National Grid’s report to Ofgem this week following the August power outage puts into sharp focus the importance of a secure and flexible supply of energy to the UK economy. A series of events, several triggered by a lightning strike, led to the loss of more generation than all the back-up National Grid has available and 1.1m customers lost power. An emergency is often needed to raise the public’s awareness of what’s happening in the country.
It was comparatively easy to manage the National Grid when the UK’s electricity was supplied by a few large coal and nuclear power stations. We knew where the power was coming from, and where it was likely to be needed. In Q1 2019, renewables share of electricity generation increased to 35.8% and this figure will continue to rise. Yet although this is an important step on the road to net-zero carbon, management of the grid becomes a whole lot more complex with this proportion of renewables. The possibilities for getting it wrong and causing massive power outages increases immeasurably.
Until recently, energy has been totally out of sight – and out of sight is also out of mind for most of us. However, as de-carbonisation gathers pace, more of us our using electric vehicles and electric heat pumps, placing more variable loads on the grid. This isn’t an argument against the use of renewables, rather a recognition that greater volatility of both supply and demand on the grid makes it imperative that it’s fit to cope with these dynamics.
Industry and government must work hand in hand
Industry is already playing its part. Massive steps are being taken to de-carbonise our energy supply which will help realise the UK’s net-zero ambitions and deliver a smarter energy system. Large scale battery storage is being installed by commercial entities to balance the intermittency of solar generation in particular. The technology and infrastructure to control, manage and trade electricity across the grid is already being developed and will be deployed in coming years on a big scale – if regulators create conducive regimes across Europe. The roll-out of smart meters in almost all European countries is an essential pre-requisite for smart grid management to work effectively.
None of this would have happened without government taking the lead, not just in terms of setting targets but by putting in place policies to deliver distributed small scale renewable generation and to help deliver low carbon transport and heat as part of a sustainable and flexible smart energy system.
Currently, BEIS is conducting a Future Energy Market Review, which aims to ensure that the energy transition reduces consumer costs, supports decarbonisation and improves the security of supply. This is a welcome move, but government has a responsibility to ensure that the policies put in place today are part of a planned trajectory and are not subject to feast or famine stimulus mechanisms such as we saw with feed in tariffs.
The National Grid has been relatively proactive in engaging with industry on new products and services, but faster progress is now required. The government has set out strong ambitions for the UK to be a world leader in flexible generation, but this has not always been matched by consistent action.
In the last two years, Ofgem has removed embedded benefits for distributed generation and storage, derated benefits for batteries in the capacity market and eliminated feed-in tariffs for solar. There are now also plans to hike VAT on batteries for homeowners, a very counterproductive step which will stifle the nascent market for home energy storage.
If government is serious about maximising the advantages from the shift to decentralised energy, it must set clearer targets and show greater urgency in putting in place the framework and investment for an open market in flexible generation.
Such commitments would stimulate the market and give developers and investors more confidence to accelerate their plans. This, in turn, would encourage innovation and business growth while ensuring a more flexible and smarter energy system for the UK. A few more days like 9 August might demonstrate to the public why this is so important.
Patrick Caiger-Smith is CEO of smart energy company Green Energy Options. He is also President of BEAMA and a member of the CBI Innovation Council.