Wires or pipes?

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There is a fascinating debate over whether long distance High Voltage Direct Current supergrids are the right way ahead for energy transmission. In theory they allow variable local supplies  and demands to be balanced across wide geographical areas and are much more efficient, in terms of energy losses over long distance transmission, than conventional AC links.

However there are problems.  It is much harder to shift power up and down from HVDC to and from local AC- expensive converter transformers are needed. That’s why HVDC is usually seen as best for very long distances, with transformers just at each end. Another approach, a bit of a compromise, is an HVDV ring, with tap offs along the way. Others argue that a HVAC overlay grid may be best for regional distribution.   It can get quite technical.  AC allows for easier local, regional or even national frequency balancing, whereas a fully optimised HVDV system would require central control of all the resources.  Some say that we ought to simply interlink national AC systems, so as to retain local autonomy, although some long distance HVDC could also be added as a feed in (and out) to and from strong points in the systems. At the extreme is the idea of local ‘island generation’, with each region operating more or less independently on AC, but linked to others for trade and balancing. That raises all sorts of grid stability and reliability issues as the experience in the fragmented USA shows.

Germany is planning a major series of HVDC ‘corridors’ 660 km long in an €10 bn project to shift electricity from the north, which is where most of the wind resource are located, to the south, which is where there are some large cities. http://carbonnation.info/2013/05/01/germany-jumpstarts-the-supergrid/ and http://carbonnation.info/2013/06/18/german-parliament-oks-bold-hvdc-grid-upgrade/

HVDC is of course already widely used for undersea links, and China has used it for bringing electricity from its huge but remote hydro projects to cities on the coast. A series of High Voltage Direct Current links have been built to East and South China, over distances of around 1,000 km, to transfer electricity from the Three Gorges hydro plant. The total capacity of the HVDC links is 7,200 MW, with line losses put at about 3%.

Another idea entirely is to down-play electricity transmission and make much more use of gas and gas transmission.  Energy losses are even lower and buried gas mains are much less invasive, once installed, than power grid towers and cables.  The gas grid already handles four time more energy than the electricity grid in the UK, and in effect acts as a buffer store, helping to deal with variable demand: demand for heat varies much more, both daily and over the year, than demand for electricity.  That approach can be expanded with large gas stores (gas is easier to store) and we could switch to green gas, methane from bioenergy sources (e.g. AD biomass using farm and food wastes) and from wind-to-gas electrolytic conversion, making use of the excess energy produced from wind at times of low demand. Some of the gas could of course be used to make electricity locally where needed.  Some of the gas can also be exported and imported. So we don't need electricity supergrids. Green gas could provide a cheaper and more flexible balancing and transmission option.  And if the combustion of green gas is combined with carbon capture and storage, then you get negative carbon emissions.  Sounds like a winner! Pipes not wires!

Some of these ideas are already being explored in Germany. Biogas is being added to the gas mains and 'wind to gas' projects are spreading, with some developing synfuel production using captured CO2 and electrolytically produced hydrogen: http://www.itm-power.com/wp-content/uploads/2013/04/Platts-April13.pdf and http://www.iwes.fraunhofer.de/de/publikationen/uebersicht/2010/towards_100_renewablesandbeyondpowerthepossibilityofwindtogenera.html.

Heat production, transport and storage is another possible winner –storing energy as heat is even more efficiently than storing it as gas, and although heat transmission is less efficient it can be sent quite long distances with low losses- the longest example so far is 65km from a rural waste to energy power plant to the city of Prague, linked with a 200MW capacity pipe.

www.copenhagenenergysummit.org/applications/Prague,%20Czech%20Rep-District%20Energy%20Climate%20Award.pdf

So rather than distributing electricity, or for that matter fossil or green gas, to individual domestic consumers for heating, wherever possible, heat could be supplied via district heating (DH) networks, fed from high-efficiency community-scaled green energy fired Combined Heat and Power (CHP) plants. While heat can be sent long distances, in economic terms, building local DH distribution networks only makes sense in urban and perhaps suburban areas where there are good heat loads. The heat can be from a range of sources.  Biomass and solar-fired DH is now moving ahead across the EU, usually linked to heat stores, and in some cases inter-seasonal heat stores. Most of these will be sited to meet local loads, but in some case long distance transmission might be appropriate. For example, Oslo’s district heating network is fed via a 12.3 km pipe from a waste burning plant in the city outskirts. In Denmark there is a 17km link from a CHP plant to the city of Aarhus. Helsinki has a CHP/DH system, supplying over 93% of Helsinki’s heat, including a plant linked in via a 30km pipe in a tunnel.  So that is an extension of the ‘pipe’ rather than ‘wire’ approach, with piped heat as well as piped gas.

