‘Precarious’ is how industry experts characterise the state of security in Europe’s energy system. As for the UK, “people want to know,” as Simon Hobday puts it, “whether at any particular time electricity production meets demand – and then there’s the wider fuel source issue, including the technical and financial implications. The two are related but they're separate.”
Working as a partner in the energy practice of Osborne Clarke LLP, Hobday took part in a roundtable of the PowerGen Europe 2016 advisory board in the run-up to the trade show along with the CEOs of Advanced Power Europe and Pearlstone Energy, Peter Ramm and Azad Camyab, as well as Rudy Koenig, principal at QENIQ Advisory. Doors open today at MiCo Milan for the 3-day PowerGen Europe conference and trade show under the motto ‘delivering an integrated energy future’.
It’s crunch time
Blaming EU directives is part of the ‘spiel’, notably against the Industrial Emissions Directive and the Large Combustion Plant Directive which are feared to take 15-20% of UK capacity out of the UK energy market between 2016 and 2020.
Pointing at predictions from the regulator Ofgem that the UK's reserve capacity margin is set to fall to less than 1.5% from 2016 onwards, the Azad Camyab said “, when I joined the market just over 20 years ago this margin was around 23%.
“When regulations have that effect you need to build new capacity back into the system,” he says but warned “whether it’s because of the effect of the oil price on CCGTs or the slow development of nuclear: Even if we were to build now, capacity wouldn't come online until at least 2026 – leaving us hugely vulnerable in the meantime.”
A series of unforeseen events – cold spell, low wind, fossil plant outages – could, in combination, leave the system very vulnerable, Hobday warned. In a situation “where we’re constraining demand and there's nothing else to give, the system starts to trip automatically. Historically we’ve had the margin to cope but we don’t at the moment. It will come back, but it’s just not there now.”
Role & impact of RES
Renewables do provide “a certain type of energy”, as Peter Ramm puts it, highlighting the low gross revenue for dispatchable power plants which has led to wide-spread mothballing of fossil generating capacity. In his view, “security of supply will become an issue when we've shut these plants down and renewable sources struggle to make up the difference.”
Politicians and the general public tend to ignore the consequences and risks of the ongoing energy transition, Rudy Koenig warned. “Germany, for example, already spends approximately €25 billion per year subsidising existing renewables capacity, is behind in developing the necessary new infrastructure for transport and storage, has priced large parts of its dispatchable capacity out of the market and is shutting that down together with its nuclear fleet.
“We are heading towards a tipping point,” he warned, though acknowledging that low wholesale fossil fuel prices and a healthy Germany economy have offset some of the costs. Despite slow progress in building new power lines to transport offshore wind power from northern Germany towards the south of the country, the existing grid infrastructure – combined with exporting surplus electricity – has coped with the additional stress on the system.
Pay for flexibility, not MWh
Delays in large-scale generation projects, notably new nuclear, are caused by a fundamental mismatch. “We pay for electricity on an energy basis (per MWh) when we should be paying for when we want it, i.e. on both an energy and capacity basis,” Mr Ramm pointed out.
Power transmission is also an issue but he sees “good progress” on improving interconnectors. Weather patterns are the new wild card, and increasingly so as the deployment of renewable energy sources progresses.
Critical voices are abundant within much of the industry regarding the green energy transition. “Renewables displace conventional capacity, eliminating the economic value of the assets, and absorb huge amounts of fresh capital. This is taking a mortgage out on the future and reserves out of the market,” it Mr Koenig’s take on the conundrum.
Loss of inertia
Grid operators not only struggle with supply intermittency - loss of inertia is another key issue. Solar, wind and most micro energy sources use inverters or induction generators to deliver power to the grid, not providing any inertia at all. In the event of an unforeseen outage of several large-scale power plants, the system frequency will decline much faster than before – increasing the risk that the remaining large generators on the grid will trip offline.
Recollecting the debate at a recent National Grid forum, Mr Camyab remembered the UK grid operator as saying that of its 7.2 GW of solar/PV capacity, it cannot really account for about 4 GW. “That's nearly 60 to 70%. It's unpredictable and that is a real issue.”
Asked for solution, panellists were less certain. There is certainly no ‘silver bullet’. Flexibility was highlighted as well as appropriate pricing signal for dispatchable capacity and a “reappraisal of priorities,” including localised power generation and usage.
Virtual power plants are seen to gain importance as they can leverage the flexible load that large industrial and commercial facilities offer which can be shifted from peak to off-peak periods. Energy storage, though still an expensive option to date, may soon be ready to form a big part of the puzzle.