This week, a new report, Plugging the Energy Gap, was released based on research by Imperial College London. It looks at how to secure our future electricity needs at least cost and addresses common concerns regarding the intermittency and reliability of renewable energy generation like wind and solar. Such concerns have, in part, led to government blocking announcements on future auctions, which are the route-to-market for onshore wind farms and solar photovoltaic (PV) projects in the UK. Results of the report, however, show that these concerns are based on perceived, rather than actual, cost barriers and that the cheapest way to decarbonise our power system would in fact involve large volumes of variable renewable generation. This is the case even if any additional costs of creating the flexible system needed to manage intermittency are taken into account.
Good value for money for consumers
As conventional power stations close down, Britain is facing an “energy gap”. By 2030, the UK requires the construction of new low carbon generation capacity capable of producing over 150TWh of electricity each year by 2030. That is the equivalent of around half of all current annual consumption.
This creates an unprecedented opportunity to create a secure, clean, flexible energy system fit for the twenty-first century. However, new policies are required to ensure that the capacity to plug this energy gap is delivered at least cost to consumers.
With this in mind, it seems evident that low carbon procurement decisions should be underpinned by value for money. On the 9th November 2016, the Government announced its second round of auctions for less established renewables. It did not, however, provide a clear cost justification on why budget had not been allocated to lowest cost, mature technologies. This was despite a very clear recommendation made by the Competition and Markets Authority in June this year following their investigation of the energy market, to provide evidence that these procurement decisions did indeed deliver value for money.
The lack of justification is even more troubling because on the same day the Government also published an update of the cost of electricity from new power stations. This clearly highlights that mature renewables like onshore wind and solar PV are by far the cheapest form of low carbon generation in the UK. In fact, it predicts that, in just a few years, mature renewable projects are expected to be the cheapest form of generation in the UK - and that includes gas. The renewables industry believes that onshore wind and solar PV are already cheaper than gas, but a new auction round is required to prove this.
The cost of intermittency
Understanding the real cost of variable renewables is not simple. Renewables, like solar and wind, are infamous for being intermittent. Even though wind and sunshine are free, there is a hidden cost to keeping the lights on when the sun isn’t shining and the wind isn’t blowing.
In a report on costs, the Department for Business, Energy and Industrial Strategy has said that they are working on understanding this topic in more detail. There is, however, already a growing body of evidence to inform this question and Imperial College London has been working on this issue. Their findings, reported in Plugging the Energy Gap, conclude that “the cheapest way to decarbonise the power system involves large volumes of variable renewable generation even when taking system integration costs into account.”
The analysis shows that it would be possible to more than double the levels of variable renewables without adding significant integration costs to consumers from current levels. So, contrary to general perception, system integration costs do not change the fact that mature renewable technologies are the cheapest form of low carbon generation. Given a chance to participate in future auctions, evidence suggests that mature renewable technologies will prove beyond doubt that they are cheaper today even than gas.
With the looming “energy gap”, the UK will need to build new generating capacity to deliver at least 150TWh more electricity per year by 2030. This is an unprecedented opportunity to create a modern, secure, clean and flexible energy system. Mature renewable technologies are still the cheapest form of new low carbon generation, even taking into account the costs of dealing with their intermittency. The Government will need to provide a clear trajectory for the deployment of all low carbon generation that is consistent with delivering on its long-term carbon budgets at least cost. At the same time, it can continue to grow regional supply chains as part of its industrial strategy. Plans to fill the energy gap and, at the same time, deliver on carbon budgets should strive to maximise the advantages for both consumers and the economy.
Alex Coulton is a senior policy analyst at RES
The views expressed in this article are those of the author, not necessarily those of Bright Blue