Probably though a mixed system would be best, capitalising on the strengths of each. However the best balance between heat, gas and electricity and which will, or should, dominate in future, is unclear. It will be influenced by the location of the sources and the demand. For example, access for pipes may be hard in some locations. Technological change could also tip the balance of advantage between these vectors. The wind to gas route may prove too expensive, whereas the availability of cheap storage of electricity might make electricity more attractive. The debate continues.

One way follow it is via the Claverton Energy Group e-conferences:

 http://www.claverton-energy.com/

*This post was delayed from its usual start of the month slot since I was away on holiday!

Politics and energy: election issues

Soon we’ll see election positions being taken up, with energy being one key issue: some first shots have already been fired- e.g. Labour’s pledge to freeze power prices. And (see below) its new ‘green gas’ commitment.

Setting the wider scene, the Conservative Party’s manifesto in the recent Euro election outlined what it saw as its achievements in relation to the EU, including: stopping EU attempts to ban further offshore oil and gas drilling, stopping EU attempts to over-regulate the UK’s emerging shale gas industry, and ensuring that the proposed 2030 renewable energy target is non-binding on individual EU countries. What will be in their 2015 national election manifesto? An on-land wind freeze?

www.conservatives.com/~/media/Files/Downloadable%20Files/MANIFESTO%202014/Large%20Print%20Euro%20Manifesto_English.ashx 

The Lib Dems oddly didn’t mention their support for nuclear in their Euro election bumph, Labour is also all for it, so is UKIP (and very hostile to renewables), leaving just the Green Party as the only pro-renewables/anti-nuclear option, the SNP in Scotland apart.

However, to be fair, investment in renewables has doubled under the present government, with renewables now supplying 15% of UK electricity, although whether they can claim to have aided or hindered that is another matter. In terms of overall expansion plans, a Parliamentary answer a minister indicted that by 2015 on shore wind was expected to deliver 5.6-6.6% of UK electricity, offshore wind 3.4%, solar 1.3 and nuclear 1.5-16.7% (Hansard 14/5/14 : Col 595W).

Will rival parties push for more in the election run up? And new support options? DECC had made proposals for an Offtaker of Last Resort (OLR) system, to support independent renewable generators by guaranteeing a route-to-market and therefore improving their ability to raise project finance. That seems to be designed to help small generators, but details are scarce. Could there be other new forms of support, or is it just the standard Contracts for a Difference system, shared with nuclear ? If so, then the new £205m p.a. CfD cap limit on renewables will slow things down.. https://www.gov.uk/government/news/over-200-million-boost-for-renewables

More immediately, there’s the Scottish Independence referendum. What does that means for energy and in particular, renewables?  Carbon Commentary.com  suggested that about 15 GW of 2020 renewables will be in Scotland or in Scottish waters and only about 18 GW will be in England and Wales. So Independence would mean that around 40% of total renewables will ‘disappear’, but only 10% of UK electricity consumption. The UK rump would have to import this green power to meet its targets. Also it claimed that Scottish renewables would only need a subsidy of on average £44/MWh as against £93 for England and Wales. (CarbonCommentary, quoted in issue 62 of NuClear news: http://www.no2nuclearpower.org.uk/nuclear-news/)

Whatever happens in relation to Scotland, there will be room for new interventions.  Labours energy spokesperson Caroline Flint says if Labour won the general election, they would commission the Committee on Climate Change, with National Grid, to report by the end of 2015 with advice and recommendations on reforms needed ‘to maximise the potential for the development of green gas’. She claimed that the cost of minor gas grid upgrades for green gas injection, so as to continue to provide heating, would be much less than for the electrification of the heating systems in the UK (the current government plan is to do that mostly via electric powered heat pumps) which would require an electricity transmission and distribution system four times its current size. It’s an interesting idea. Landfill gas and sewage gas production is effectively free and its use offers some of the cheapest electric power we have, but these are relatively limited resources, and probably best left for electricity production. AD biogas production is a potentially much larger resource, using farm and food wastes and possibly energy crops, like short rotation coppiced willow. Though it’s more expensive than using landfill/sewage gas. There may also be land use and eco-limits to the use of some energy crops: www.theguardian.com/big-energy-debate/biogas-green-energy-environmental-damage

