With a snap election called for early July the difference between the main political parties appears narrow. However, their respective views on the energy system are very different.
In March the incumbent UK Government announced a slew of new gas-fired power plants to deliver spinning reserve to cover the GB grid for those windless winter days with no sunshine. At the time, Energy Secretary Claire Coutinho said: ‘There are no two ways about it. Without gas backing up renewables, we face the genuine prospect of blackouts… There are no easy solutions in energy, only trade-offs… As we continue to move towards clean energy, we must be realistic.’ On the face of it, the argument appears sound, however evidence would strongly suggest otherwise. With increasing penetration of cheap renewables onto the grid, the cost of marginal gas generation will become increasingly expensive and will drag up consumer bills. This is a genuine paradox – more cheap renewables equals higher electricity bills – and is an unfortunate consequence as we advance intermittent green power across a grid system originally designed for dispatchable power sources utilising coal, gas, nuclear and hydro. As Coutinho says, trade-offs are required – but if we want consumers to truly benefit from the cheapest forms of electricity (i.e. renewables), and to get fully on board with net zero, then some new approaches are required.
No one can now dispute that renewables are cheaper than fossil fuel generation as evidenced by the graph below with the LCOE of different technologies – and we now see capacity additions outstripping their fossil fuelled equivalents globally.
By 2025 renewables is on track to overtake coal as the largest source of global electricity generation.
The UK is in the vanguard. In 2023, renewables supplied 47 percent of the country’s power, up from just two percent in 1991. Low carbon nuclear power supplied 13 percent, while the remainder was fulfilled by gas suppling 31 percent, coal circa 1 percent, and 7 percent imported via inter-connectors from the continent.
However, despite the increasing penetration of low-cost renewables, over the last five years the UK socket price for domestic electricity has risen at a compound average growth rate of 12.8 percent. However, as a result of an increasing share of low-cost intermittent renewables displacing gas to power, there is now greater risk in matching supply with demand. In the event where forecast demand is not matched by generation, National Grid will make a call for power via the balancing mechanism at a premium price (due to lower utilisation – see ‘Balancing Act’ section below) from dispatchable sources which are largely made up from carbon emitting gas fed power generators and the heavily subsidised, inefficient Drax biomass plant (circa £800 million per annum).
These balancing mechanism costs were £2.9 billion in 2023 (compared with £4.2billion in 2022 which can be directly linked to the gas price spike post Russian invasion of Ukraine). The combination of balancing mechanism costs plus constraint payments due to insufficient grid infrastructure are equal to £139 for an average electricity bill payer, representing 11 percent of the annual consumer electricity bill in 2023. (compared with 14.5 percent in 2022).The UK is in the vanguard. In 2023, renewables supplied 47 percent of the country’s power, up from just two percent in 1991. Low carbon nuclear power supplied 13 percent, while the remainder was fulfilled by gas suppling 31 percent, coal circa 1 percent, and 7 percent imported via inter-connectors from the continent.
However, despite the increasing penetration of low-cost renewables, over the last five years the UK socket price for domestic electricity has risen at a compound average growth rate of 12.8 percent. However, as a result of an increasing share of low-cost intermittent renewables displacing gas to power, there is now greater risk in matching supply with demand. In the event where forecast demand is not matched by generation, National Grid will make a call for power via the balancing mechanism at a premium price (due to lower utilisation – see ‘Balancing Act’ section below) from dispatchable sources which are largely made up from carbon emitting gas fed power generators and the heavily subsidised, inefficient Drax biomass plant (circa £800 million per annum).
These balancing mechanism costs were £2.9 billion in 2023 (compared with £4.2billion in 2022 which can be directly linked to the gas price spike post Russian invasion of Ukraine). The combination of balancing mechanism costs plus constraint payments due to insufficient grid infrastructure are equal to £139 for an average electricity bill payer, representing 11 percent of the annual consumer electricity bill in 2023. (compared with 14.5 percent in 2022).payer, representing 11 percent of the annual consumer electricity bill in 2023. (compared with 14.5 percent in 2022).payer, representing 11 percent of the annual consumer electricity bill Written By Gabrial Mynheer, President