Friday, 14 August 2015

Future energy scenarios without storage - unicorns and rainbows?

National Grid's latest Future Energy scenarios report [1] has four energy scenarios as before, but only one of them meets our climate change mitigation targets and that one seems to be based on unicorns and rainbows. The Gone Green scenario has a similar proportion of renewables to the others, but it uses more nuclear power, more connectivity with Europe, and adds carbon capture and storage to bring down the carbon emissions. Unfortunately nuclear is expensive and CCS for power stations is still not proven on a commercial scale. Adding more renewables instead makes balancing load and demand more difficult. Interconnections with Europe can help but when push comes to shove they are not reliable either. Why doesn't National Grid include more energy storage to help with balancing? Apparently current regulations positively discourage it. We need to fix this now.

The Gone Green scenario sounds like unicorns and rainbows to me. National Grid says (quotes from the report are in italic throughout):

In a Gone Green world there are high levels of prosperity; consumers are able to buy new appliances and technologies, industrial and commercial users have investment capital available and the government has more money available for incentives. There is a high level of green ambition across all sectors of the economy, with new policies introduced to reduce emissions. This green ambition extends across Europe, with harmonisation and long-term environmental energy policy certainty.

The 4 scenarios from National Grid's Future Energy Scenarios 2015. Only 'Gone Green' meets our climate change mitigation targets. All but 'No Progress' have between 51% and 54% renewables but 'Gone Green' has more nuclear power, more reliance on interconnectors with Europe and 4 times as much carbon capture and storage than the others. This chart was created using supporting Excel data from [1].
Nuclear power is expensive and faces legal challenges
Gone Green needs lots of investment and quite a bit of luck because it relies on three technologies that all have their risks. Nuclear power is low carbon but expensive to build and may anyway be thwarted by litigation: German and Austrian utilities have got together with Greenpeace to challenge the UK's subsidy, which they deem to give 'hazardous technology' a competitive advantage[2].

Carbon capture and storage is still in the development stage, relying on hefty EU grants
Carbon capture and storage (CCS) technology is hardly mature. As of October last year there were only 13 operational CCS projects in the world and only one of them connected to a power station: Boundary Dam in Canada. It captures carbon emissions from a 110 MW coal plant [3]. The UK's White Rose project, now in planning, is nearly 5 times bigger and still regarded as a demonstration project requiring hefty development funding. It has been awarded €300 million from the EU [3]. No-one can say as yet how much CCS will cost at scale.

Interconnectivity isn't reliable - but storage can help with the balancing challenge
As for interconnectivity, at least the technology is well proven. The EU is working on connecting all our power markets together in order to improve reliability and reduce costs. However, there are challenges in managing bigger and bigger international grids. Germany's neighbours are not pleased by its recent behaviour in dumping power overloads on them [4]. In any case, interconnectivity is never entirely reliable because there is no guarantee there will be spare power available when we need it. National Grid says:

The Balancing Challenges chapter shows how distributed generation exporting onto the grid at times of low demand has implications for energy balancing and system operability. ... Storage, both large scale and domestic, has the potential to alleviate this challenge and unlike interconnection, will not be impacted by European countries experiencing the same issue at similar times of day.

OFGEM says our power supply is secure as it is - to 2018
Which brings us back to the issue of storage, which is actually where I started from. I only read this report because of an email I got from OFGEM in reply to my general concern about the lack of market support for energy storage. (See Open letter to OFGEM: where is the market for Energy Storage). OFGEM says that they have analysed Britain's supply outlook to 2017/2018 and can confirm we will be OK with the existing hydro-electric pumped storage. They have used National Grid's Future Energy Scenarios as input to their computations. Well I can believe that we will be OK for the next couple of years; it is the next 10-20 years that worries me. Energy infrastructure requires long term planning. We need to establish policies now to set the industry on a path to meet our needs in 2025 and beyond.

National Grid would like to have more storage but there is a lack of policy supporting it.
National Grid does not ignore storage altogether - in fact they would very much like to have more of it. However, they are concerned by the lack of policy instruments supporting it:

Although the potential benefits of storage have been established, support remains focused on innovation funding and demonstration projects, rather than through a policy instrument such as incentives, due to the relative infancy of some storage technologies.

If electricity storage is still in its infancy (and I think many would disagree, Elon Musk for one) then it deserves big development support, similar to CCS.

Regulations put energy storage at a disadvantage and discourage integration with renewables.
National Grid declares a red danger signal for 'policy and regulatory developments' supporting electricity storage due to strong market disincentives. For example, storage technology is currently classified as a subclass of power generation which means that the grid operators are not allowed to control it directly. Also, when storage competes in the market for buying and selling power it is disadvantaged by bizarre charging regulations:

As transmission system operators (TSOs) are prohibited from controlling generation, this restriction extends to storage. It also results in double charging, where storage is charged for both consuming (charging) and generating (discharging) energy, impacting on operating costs and therefore profit levels.

Integrating storage with renewables is another approach that helps to make renewables more grid friendly but current regulations are a powerful disincentive because:

At present, renewable electricity is not eligible for incentives if it is used to charge storage before it enters the electricity system.