However it’s surely vastly preferable environmentally to use biogas than (fossil) shale gas. And if, tragically, the wind programme stalls, or is stalled, and nuclear is delayed (which seems very likely) or abandoned (which would be sensible), then this, along with energy saving, might be part of the way ahead for heat supply, rather than massive reliance on electrification. And biomass/waste-fired CHP linked to district heating, ought to appeal to Labour, with its urban emphasis. 

I will be looking at some of these technical options in my next post.  But on the politics side, there was a time when the Labour left was anti nuclear and pro-renewables and the right pro nuclear and anti-renewables . However, these days energy choices don't always map onto politics in any immediately obvious way, at least in the UK. Elsewhere it can be different, though party positions do vary- who would have thought a right of centre German government would be pioneering a nuclear phase out and a green future? This sort of speculation may be of little value,  especially since policies and contexts keep changing (see Ben Sovacool and Scot Valentine’s  2012 Routledge book ‘The National Politics of Nuclear Power’), but one cross-EU study did find some clear left-right political correlations on sustainable energy and nuclear power: www.sciencedirect.com/science/article/pii/S0960148112002479. 

For what it’s worth, very roughly, there is, as far as I can see, a spectrum in terms of positions on sustainable energy and climate change, but not often linked to governing party politics, from very progressive and radical to reactionary and conservative. So at one end, for example, there’s Denmark, Germany, Austria and Scotland and at the other extreme Russia, along with ex-Soviet countries like Hungary and Poland, and tragically now Australia, and maybe Canada.   I’d put the UK in the centre right in this range, drifting ever more to the right. Despite differing party policies, Spain and France seem to have ended up in the middle too. Where you might put China and USA in this framework who knows! China to the centre left, the US to the centre right?  It’s much easier to locate organisations within this framework, with for example the World Future Foundation, along with Greenpeace, WWF and maybe FoE, at one end and the Global Warming Policy Foundation and the UK’s Renewable Energy Foundation, plus many US anti-renewables groups, at the other!

Hard to place Renewable UK: it’s clearly progressive, but seems happy to accept nuclear power- or at least not oppose it publicly. Though it’s clear where its loyalties lie: in its self-styled ‘election manifesto’ it says onshore wind should be the cheapest new source by 2020, while offshore wind should be at £100/MWh, and by then ‘wind should be meeting a quarter of the UK’s electricity need’. It wants the Government to ‘set a clear path for investors by setting a 2030 decarbonisation target, with an accompanying extension of the Levy Control Framework, and an indication of how different technologies will play their part. The strongest signal of all would be a 2030 renewables target.’ There was also a need for continued support for technological innovation to get costs down e.g. for offshore wind. Interestingly it notes that 61% of Conservative voters, 72% of Labour and 79% of Lib Dems back wind, as do a majority of UKIP voters.  If so, then maybe renewables are in with chance: www.renewableuk.com/en/publications/guides.cfm/general-election-manifesto

 

Renewables are a mistake

It’s sometimes argued that renewables are too expensive to rely on, at least at present, and that, if emissions are of concern, we should focus instead on cleaning up fossil fuels via Combined Hat and Power (CHP) and Carbon Capture and Storage (CCS) and reducing energy use via efficiency measures, all of which could offer lower costs/tonne of carbon emissions avoided.  That may be true for some of these measures in the short term (maybe not CCS though) and some should be followed up (efficiency and CHP especially), but if that position is taken to the extreme, then that’s all we will do, right up to the point when we run out of fossil fuels.  So renewables won’t be developed seriously and their costs may continue to look high- until we are forced to try to deploy them in a rush when, despite all the fixes and fudges, it is finally clear to all that fossil fuels have become untenable economically and environmentally.

