CROSSING THE MINEFIELD TO DELIVERING A NET ZERO ENERGY SYSTEM
26th May 2021, Virtual Discussion
"The decarbonisation of energy (electricity and gas) is essential to achieving the UK Government’s legally binding target of net zero by 2050. Policy and strategy for energy decarbonisation require trade-offs between the three goals of affordability, security of supply and environmental impact. The interplay between these is known as the energy trilemma which is becoming increasingly complex and challenging for policy makers (both in the UK and more widely) to grapple with as Net Zero rises up the political agenda and the pressure for real progress towards meeting 2050 and interim targets grows inexorably" - Sir Peter Gershon CBE FEng
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The Speaker
The discussion was introduced by Sir Peter Gershon CBE, FREng.
Peter is a mathematician by background with a career spanning both the private and public sectors. He steps down from the chairmanship of National Grid at the end of May after nearly 10 years on the board. Peter is currently also Chairman of Join Dementia Research, and the Dreadnought Alliance as well as being a trustee of The Sutton Trust and Education Endowment Fund.
With National Grid having significant operations in both the UK and USA Peter has had first-hand of experience of the unstable nature of the trilemma and situations where politics and the long-term characteristics of the energy industry have not been easy bedfellows.
Introductory Presentation
Peter introduced the energy trilemma by describing a triangle of the three aspects that pull against each other – affordability, security of supply and environmental impact - emphasising that a good national energy policy would reflect the relationship between them. The scale of investment and impact meant it was vital that such a policy should be agreed across the political spectrum and endure well beyond the normal political cycle. Then taking each of the three in turn:
Affordability
There was a material difference between cost and price – today what consumers pay is not a true cost given that electricity includes a tax as a contribution to environmental and social causes which adds some 23% to bills whereas gas currently includes just 1.86%. If it reflected the true cost of carbon, gas would be twice the current price to consumers. However, gas is the predominant means of household heating today and already around 3.1M households in England alone are reported to be in fuel poverty.
Transitioning to a green future therefore has significant issues for the cost of heating energy to consumers. To achieve that transition would require a fair and just apportionment between consumers recognizing that many of the least able to pay higher prices also lived in the least well insulated properties, and weighted towards the less affluent regions of the country.
In Peter’s view, it would not be ethical to load the cost of the transition needed now on to future generations through borrowing.
There would also be implications on the global competitiveness of our more energy intensive industries unless actions in Britain were in harmony with elsewhere.
Security of Supply
Peter highlighted resilience against three particular threats – extreme weather (especially that when there was likely to be little wind across Britain), physical attack on installations and cyber attack on the supply system. The need to build and maintain protection against terrorist action was self-evident but was more challenging with a multiplying number of generating sites and distribution systems. Meanwhile, recent events in the USA had demonstrated the reality of the remote cyber attack whether by criminal elements or as state-sponsored acts.
Traditionally Britain has had an “insurance premium” whereby the electricity industry has been paid c£250m per annum to provide 1.2GW of hot standby facilities – which is the output of a Sizewell nuclear facility. There are 29M households and the gap between the annual “average” and “peak” demand in winter evenings can be 10GW. Historically, generation had been from base load gas, nuclear and coal plants – indeed the winter peak has been accommodated by large stockpiles of coal beside power stations. However, the balance is changing rapidly to most energy coming from intermittent sources – principally wind. In recent years with the progressive phasing out of coal, the historic levels of reserve have steadily diminished and there have been days when maintaining supply to all has been challenging.
In the future, providing security of supply that can accommodate a peak winter evening demand coinciding with still wind conditions and weak winter sun will require major investment. This will not only be in extent of electricity generating capacity but in a major rebuilding of the network to enable adequate management of frequency and voltage from diverse distributed sources.
Environmental Impact
The government had made a public announcement requiring 40GW of offshore wind capacity by 2030. This represents a 20-fold increase. Along with the physical wind arrays, there would need to be major new transmission routes, and significant changes to the grid to manage the power coming from different locations to previously.