In other countries, energy storage is proving to be financially viable.
National Grid cite several examples from other countries where storage is already proving to be financially viable, given appropriate regulatory support. For example the Californian target of 1.3 GW storage by 2020 means storage does not have to compete directly with conventional generation. Some US senators are so impressed with its success they want to roll it out across the US [5]. Another example is from Italy, where battery storage is being included in networks to reduce congestion at peak time. Storing extra power close to demand has been shown to be cheaper than strengthening the grid to carry more peak load [6].

In the Italian case, the storage project does not buy and sell energy on the market, it supplies a storage service to the network. This model of storage as a service, rather than as an energy market participant, is less risky and so more investment friendly. However, National Grid finds the UK regulations work against that too.

Energy policy is up in the air so we can fix this now.
Since energy policy seems to be up in the air at the moment, maybe this would be a good time to adjust the regulations to allow energy storage into the game.

I have made these points in my reply to OFGEM (text below). We shall see what happens next.

[1] Future Energy Scenarios 2015 (National Grid) July 2015
[2] Lawsuit launched against Hinkley C nuclear power plant (BBC) August 2014
[3] White Rose CCS Project secures award decision on European NER300 funding (WhiteRose) August 2015
[2] German winds make Central Europe shiver (Politico) March 2015
[3] Around the world in 22 carbon capture projects (Carbon Brief) Oct 2014
[5] Senate Bill Would Create America's First National Energy Storage Target (The Energy Collective) May 2015
[6] Energy storage takes a hold in Italy (Energy Storage Report) Feb 2014

My reply to OFGEM:
Thank you for your reply to my email but it hardly allays my concerns. I dare say that our supplies are reasonably secure to 2017/2018 however that is not very far ahead. I am worrying about 2025-2050, not next year.

You refer to the National Grid Future Energy Scenarios report - this gives projections to 2035 for four scenarios. In last year's report only two of these meet our environmental objectives and in the new report for 2015, this is reduced to one: the Gone Green scenario. There is no point in considering scenarios that don’t meet our climate change mitigation targets.

However, Gone Green is arguably an unlikely scenario. It assumes ’there are high levels of prosperity … the government has more money available for incentives’. Also it relies heavily on nuclear power, carbon capture and storage, and interconnectors with Europe to ensure security of supply but all of these technologies carry considerable risk: nuclear power is proving very difficult to finance, CCS on an economic scale is still untested, and the interconnector option requires international co-operation and investment that may not be forthcoming. I see that the current infrastructure is unable to handle Germany’s exports right now, and causing international tensions.

The lastest National Grid report includes a case study of balancing issues (Section 7.1) that illustrates our problem, particularly with high levels of embedded solar in the mix. This can lead to flat power demand during the day and a steep increase in the evening (figure 96). To accommodate this, they suggest we need development in flexibility of generation and demand, and storage (section 7.1.6).

In Section 7.4 they discuss the potential value of electricity storage and what needs to happen in order to realise that potential. Under the traffic light system, they rate the area of ‘policy and regulatory developments’ as red i.e. danger. They point out: '…support remains focused on innovation funding and demonstration projects, rather than through a policy instrument such as incentives'. They also indicate storage solutions are disadvantaged by current regulations such as double charging: 'As transmission system operators (TSOs) are prohibited from controlling generation, this restriction extends to storage. It also results in double charging, where storage is charged for both consuming (charging) and generating (discharging) energy, impacting on operating costs and therefore profit levels.’

In addition there are disincentives to integrating electricty storage with renewable energy such as wind or PV: 'At present, renewable electricity is not eligible for incentives if it is used to charge storage before it enters the electricity system.’

The situation seems to be even worse than I thought. Firstly, the only one of National Grid’s scenarios that meets our climate change targets relies on a combination of risky technologies and economic prosperity. Secondly, current regulations and incentives do not merely fail to support development of electricity storage, they actually work against it.

Is this an issue for OFGEM or for DECC? If you think I should take this to DECC, can you tell me who I should contact?


  1. Nicola,

    I would question your assumption that nuclear power is very expensive. Compared to what, exactly? It's unit costs seem to be very similar to onshore wind. That it's proving to be difficult to finance is true, but that is a factor which applies to renewables too. Neither will prosper in the kind of market-based regulation we have where different energy forms compete with one another. Getting challenged by Germany, Austria and Greenpeace also doesn't help, because here the arguments are inspired about environmental concerns, not finance. It rather depends on whether you see climate change as a bigger threat than radiation leaks and/or proliferation.

    1. Nuclear power is expensive for a lot of reasons. The CfD subsidies for it are similar to onshore wind but they last for 35 years, compared to only 15 years for other technologies. Personally I am not too concerned about accidents or proliferation but I am worried about waste disposal. I think we need to look at 4th generation designs that can burn up the waste we already have. However waiting for them will also cause delays and climate change is definitely the bigger problem. Of course not everyone agrees with me on that, and the disputes cause more delay and risks.


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