Basically, longer term, we can’t afford not to start deploying renewables, in order to get their price down- and that is already working. The ‘delay it’ argument may at base reflect a fundamental dislike of ‘disruptive’ renewables by those wedded to the status quo, who at best look to technical fixes and minor adjustments, or, if really pressed, to dubious and perhaps dangerous experiments with CCS, geo-engineering or nuclear fast breeders.

Their arguments against renewables can get quite tortuous.   In one version it’s accepted that, with renewables, the fuel may be free, but it’s noted that the technology itself is not renewable- it has costs and has to be regularly replaced. So, overall, systems using renewable sources are no more renewable than fossil systems, which can, with CCS, yield the same carbon saving at lower cost. The Renewable Energy Foundation’s Dr John Constable says, with current renewables ‘the cost of extraction, conversion, and delivery is very high compared to that for fossil fuels, largely because the density of renewable energy flows are so diffuse in comparison, requiring large machines to concentrate this energy. The capital and O&M costs of the conversion devices, the wind turbines, the solar panels, the delivery costs, have to be very low to become competitive with current fossil fuels’. www.scientific-alliance.org/energy-climate-change/scientific-alliance-scotland-launch-event  Well actually, some already are, despite the continuing heavy subsidies for fossil fuel … for example on land wind and PV. See my Ecologist article: http://bit.ly/1cLWwYI

The same sort of argument has come from the coal lobby. In an analysis for conerstone.net, Prof. Robin Batterham Kernot,  from the  University of Melbourne, argues that coal is a sustainable energy option: ‘Given that coal will be abundantly available for the next few hundred years, whether coal as a resource is exhausted is barely relevant in terms of the needs of future generations’. And it can be low emission too! ‘The fact that the public and governments have focused on renewables instead of low-emission energy puts the coal industry in a difficult position. The response of the industry must be to emphasize that coal can also be a low-emission energy source. By adopting this position, coal can be seen as just as worthy as any other technology, at least for the present. For existing power plants and their supply chains, the opportunities for emission reduction lie mainly in the upstream processing (mining, coal cleaning, and transport) and in carbon capture, use, and storage (CCUS). For new power plants, far more opportunities for emission reduction exist.’

Well CHP, and maybe eventually (at high cost) CCS, may allow for some fossil fuels to be used alongside renewables for while, with relatively low emissions. But is coal a long-term option? Here’s what the article says: ‘Coal use for power will cease when replacements are seen as more sustainable.’ Isn’t that where we are getting to now? www.pennenergy.com/articles/pennenergy/2013/12/winning-public-support-for-the-future-of-coal-power.html

In this context it’s interesting that leading German research group Fraunhofer ISE now suggests that any new coal plants would be expensive in relation to new solar and wind (onshore) within 15 years – and such plants generally run for 40-60 years. The ISE team don’t cover nuclear (as there won’t be any in Germany) but commenting on the study, energy campaigner Craig Morris, using the UK nuclear CfD price, said the proposed new   Hinkley nuclear plant would be more expensive than practically all solar and wind power by the time it went online. www.renewablesinternational.net/renewables-becoming-competitive-with-conventional-power/150/537/74751   So that’s coal and nukes seen off!  

Given proper attention to renewables and efficiency, we do not face a coal or nuclear choice, as the Guardian’s George Monbiot keeps suggesting. www.theguardian.com/commentisfree/2013/dec/16/nuclear-scare-stories-coal-industry

Coal burning is clearly something we must stop as soon as possible and, even if CCS proves be successful, it would arguably make more sense to use it with biomass, to make the process overall carbon negative. Biomass-based carbon capture and use might also be helpful, creating new green synfuels (perhaps using hydrogen derived from surplus wind-electricity), as well as heat and power (via CHP).

However, overall, the simple truth is that renewables for all uses are getting cheaper and could accelerate dramatically if we didn't waste money trying to sustain the use of dirty, and ever more costly, fossil fuel, or resuscitate dangerous and expensive nuclear options. No one suggests there won’t be problems in redirecting the development of energy system along more sustainable lines, but claiming that we should leave renewables until some unspecified time in the future seems to display a tragic lack of vision.

