A new report draws attention to the extent of power plant closures planned in Britain by 2025. But can industry fill the gap, given the right incentives?
The IMechE’s new report published today (26 January) on Engineering the UK Electricity Gap predicts a supply shortfall of 40 to 55% by 2025 if replacement capacity is not constructed as coal and nuclear plants close. It rightly draws attention to the need to take action to replace capacity, but what form should the action take?
The energy and electricity sectors are in the early stages of transformational change, with a number of factors all combining to create a landscape of massive complexity and enormous opportunity. At the community or even personal level we see smart systems, technology companies taking over the home energy economy, affordable domestic storage, etc. This all allows demand to participate in energy balancing, ultimately saving consumers’ bills by reducing the amount of generation needed.
Smart cities will over time maximise the opportunities for communities to optimise their energy solutions, and integrate them with and within other infrastructures. Virtual communities of users (for example supermarket refrigeration) offer opportunities for peak demand management and frequency control. There is uncertainty, however in when this will all happen. Regulators need to get out of the way, and it’s pleasing to see Ofgem consulting on just this issue.
Likewise there is also uncertainty in how far and how fast we will see the electrification of heat and personal transportation, either of which will have a massive impact on electricity demand.
Hence the policy dilemma is how to balance facilitating investment in innovative, transformative, technologies, whilst also incentivising that sufficient large power plant are built for the base load needs of the next few years and most likely a longer term backup of dependable capacity. Too little building and supply security is put at risk, too much and innovation gets squeezed, consumers overpay and carbon emissions become locked in.
There are other cards in play too. Interconnection with other countries can be highly efficient, allowing smoothing of peaks across larger power pools, but common mode resilience issues need thinking through. Renewables and storage will continue to fall in cost and improve in performance. And the supply chain will deliver a higher UK content if it can see sufficient certainty to develop capability here rather than import it when needed.
So there is a role for Government here. If community heating is the future, it needs strong delivery incentives, especially if it is to be co-developed with combined heat and power plant needed for electricity production in the next few years. If combined cycle gas turbine (CCGT) plants are the future, and it’s hard to see how they aren’t at some level, the capacity mechanism needs to be adjusted to incentivise such plant, rather than the least cost peaking plant as currently.
I don’t think the rate of gas fired build needed is as scary as the IMechE implies – it says we need 30 CCGT plants in the next ten years when we have built only four in the last decade - unless electric vehicles take off quickly, which seems unlikely at current oil prices.
However some CCGTs are needed to fill a gap before nuclear really delivers; big renewables will contribute energy but not capacity. I believe carbon capture and storage (probably retrofitted later) will be a factor in this world – if the incentives are there, and Mott MacDonald’s work has demonstrated the economic value of small modular nuclear in CHP applications (but after 2025 because of the time needed to develop and prove the technology). But don’t underestimate the pace of tech company innovation, given the space to breathe it could happen very fast.