Last
year the Times reported that ‘Brussels is threatening to block a subsidy
scheme for gas-fired power stations that the Government hopes will keep the
country’s lights on’- the
UK’s plan to create a Capacity Market to allow gas plants to compete for
subsidies by acting as peak back-up suppliers when energy demand is high and
wind-power low. It would
be funded by levies on consumers’ bills. However, the European Commission has
warned that this contradicted the aim of creating an internal EU-wide energy
market. Evidently it would prefer grid balancing to be achieved by using
supergrid links across the EU, trading power excesses between countries to meet
local shortfalls, and enhancing competition. www.thetimes.co.uk/tto/business/industries/utilities/article3924542.ece
In
the UK’s case that would mean building more undersea interconnector
s- which is
already planned. But the UK’s proposed Capacity Market was meant to be more
than just a mechanism for subsiding gas peaking plants, it was also meant to
support other grid balancing options, including demand side management and
energy storage. As Germany has
found, with a big renewables input, you need incentives to maintain backup
since renewables undermine the peak power market. German energy expert Frank Peter says ‘We need a suitable market design
for the new conditions. In the future, gas power stations, partly also coal
power stations, need to be able to be operated economically within this system.
This is one of the main challenges that the German government needs to focus
on’. So they
also need something like a capacity market. www.dw.de/energy-expert-renewables-can-compete/a-17204519
Interconnectors
can certainly help. Although Frank Peter says ‘as costs for renewable technologies drop dramatically,
long distance energy transportation makes less and less sense’, he goes on ‘ it does make sense to connect the production of
renewable energy over a large area. Conventional power stations can serve as a
model for this. In this way, there is a higher probability that some kind of
renewable source can produce energy at any given moment. The argument for a
network connection is no longer to do with costs, but the fact that more
renewable energy can be used’.
The
big utilities of course don't like any of this- they would prefer the status
quo, ideally without disruptive renewables, and some see supergrids also as
undermining their control of local/regional markets by introducing cross-EU
competition for all types of power.
However they are loosing traction. For example, according
to energycollective.com, with consumers (or ‘prosumers’) now generating their own power and
selling excess back to the grid, Germany's giant RWE energy utility is shifting
their activities to sales, trading and decentralized power. It evidently wants
to depart from its traditional developer and ownership roles in relation to
large centralized power plants and instead use its expertise to help manage and
integrate renewables into the grid. This was necessary since ‘the massive
erosion of wholesale prices caused by the growth of German photovoltaics
constitutes a serious problem for RWE which may even threaten the company's
survival’.
RWE's share price has lost one-third of its
value over the last three years due to the European energy
transition and the company now looks to be addressing the
possibility of further shrinkage in a dramatic way. Under the proposed new
model the guiding principle is ‘from volume to value' with, according to a
document quoted by
energycollective.com, the focus on ‘technologies ranging from
large-scale offshore wind and hydro to onshore wind or photovoltaic’. But it added ‘ we will no longer pursue volume or percentage
targets in renewables. We will rather leverage our skill set by taking a
‘capital-light' approach. Based on funds sourced largely from third parties, we
will position ourselves as a project enabler and operator, and [as a] system
integrator of renewables.’ It went on, ‘developing
an innovative and profitable prosumer business model is a challenge we also
need to address successfully, as we see a billion-euro market emerging
alongside our traditional value chain.’
However there were some row backs and
prevarications. RWE Innogy told Power
Engineering International that, ‘there is no RWE
strategy to transform its business completely to renewables. The last target
for renewables was 25% of the capacity (not production) in 2025’, although the German newspaper Handelsblatt reported that RWE Chief
Executive Peter Terium wanted no further investments in fossil-fuelled powered
plants: ‘In 2020, conventional forms of power generation should contribute
no more than one fifth of the operating result’.
It may take a bit of time, but as Stephen
Lacey of GreentechGrid put it last October: ‘We may be about to witness one of the
most profound transitions ever to occur in the utility industry’, with RWE evidently planning to transform itself ‘ from a
traditional electricity provider into a renewable energy service provider.’
And all this at least partly because of the
spread of grass roots power! It can’t happen here! www.morningstaronline.co.uk/a-30b3-Energy-for-tomorrow#.Uoqc1nDTmM8 But we live in
hope that DECC will have noticed that elsewhere in the EU local ownership is
the driving force for change, with ‘prosumers’ and local energy co-ops now
running much of the show, in Germany especially, including in some cases,
city-wide distribution grids being taken over from the utilities.
Even with
decentral systems like this, there will still be a need for balancing capacity
and interconnectors, and someone has to run that, but a new system could be
emerging in which grid services like this are shared under some form of
collective control, as they used to be when power systems were publicly owned. Far fetched? Well it’s interesting that
one of the results of the recent reactions against utility price rises has been
a swing in public support for the idea of re-nationalising energy, with in a
You Gov poll last November, 68% of the public saying
the energy companies should be run in the public sector, while only 21% said
they should remain in private hands…
http://www.independent.co.uk/environment/should-the-big-six-be-nationalised-8981112.html
Back in the now, however, the Chancellor,
desperate it seems to squeeze ‘green crap’, has capped the Carbon Price Support
rate at £18/ton of CO2 from 2016-17 until 2020, saying ‘this will save a mid-sized
manufacturer almost £50,000 on their annual energy bill. And it will save
families £15 a year on their bills too - over and above the £50 we’ve already
taken off.’ What he didn’t say was that this attack on the carbon market
will, by reducing the carbon tax on fossil fuel, reduce the incentive to invest
in non-fossil options like renewables and energy efficiency - and also,
perversely, given the government’s commitment to it, nuclear power. We’re not there yet, but we could
be heading back to free market for fossil fuels..and a coal and gas boom.