In fact, renewables are doing well, supplying around 22% of global electricity from around 1,560GW of generating plant, and 19% of total global primary energy, according to the 2014 edition of REN21s annual renewable review: http://www.ren21.net/gsr

And the International Renewable Energy Agency say that, given proper support, by 2030 renewables could be supplying 30% or more of total global energy, with some leading countries getting around 60% of their electricity from renewables by then. www.irena.org/remap/  Heading on the way to, hopefully, 100% within a few decades, this is no time for faint-hearted rethinks.

Goodbye to FiTs

The European Commission is pushing for guaranteed price Feed In Tariffs (FiTs) to be replaced by more market-orientated funding schemes, despite their proposals being strongly opposed.  FiTs have been very successful at getting renewable capacity built, in Germany especially- about 70GW so far there.  But as renewable capacity grew, especially initially expensive PV solar, the FiTs had passed increasing amounts of surcharge on to consumer bills. The European Commission has now proposed new rules which will be phased in gradually, following a pilot phase from 2015-16. But from 2017 all member states will have to use tenders to support new green power facilities. The idea is to replace FiTs with auctions or bidding processes open to all green energy generators competing equally. In its draft paper ‘Services of DG Competition containing draft Guidelines on environmental and energy aid for 2014-2020’, it says, on ‘Aid granted by way of a feed-in-premium or feed-in-tariff’ that in future ‘aid is granted in a genuinely competitive bidding process on the basis of clear, transparent and non-discriminatory criteria’.

There are similarities with the Contracts for a Difference  (CfD) system now being introduced in the UK, which, in its latest variant, includes a competitive project assessment phases, and indeed also with the old  Non Fossil Fuel Obligation (NFFO) capacity auction system the UK started out with in the 1990s. That had proved very ineffective at getting capacity built:  some developers bid low to get the contracts but often were unable to go ahead with the project. Germany’s new premium market EEG system also has some similarities- FiT are mostly replaced by direct market competition. That has not gone down too well with critics like the World Future Council: ‘With this reform the German government ends its success story by putting the energy system back into the hands of those who have a deep interest in remaining with conventional, dirty fossil energy sources. The German government with its reform is slowing the rapid expansion of renewable power, as it forces investors to take higher risks when investing in a future-just energy system.’  http://power-to-the-people.net/2014/04/german-renewable-energy-act-reform-is-not-a-feed-in-tariff-2-0/

As with the new German scheme, the EC is proposing some exemptions for the EU wide scheme. As Reuters noted ‘Following extensive lobbying from companies, the new rules allow for exemptions in special circumstances, including sparing energy-intensive industries such as chemicals, metals, paper and ceramics from helping to pay for renewable power’ But, it added ‘That leaves ordinary household consumers to pick up the bill’, and, understandably, reactions from green groups have be very hostile. Claude Turmes, a member of the European Parliament representing the Green Party, told Reuters ‘Citizens will lose twice: they will pay for industries' new free ride and will continue to suffer from an outdated energy system.’ The European Wind Energy Association said that, while it was appropriate that the increasingly competitive wind industry be integrated into the market, the Commission should eliminate all fossil fuel subsidies as a priority. The EC was ‘ignoring the obvious market distortions that need to be tackled first, such as the majority of subsidies that go to fossil fuels and nuclear’.

 

Nuclear was included in an early draft of the proposals but, after protests, has now been excluded- developers/ governments have to make a special case for it, as in the case of Hinkley in the UK. But most of the rest of the proposals stayed. So now it’s goodbye to all the various variants of  FiTs . Instead, in most cases, there will be pressure to impose a one-size-fits-all market approach across the EU, with presumably the EC using the threat of baring other approaches under the ‘state aid’ subsidy rules, to police the system.

Views on all this will differ. Certainly the new market approach should reduce costs to consumers in the short term: that seems to be the ostensible aim, though that was not the result of the UK’s disastrous Renewables Obligation (RO) market orientated approach: that cost UK consumers  much more/kW and kWh than the FiTs used elsewhere. But just like imposing capacity caps (as in Germany and elsewhere), the market approach will no doubt slow the deployment of renewables- that’s how it will reduce costs. Though since increasingly expensive fossil fuel will therefore have to be used more, longer-term it will push prices up. However, despite the evidence from the RO and NFFO, devotees of market competition may argue that competition will lead to reduced renewable energy technology cost, so that may compensate, leading to more capacity for the same, or reduced, outlay. Place your bets!

http://uk.reuters.com/article/2014/04/09/eu-funding-energy-idUKL6N0N12FP20140409

EU energy market battles- who is in control?

