It was 3AM on Monday and staff at National Grid’s central control room had a problem. Arrayed before them were dozens of computers tracking the UK’s energy supply and demand. Overhead was a huge screen displaying, second by second, Britain’s whole electricity generating and supply network. The giant bear pit of a room is the nerve centre of Britain’s complex power grid. Its precise location – somewhere near Wokingham – is kept under wraps for national security reasons. That morning, a message flashed up, telling them that a gas-powered electricity generator with a chunky 800MW capacity had to go offline because of a fault.
Such outages, as they are known in the industry, are not uncommon.
But last week, there was another problem to compound it. As weather forecasters had told viewers on the evening news shows a few hours earlier, an area of high pressure was coming in to sit over the UK, temporarily bringing summer back from the dead. While this would give Britons one last chance to break out their sun hats, it also meant wind turbines up and down the land had slowed to a crawl in the still air.
The 20 engineers on shift in the ESO (electricity system operator) control room realised there would be a shortfall of power before the morning rush. They sprang into action.
Standard procedure if an “event” occurs is to opt for the next most cost effective option. And with wholesale gas prices currently at a record high, firing up more gas-powered generators was not it.
The solution was to turn to a rather unloved power source – coal. Having studied weather forecasts for weeks, ESO had already asked EDF to warm up the 55-year-old West Burton A coal plant in Nottinghamshire in readiness. “We could see a while in advance that we’d need to warm some coal units in case we lost other generators on the day,” explained Rob Rome from ESO. Now the order to fire up the station, one of only two remaining coal plants in the UK, was sent electronically from Wokingham. Just in case the message didn’t get through, operators still have a green phone on their desks to send instructions the old fashioned way.
The upshot was that for several hours on Monday last week, coal went from zero to more than 5 per cent of the UK’s energy mix, its highest level since the winter. Wind power dipped to just 2.5 per cent, down from 21 per cent at the same time the week before.
Coal remained in use for several days last week, highlighting the challenges in the UK’s energy system and posing difficult questions for ministers touting the country’s green credentials ahead of the COP26 climate summit in Glasgow later this year.
Meanwhile, as wholesale energy prices rise, suppliers are struggling to make ends meet: two smaller energy companies stopped trading last week. So what does the future hold for UK energy, how green can it be, and will consumers simply have to get used to higher prices?
Heatwaves aside, the story of the UK’s energy generation in the last decade has been one of remarkable transformation. National Grid declared 2020 the UK’s “greenest year” ever. There has been a 96.5 per cent fall in coal generation since 2013, with the UK going 68 days straight last year without energy provided by the black stuff.
Gas made up the largest share of the UK’s energy mix in 2020, at 34 per cent; followed by wind on a quarter; nuclear at 17 per cent; biomass at 6.5 per cent and solar at 4.4 percent. Despite the progress of renewables, detractors note the problems arise when the sun doesn’t shine and the wind doesn’t blow. Until reliable battery storage for renewable energy is developed, these sources can only ever be intermittent, critics argue, and some infrastructure will continue to use oil for back-up generation. It is a case made by the nuclear industry, which says that it is uniquely placed to provide the zero-emissions baseload the grid requires.
Gas prices surge
Runaway gas prices are already sparking concern across the energy sector, with fears that consumers are facing a “bill shock” this winter. Personal finance expert Martin Lewis warned his readers last week: “This autumn’s signature noise will be a deep thud… the sound of jaws hitting the floor as people finally see the practical evidence of the energy bill catastrophe laid bare.”
UK gas prices reached 130p per therm last week, compared to 30p a year ago. In an unusual inversion, gas prices are trading above the equivalent price of Brent, the benchmark for crude oil.
Both supply and demand factors are at play. The reopening of economies after Covid lockdowns has pushed up demand for gas. Countries are also trying to cut their use of coal, and switching to less polluting gas as a result. Europe is thus competing with Asia for shipments of liquid natural gas (LNG), a more mobile form of gas that is increasingly popular.
Supply is also tight: a particularly cold winter meant Europe used up more reserves than usual and these have not been replenished. A spate of outages at gas production plants in different parts of the world have compounded the problem.