Most of the new offshore wind generating capacity would be located in the southern North Sea, principally off East Anglia. Up to now power from each new array has been brought ashore by each own link. Conversion from DC to AC then requires not only a large set of converter buildings but also new pylons for onward connection to the grid. Unsurprisingly the level of opposition to this visual and environmental intrusion into rural areas with significant natural endowments has risen rapidly.
Undoubtedly the level of new infrastructure, reinforced by a recent judicial review of the impacts of two adjacent but uncoordinated new arrays and allied facilities, would mean that in future there would be better pooling of at least onshore infrastructure. However, the current policy of pylon-based distribution unless in an AONB or SSSI would still represent a very large impact on the East Coast communities and landscape. Burying power cables underground was 5-6 times more expensive than pylon routes and of course the act of burying wasn’t without impact either.
Whilst much of the focus will shortly be on the impact of the industrialisation of East Anglia, a rising concern is bound to be the impact on the southern North Sea itself. All the countries surrounding it have similar plans for huge expansion of wind generation.
Concluding
To meet the current Government announced target of 40GW of offshore wind capacity by 2030 utilising an undersea grid with landing points in less sensitive areas of the East Coast would appear extremely challenging given the current maturity of the technology. An additional complication was the impact of energy pricing having become a party political issue in the last decade leading to the 2018 Energy Price Cap legislation and now the 2021 regulatory proposed settlement.
The need to decarbonise heating – 14% of the nation’s greenhouse gases – as well as other users such as transport in the drive to net zero will require an immense amount of new infrastructure.
Peter then set the discussion groups three questions:
Which of the three elements of the Trilemma would prove most challenging in seeking to achieve the 2030 offshore wind target?
How can security of supply be maintained on still, frozen winter days with weak sun?
How does Britain make its housing stock fit for decarbonisation?
Discussion
General
The discussion drew out a rich diversity of views, particularly on the prioritization between the Trilemma elements. However, there was considerable consensus that:
The challenges of the drive towards net zero by 2050 were enormous and would require concerted whole-of -government action,
A focus and effort across government akin to the vaccine programme in response to the Covid pandemic would need to be mobilised and sustained over years and decades,
Therefore, a system-wide strategic plan would be needed covering not just production, itself enormously challenging, but also how energy is used and its prioritisation,
This could only be led by government which was setting the targets but also controlled the levers of demand as well as planning policy and consenting requirements,
The Government lacked engineering knowledge and would need expert assistance. It needed a chief system architect as this was a system challenge
Any policy could only succeed if pursued on a non-partisan basis, and
The real consequences to all users, especially the general public clearly and honestly articulated.
Trilemma Priorities
By setting the target for 40GW of offshore energy by 2030, the Government has set challenges for all three elements.
On balance, the £180bn (plus onshore distribution £bns) cost was considered perhaps the least important but this assumed a break in its relationship with price to the consumer. A multiplication in the numbers of households in energy poverty and great price rises to the remainder was considered unlikely to be politically acceptable. It was recognised that there were many major infrastructure funds which would be keen to invest so the availability of money as a basic resource was not likely to be a barrier. The temptation would be to borrow and load the cost onto future generations.
Many raised concerns about achievability due to availability of skilled people and physical resources. It was noted that redirecting the skilled and competent resources within energy companies, previously focussed on carbon courses, should make aspects of this risk manageable. However, as recent major infrastructure development on a smaller scale to what will be necessary has shown, is that resource constraints are likely to be in less obvious areas such as planning, legal process, environmental assessment - and onshore allied works where there will be many competing demands, not least infrastructure to allow decarbonisation of transport and housing.
Given the prioritisation of net zero as an essential environmental programme, it was thought that environmental impact on the North Sea, East Anglia and the people and nature affected by all the new infrastructure would be accepted. Some in the discussion groups observed that whether this proves to be the case once the scale of activity is exposed remained to be seen.