 

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.leftwards.co.uk/the-case-for-renationalisation/

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. 

UK energy mess gets worse

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UK energy policy continues to be a mess. The Electricity Market Reforms, far from sorting out problems, have created many more. The sub text was always that the new system had to be able to support nuclear, while not appearing to do so more than it supported renewables. It has not worked. The Contracts for a Difference (CfD) system is being used in a way which privileges nuclear over renewables, with a 35 year contract for the proposed Hinkley nuclear plant, compared to 15 year contracts for renewables, and a promise of £10bn in investment guarantees for Hinkley.  And whereas the renewables are having to face a new complex series of competitive auctions and assessments to get access to CfD support, EDF was the only contender for Hinkley, with a strike price offered which on land-wind and even PV should better by the time work starts on it in 2015- if it goes ahead. By the time it actually starts up, presumably after some inevitable delays, in the mid 2020s, offshore wind could even be cheaper.

This disparity in treatment has been noticed. In its initial reaction to the proposed CfD subsidy for the Hinkley, the European Commission said the measures proposed by the UK may not ‘avoid overcompensation’ and ‘ has doubts on the structure of the CfD for nuclear which, by its design, duration and scope, has the potential for distorting competitive conditions.’ It also doubted ‘whether the combination of aid measures, and in particular of a CfD with inflation indexation and a credit guarantee, is proportional to the potential benefits.’ We now await the ECs detailed analysis. There is no formal deadline for this, or a final decision date, perhaps it might emerge by the end of the year.

The emerging and then final EC view on the nuclear CfD may have some impact on the CfDs for renewables, for which the UK government is also seeking to get EC clearance, so that early projects can start soon, maybe next year and certainly by 2017, when the CfD system is meant to replace the Renewables Obligation. That would be tragic- and unnecessary. The World Nuclear Association admitted that ‘support for renewable generation forms is specifically allowed under EC guidelines while no such guideline exists for nuclear power’, but the specifics of the CfD and EMR, which cover both, have yet to be agreed by the EC. As Alan Whitehead MP put it: ‘by sticking with the elision of nuclear and renewables within the contract for difference and investment instrument processes, future renewable underwriting risks becoming dragged down into a protracted nuclear state aid judgement  process. If it was separate, as it was originally under the Renewable Obligation, it would be clearly derogated from further state aid examination’. www.businessgreen.com/bg/opinion/2327295/why-the-beastly-eu-has-cried-foul-on-nuclear-state-aid

And, adding insult to injury, in an unusual move, given all the cut backs, Energy and Business Minister Michael Fallon implored executives in renewable energy companies to ‘support our case’ for the EDF Hinkley project by writing to Brussels, since it is ‘dependent on a positive state aid decision from the European Commission’. A unnamed industry source quoted by the Sunday Times  (March 16th) said: ‘the renewables industry is somewhere between bemused and appalled that Michael Fallon has asked them to lobby for Hinkley Point's [subsidy]. He is living in cloud-cuckoo-land.’                          

 

For the moment DECC is still proceeding as if the EMR/ renewable CfD arrangements will be accepted, but as noted above, it has also been shifting the goal post- by adding an auction process for the renewable CfDs, to increase competitive pressures. All in response to and endless right wing media came of opposition to green taxes and all things green.  It’s claimed that the policy changes, new assessment processes and uncertain mood have lowered the UK attractiveness as an investment location for new renewables projects. In the latest edition of its quarterly Renewable Energy Country Attractiveness Index , consultancy Ernst and Young (EY) says that Britain is ‘in a spin’ because of ‘a combination of prolonged policy uncertainty, less-than-welcome news that mature technologies must compete for contracts for difference from day one, and a series of offshore wind project cancellations.’

www.ey.com/UK/en/Industries/Cleantech/Renewable-Energy-Country-Attractiveness-Index

