The RSMR Weekly Broadcast - the new energy mix: can it supply demand?

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It’s not every day that we see the National Grid control centre issuing a flurry of informal and official warnings, along with urgent calls to suppliers to provide additional capacity and with this winter set to be one of the tightest in history for electricity supplies, we’re right in the thick of it.

It’s been a turbulent time for electricity prices. On a bright and still Sunday in December, plunging temperatures and a drop in wind turbine power generation pushed electricity prices to a new high and prompted the National Grid to put out an urgent call to suppliers. Electricity market prices surged tenfold reaching a new record high of £1,000 per megawatt hour, eventually settling at around £700 per megawatt hour. The combination of high demand, low wind speeds and traditional power plants being out of action, caused electricity prices on the wholesale market to soar and this wasn’t a one-off, spikes such as these are becoming more and more common as we make the switch to a new mix of energy sources.  

Coal and nuclear energy have powered Britain for decades but as the government looks to de-carbonise, these sources have been significantly reduced and coal completely priced out of the market. We’re now looking much more to sustainable sources for our electricity supply.

What has replaced traditional energy sources? Gas is still a significant resource and wind power is the largest source of renewable energy. The UK is the world leader in the production of wind energy and we also harness the sun’s power to provide us with electricity for our homes and businesses.  During the summer months, solar energy represents between 10% and 15% of our electricity generation capacity. The move to renewables is vital and invaluable but warnings issued by the National Grid show that we can’t consistently rely on our current sources to supply the daily demand and on the 6^th December, with very little wind, the energy generation capacity was running at an absolute peak.

An initial predicted shortfall of 400MW prompted the National Grid Electric System Operator (ESO) to issue an Electricity Margin Notice (EMN) until the operator confirmed its buffer of spare capacity had been restored to a reasonable level. The gap was bridged by several technologies coming together such as pumped hydro storage, gas, biomass and interconnectors. Events like this underline that the net zero power system of the future will not just rely on one or two technologies, but a broad mix working together.

We have a buffer to help stabilise the balance between supply and demand but we’re eating into this more and more as the energy mix in the UK changes. Wind can produce enough power to generate up to a quarter of our energy requirement, but wind is a variable and unreliable resource. Nuclear power stations provide a constant source of power but with many now closed, a constant, uninterrupted supply of energy is not always accessible.

The energy requirement in general in the UK has declined in the last two decades with the push for energy efficiency and deindustrialization flattening demand. We are more energy-efficient, we insulate our homes better, millions of houses have solar panels and a large part of the energy-intensive industry no longer exists. After three consecutive years of record-mild winters, we also see a risk that power demand could shrink on a sustainable basis compared to the previous decade. Add coronavirus into the mix and you’ve got a fall of more than 20% in power demand versus 2015-2019 averages across the forecast markets.

This trend won’t continue though, and the electrification of industry, heating, and transport will increase demand substantially five years from now. Harnessing the power of wind and other renewable sources so that we avoid potential power cuts and have a constant supply is more important than ever. We need to create an infrastructure that can handle our current and longer-term energy demands by upgrading the electricity grid and creating an effective store that supplies the UK, whatever the weather. Not only will we be home and dry when it comes to our electricity supply, but a focus on infrastructure could boost economic growth and provide an exciting opportunity for investment.

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