On balance, most agreed that the most challenging element would be security of supply, not least because it has been accepted as an absolute given for several generations. Put bluntly, blackouts lead to loss of life. This led naturally to the challenge of intermittency, especially on cold, still winter days.
Security of Supply
Technical solutions were listed including development of battery and hydro storage but it was recognised these couldn’t solve the issue alone; a combination of actions would be necessary, all demanding significant investment. People currently tend to overlook the carbon embedded in battery creation. As other nations would be looking in similar directions, material supply at an affordable price might well be a further challenge.
A major increase in international interconnector installation would be vital, assuming that neighbouring countries had not also adopted wind as their major source of energy and that demand would be staggered. The practicality of sourcing electrical energy from longer distances, eg the Mediterranean solar producers, was challenged.
Other green energy sources should be reconsidered to avoid an over-reliance on intermittent and irregular wind. Highest on the agenda for many was small and medium scale modular nuclear facilities. The costs and regulatory standards required were currently a barrier and but public acceptability of relaxing the latter was unlikely.
The economics of tidal energy were thought to have changed in the last few years and offered scope for predictable energy production as well as energy storage.
Several questioned why Britain didn’t seek to harness carbon capture which was seen as a real opportunity given the strength of the UK research sector. This had the added attraction of avoiding premature decommissioning fossil fuel facilities, the construction carbon footprint of which has already been incurred.
Schemes such as being developed in the USA to contract with manufacturing and other industrial users to lose supply in peak demand moments were also highlighted. The possibility of embracing electric cars as micro storage units was also postulated.
Ultimately, considerations of supply needed to be bound up with the debate on reducing energy usage. Whereas in transport some voices were highlighting the change in culture needed to reduce casual vehicle use, and overcome the infrastructure conundrum of predict and provide by promoting public and shared personal transport, the debate moved naturally to domestic housing.
Housing
It was stated a number of times that Britain has “the worst performing housing stock in the world” in terms of construction for efficient heating energy use compared with climatic need. New housing could now be built to modern regulations and energy specifications but the number of new dwellings as a proportion of the total was not going to be huge. In addition, several highlighted some recent examples of poor quality construction showed a construction industry not culturally committed to achievement of necessary standards or the training of constructors to achieve them.
It was not evident that there was any coherent plan to convert existing housing stock away from its dependency on lower cost gas. It was cited that the assumed average cost of conversion would be in the order of £15,000 and of course would be simplest for the lowest density housing in the most affluent areas where there was room for heat pumps (as there was for off-road vehicle charging). Solving the issue for urban and high density dwellings would by technically far more challenging.
This also raised in some minds the wider issue of taxation and incentives to ensure social equity – with the most support needed to the least able to fund conversion. Various instruments were mentioned; electrification v hydrogen, green bank, social obligation schemes, choosing the right incentives set against the rising costs of grid connections. But all of this is piecemeal, the challenge is that of system design with all actors, agencies and levers being brought to bear.
The conversation highlighted the necessity to improve the thermal performance of existing housing stock, although it’s often low quality would make this extremely challenging on any scale due to skills and resources availability.
Response
The discussions had been extremely wide-ranging so rather than attempt to cover everything the speaker response focussed on only a few points.
The absolute need for a thought out and enduring energy policy which sets out the desired relationship between the components of the trilemma and commands cross party support.
Without such a policy politicians and energy companies will hit very major obstacles that could have been avoided in the journey to net zero and achieving public acceptance of the scale of impact both societally and individually very unlikely.
The need for Government to act as the guiding mind given the need to manage expectations and levers of demand as well as incentivisation of investment and prioritisation of resources.
Whilst it will be difficult and expensive, improving the thermal efficiency of the UK’s housing stock is a no regret action whatever the future energy mixes or price to consumers and is necessary in any scenario for the decarbonisation of heat.