And it gets worse. To curb energy cost rises, the Chancellor has now frozen the UK unlilateral carbon floor price support (CPF) arrangement. Carbon prices in the EU Emission Trading system have remained stubbornly low, mainly due to the fact that, due to pressure from some carbon-intense countries, the overall carbon cap levels have been set quite high. However when the UK carbon floor price support system was started in April 2013, with a levy paid by a small extra charge on all consumers bills, the effective price of carbon was pushed up to £16 a tonne, with this set to rise to £30 by 2020.  Carbon prices don't effect renewables or nuclear directly but they do benefit these non-fossil energy projects indirectly, making them more competitive by comparison. That was the aim. Utility Week reported that according to analysts, the wholesale power price in 2020 would be £5 to £6/MWh lower with a freeze, compared with original projections and that ‘under the incoming [CfD] subsidy regime, this would make each contract for difference more expensive to finance, so the support budget would be used up on fewer projects’. Not surprising then, in a joint letter to the chancellor, the Nuclear Industry Association and Renewables UK (RUK) warned that a retrospective cut would ‘undermine confidence’ in their industries- although some greens might say a direct system of support (e.g. a FiT) that rewarded just renewables, not nuclear as well, would be better.

In the event the Chancellor ploughed on regardless, capping 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.’ He also enhanced the compensation scheme for energy intensive to protect them  ‘from the rising costs of the Renewable Obligation and the Feed-In Tariffs’. Otherwise he said ‘green levies and taxes will make up over a third of their energy bills by the end of the decade’. He also exempted electricity from Combined Heat and Power plants from the CPF levy. And he claimed ‘this entire package delivered  without any reduction in the investment in renewable energy’. Well not directly, but the CPF freeze will hurt, as will exempting CHP- robbing Peter to pay Paul. And the overall result will be that CO2 output will rise. www.gov.uk/government/publications/carbon-price-floor-reform                               

That also looks likely to be the outcome of the other big green levy cut. To cut energy costs the government also plan to change the Energy Company Obligation (ECO), delaying some measures by extending the scheme to 2017. But it’s been claimed that ECO was much more effective than the hapless Green Deal, which the government has left alone. See DECC’s consultation: www.gov.uk/government/consultations/the-future-of-the-energy-company-obligation Under ECO, over 50,000 measures had been installed each month in the second half of last year, compared to only about 11,000 assessments each month for the Green Deal and very few actual projects: www.gov.uk/government/publications/green-deal-and-energy-company-obligation-eco-monthly-statistics-february-2014  It’s said that over 400,000 households will miss out on savings of up to £400 a year on energy bills due to the national £35 a year per household ECO cuts: www.thetimes.co.uk/tto/news/politics/article4032597.ece

So overall it looks pretty grim. And there is not much confidence about the longer term, with no clarity about the post-2020 situation.  DECC’s position is that there should be no mandatory national targets and the European Commissions seems to have bowed to this idea, in its recent proposals. There would be just a 27% by 2030 EU wide indicative target for renewable energy, within a wider EU context of a 40% cut in emissions. That would leave each EU country free to choose how to proceed- with renewables, CCS, shale gas, nuclear or whatever the market chose. Welcome to the world of market chaos. Or rather political chaos. With the last straw being that the proposed new Ofgem ‘full market investigation’ of energy prices will not cover the cost of the Hinkley nuclear project, despite that being likely, as SSE put it, to ‘add considerable costs to consumer energy bills for 35 years.’ Energy Secretary Ed Davey said: ‘The investigation will not deal with that, because it involves policy on the generation mix. A mixed, diverse source of low-carbon energy is the best way in which to protect the consumer’.

A good input  https://theconversation.com/uk-energy-policy-gets-more-complex-but-goes-nowhere-23272

Also see http://www.carbonbrief.org/blog/2014/03/the-carbon-price-floor-disliked,-divisive-and-about-to-be-frozen/

Beyond delays and prevarications

 
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During the debate on shale gas fracking in the House of Commons last July,Tory MP Peter Lilley said  ‘The current cost of electricity produced from gas or coal is £50 per MWh. The current cost of producing it from windmills is £100/MWh. For offshore windmills, it is £150/MWh and for solar it is off the scale. If we think that we will get cheaper, lower energy bills by going to energy sources that are two, three or four times as expensive, we are living in la-la land [..] Unless and until we can find a pathway or a stabilisation level for CO2 that will produce greater benefits than its costs, we should not set about impoverishing this generation in the vague hope that we may make some generation in the future richer’. www.publications.parliament.uk/pa/cm201314/cmhansrd/cm130718/hallindx/130718-x.htm

A familiar approach, which has some incrementalist appeal. It always seems easier to wait until technologies get better/ cheaper- and stay with what we have.  But that way we never move down the learning curves.  At best we focus on ameliorative options like Carbon Capture and Storage, which may not offer much on a large scale, and just allow us to burn more fossil fuel, although BECCs buffs might hope that at some point it could help make biomass combustion carbon negative.  And at worst we get panic moves to nuclear, which few pretend will get cheaper fast..

