Clive Moffatt is an energy analyst and former chairman of the UK Energy Security Group.
The Government has finally conceded that the UK needs to encourage new investment in flexible gas generation to safeguard energy security. This is a long overdue but welcome recognition of the role that gas will have to play as a vital source of power and heat in the foreseeable future. But a great deal more will need to be done to keep the lights on and avoid escalating energy bills.
In the last 10 years, reducing carbon emissions has taken priority over underpinning energy security and affordability. The Capacity Market Mechanism set up in 2013 has not worked as intended to underpin new investment in both “baseload” and particularly low carbon intensity flexible “peak” gas generation to compensate for the demise of coal and the intermittency of wind and solar generation.
Consequently, the economy and consumers have become increasingly exposed to the vagaries of the international energy market. There is a desperate shortage of reliable and flexible power generation to keep the lights on at times of system stress.
Last week the Government was keen to stress that the decision to support new investment in flexible peak gas generation did not undermine its commitment to Net Zero. However, the stark reality is that the announcement and Labour’s endorsement of the plan are tacit admissions that the political 2050 Net Zero target is unattainable.
More importantly, it is becoming clearer to politicians and the voting public that the more immediate targets to decarbonise the electricity system by 2030 in the case of Labour and 2035 in the case of the Government are neither feasible nor affordable. Furthermore, pursuing policies to try and achieve these targets will simply create an energy security and cost inflation crisis.
The Government has said that supporting new back-up gas generation is consistent with Net Zero because developers would be forced to ensure that sometime in the future either carbon capture (CCS) or hydrogen could be fitted on later.
This is unnecessary and wishful window dressing. Flexible gas generation is by definition low carbon because it operates only a few weeks a year and CCS and hydrogen are unproven technologies.
The priority has to be to get more gas generation built as soon as possible and not burden investors with the added planning cost and complexity before they can bid into a capacity auction.
Last week was a critical turning point in the debate on Net Zero. Both the main political parties now need to be honest with voters and declare that the entire project and in particular electricity decarbonisation need an urgent re-think. The are three compelling realities.
Firstly, the shortage of reliable renewable generation to compensate for the loss of coal and gas and the retirement of existing nuclear capacity. Increasing offshore wind capacity from 15GW to 50GW by 2030/35 is neither technically feasible nor affordable in terms of the scale of “Green” levies/subsidies needed to attract the required private investment.
Secondly, the fundamental lack of transmission network, distribution network capacity, and flexible short-term generation capacity to overhaul the complete electricity network to accommodate the planned expansion in intermittent generation.
Third and finally, the massive rise in consumer and industry energy costs required to fund the many billions to build offshore wind farms and finance the miles of cables and wires and electricity storage units needed to deliver reliable renewable electricity to where it is needed and also meet the 50 per centincrease in power demand projected for 2050.
The facts are that the disruption and costs associated with the decarbonisation target cannot be justified in terms of more economic growth, greater energy security, or a reduction in global carbon emissions.
Furthermore, the decision to support more back-up gas generation will not be enough to ensure that the lights stay on and energy costs are minimised. More needs to be done by whoever gains office after the next election.
Urgent action is required in across four key areas. First, we must scale back significantly the planned expansion in renewable energy generation in particular offshore wind generation to a level that is both technically feasible given current network constraints and affordable
We must also support new investment in unabated baseload as well as flexible peak gas generation to make for the demise of coal, the withdrawal of old nuclear capacity, and the delays, uncertainty, and massive capital costs surrounding new nuclear.
We must also support new private investment in gas storage to ensure we have the gas when we need it and to help mitigate the periodic volatility in both the supply and cost of imported LNG.
Finally, we need to create a new independent system operator charged with setting a minimum 10 per cent operating electricity capacity margin, market balancing in real time for both the gas and power markets setting long-term targets, and instituting a predictable regulatory framework for new investment in capacity and networks.
The economy is stalling badly and to help fuel any recovery in the foreseeable future we are going to need an electricity system where priority is given to energy security and affordability rather than reducing emissions.
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Author: Clive Moffatt
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