To make matters worse, the UK has relatively low levels of gas storage. The country has eight gas storage sites that can hold an estimated 12 days of supply. Storage capacity was drastically reduced when the Rough site under the North Sea was closed in 2017 for safety and economic reasons. Rough, a disused oil field, could hold around 70 per cent of UK gas reserves.
“The market hasn’t been able to fill up storage as we move into this winter. And hence we are very exposed, especially if it is another cold winter like last year,” said James Huckstepp, analyst at S&P Platts. “Consumers are starting to recognise that their energy bills are going to be much higher this winter.”
Import dependency
UK energy production peaked in 1999 after the North Sea boom and imports have increased since then. Around 50 per cent of our gas is imported, either through three undersea pipes – of which Norway is the biggest supplier – or by ship in the form of LNG. Electricity is imported via five interconnectors – high voltage cables – to mainland Europe and Ireland.
The UK hopes to become a net exporter of energy again in the future, for the first time since the boom years of North Sea oil – but this time selling green energy back to the continent.
Meanwhile Europe is pursuing more energy interconnections to enable the trading of green energy between countries. But geopolitical factors are at play. Last week the final stretch of the controversial Nordstream 2 gas pipeline from Russia to Germany was laid. Critics claim it will put Europe in hock to Vladimir Putin for gas supply.
Greg Jackson, chief executive of Octopus, the green energy supplier, said the UK was still “far too dependent on gas” to heat homes and generate electricity. “if we’d acted sooner to decarbonise, we’d enjoy more energy independence and lower costs of electricity generation,” he said. ”Moving to renewables will not only reduce climate change, but could actually cut energy costs.”
Future energy
The government’s energy white paper last year chimes with this view. It set out the need for a “decisive shift away from fossil fuels to using clean energy for heat and industrial processes, as much as for electricity generation”. Expansion of wind, solar and nuclear power is key.
With the latter, however, UK policy is mired in difficulty. A new nuclear reactor at Hinkley Point is years behind schedule and saddled with a financing agreement that could leave consumers on the hook for higher bills for years afterward. The construction of plants at Sizewell in Suffolk and Bradwell-on-Sea in Essex is complicated by the involvement of CGN, the Chinese state-owned nuclear power company, as relations between London and Beijing have chilled.
There are fears China could also pull out of Hinkley Point C in Somerset
There are fears China could also pull out of Hinkley Point C in Somerset
Hinkley Point C is under construction, but reports in July suggested the government was considering removing the Chinese from involvement in Sizewell C amid national security concerns. That would kill plans for Bradwell B, where the Chinese would be the majority owner and use for the first time its own reactor technology – the real prize. There are fears China could also pull out of Hinkley if it is shunned at Sizewell. The government is consulting on using a regulated asset base (RAB) model at Sizewell C, which would heap costs onto consumers during the construction phase, unlike at Hinkley.
Meanwhile the clock is ticking, with plans to close down the rest of the UK’s ageing nuclear fleet by 2030.
Hydrogen remains a great hope as a clean and reliable source of energy. The government’s hydrogen strategy, published last month, set an aspiration of having 20-35 per cent of the nation’s energy consumption be met by the gas by 2050.
Other schemes could see even more consumers and firms selling energy back to the grid from their own solar panels or wind turbines. “Over the next five years or so you’ll see an increasing number of companies looking at ways of turning this particular cost risk into a revenue opportunity,” said Mark Dickinson, chief executive of energy consultant Inspired.
Better technology could help. Arenko is a UK-based company that has developed automated battery control systems to manage “imbalances” in the energy network. It wants to update tech in battery systems connected to power stations to manage times when wind and solar drop. That could allow the National Grid’s controllers in Wokingham to make faster decisions and not keep fossil fuel-powered plants like West Burton on standby. “That will enable National Grid to provide cleaner, cheaper power for the consumer,” said Rupert Newland, chief executive of Arenko. There is much to do; the UK has to hope that its grand plans for energy are not blown off course, once again.


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