Obviously the gas option is significant for the short term, but if we get too locked into that, it just delays the inevitable- a shift to renewables. Reducing energy waste is a fast and cheap option for the immediate future, and ought to be attractive since there is a lot of low hanging fruit. However, when we have achieved all the quick and easy energy savings it gets increasingly costly to save more - there are diminishing returns. Long term we need non-carbon supply and to get its cost down fast.

That is happening, with PV solar especially. It could be competitive with nuclear in the UK by 2020, and should continue to fall in price as the market builds and the technology improves. Onshore wind is already competitive with conventional sources in some locations, offshore wind could get down to £100/MWh or less by around 2020 and wave and tidal stream seem likely follow the same trend. How fast we can go is mostly politically determined- how much extra cost can/will consumer /taxpayers accept to accelerate down learning curves? And can we avoid diversions- sold to us as quick and cheap?  Can fossil and nuclear subsidies be redirected to cut the cost to consumers and taxpayers? Is Carbon Capture and Storage really worth exploring- given its likely high cost? A lot of uncertainties there, but if we are not deflected and if funding is targeted properly, by the mid 2020s, we might expect to see renewables challenging all comers.

La La land? Well, the US National Renewable Energy Lab says that wind and solar power generation will be cost competitive in parts of the USA with fossil fuels without recourse to federal subsidies by 2025. By then, even when transmission and integration costs are taken into account, solar and wind power could compete with new natural gas fired power plants on cost.www.nrel.gov/docs/fy13osti/57830-1.pdf

The Executive Director of the International Energy Agency, Maria van der Hoeven, recently said “Renewable power sources are increasingly standing on their on their own merits versus new fossil-fuel generation. Many renewables no longer require high economic incentives.” She reiterated the IEA’s calls for an end fossil fuel subsidies, which in 2011 “globally were six times higher than renewables”. www.iea.org/w/bookshop/add.aspx?id=453

Backup for this view came from a Prysma report ‘RE-COST’ for the IEA, which said says that in many OECD countries, renewables are becoming competitive with fossil fuels. Looking at Levelised Costs of Energy (i.e. with capital costs spread over plant lifetimes), including any new grid costs, it says, ‘the costs of RET generation are declining, and approaching the costs of thermal generation (gas- and coal-fired plants), especially if the hidden subsidies that thermal generation plants may receive are not factored in’.  It adds that ‘The rate of cost reduction is higher in large solar PV’ but notes that ‘On-shore wind generation is already competitive in the regions evaluated by RE-COST’.  By contrast it says ‘The cost of generation of new non-RET plants (including gas- and coal-fired plants) are increasing, and might exceed the costs of generation of new RET plants in the near future in the regions in the scope of this report’.

http://iea-retd.org/archives/publications/re-cost

No one pretends that the transition to renewables will be easy or cheap: some of the technologies are still expensive, but as indicated above all are falling in price, and they all have to advantage of avoiding the use of  polluting and increasingly expensive fossil fuel or risky and expensive nuclear technology. And long term there is no alternative- fossil and fissile reserves are finite.   We can prevaricate and delay, but, quite apart from the urgent need to respond to climate change, eventually we have to make the transition. So why not start now, when we still have some conventional energy left to support the transition? 

There are of course debates about exactly with paths to take:  for example what role with natural gas, or green gas, play in proving backup for variable renewables. I will look at that in my next post. But looking backwards to continued reliance on fossil fuels, backed up by hopes that CCS will be available on a large scale, and making comparisons with fossil fuel costs, is no help now- their relatively low (unabated) costs disguised their huge environmental and social costs.  We have to move on- and surely, as fast as possible.