people back on supply or provide other support to customers.
It’s a criticism of a view of the energy system that doesn’t understand that delivering electricity and gas is as important as producing it.
How can we improve energy security in delivery? It needs investment. But this is where the shift to a more flexible system will eventually have a real benefit. Moving to more distributed generation will help, so areas don’t have to go dark when they have to disconnect from the wider network. So will demand side response, in an ad-hoc approach that has been invaluable in helping reduce the need for forced power outages over the last few weeks and can do much more.
There are signs that Decc at least is beginning to understand this. A key report published by the department in December seeks evidence on running a more flexible system, and suggests we can reduce costs by using DSR, storage and other flexibility. At last!
But being economic doesn’t make it cheap upfront. Networks are keen to stress that they are just a third of our energy bills. That will increase, if they have to fund more active networks, and regulator Ofgem must ensure we get value for money.
Maxing on capacity?
Of course we shouldn’t forget that we do have to meet our capacity needs. Sadly, we have failed on that aspect of security of supply too. Surprisingly, this is failing because the system at the moment looks too secure.
Decc is clear that it doesn’t want just any power. To give it its due, it wants clean flexible CCGTs to work alongside renewables. It is effectively in a protracted negotiation with potential investors to convince them to build such CCGTs.
It’s not an easy decision to invest when you see that existing CCGTs are losing money. Clearly some incentive is required. But here’s energy minister Andrea Leadsom giving evidence to a Lords Committee: “The be all and end all purpose of Decc is to keep the lights on – while decarbonising, and at the lowest cost to consumers, but ultimately keeping the lights on is our completely day-in day-out focus. … That is non negotiable … it’s absolutely our top priority…. energy security is everything. The red lines are around keeping the lights on and making sure we always have enough buffer. We will never compromise. Energy security for us is absolutely the first and last line.”
Well, minister, we get the picture (although it’s not how I would begin a negotiation). And we know that for you, it’s all about having lots of capacity. That’s why we have the Capacity Mechanism. But it has not incentivised what government really wants. Instead, in a misguided attempt to avoid picking winners, it has incentivised everything else. Apart from the diesel farms springing up around the countryside, it has paid for on-site backup power that would be there anyway and old power plants that are really past their use-by date.
The Capacity Mechanism has revealed that in generation our system is over-supplied – albeit with the wrong type of generation and at high cost. That’s no answer to long term security of supply either. We need to shut down old coal plant and make space for new CCGTs: the Capacity Mechanism has to do that.
So how do we really make energy security “absolutely the first and last line”? First, take a system approach and consider what real security is and how it can be achieved. Second, understand what a flexible system can do to help that and how we can make flexibility a reality (hint: don’t talk about DSR as “rationing”). Third, make sure that we have the networks that will be able to deliver both energy and flexibility.
And then think about how to deliver the generating capacity that’s really needed, in the right form and in the right place.
More expert energy news and comment in New Power.