Andrew Normand, of Encora Energy, explains why talk of blackouts and energy rationing is being misused to stigmatise innovation in energy transition.
In the latest political wars, Net Zero has become a hot topic amid conflicting views on benefits versus costs. Several apocalyptic scenarios have been thrown around as outcomes of the drive for a clean power system by 2030.
While the energy transition is complex and must evolve to ensure effective management of cost and risks, these dire predictions imply unmanaged risks and frame opportunities as disadvantages. While this is mainly political posturing, pandering to this will delay the necessary transition and miss huge opportunities in improved competitiveness.
What will prevent a blackout?
The most apocalyptic prediction is the danger of blackouts – periods where the supply doesn’t meet demand, and the electricity grid fails – leaving homes without power. However, most talk seems to ignore that we have a Capacity Market specifically designed to avert such a scenario.
This initiative is designed to ensure there is enough supply capacity in the UK electric power market so that electricity is available when called for and the system doesn’t fail. Essentially, it’s a payment for projects in technologies that can affect supply/demand by either exporting to the grid or reducing demand from it, along with an obligation to do this on demand from the National Energy System Operator (NESO).
As part of annual scenario plans, future capacity requirements are modelled and an auction is conducted to subsidise capacity, ensuring we have spare capacity ready to go when required. The NESO constantly monitors demand and supply balance for margin and loss of load probability and if there is a danger of demand not meeting supply, NESO issues a Capacity Market Notice. This acts as a warning that if the system does become stressed, all contracted projects must work to balance the system or lose their payments.
Over the ten years this system has been in place, there have been a total of 14 capacity market notices, and all have worked as required.
There are plenty of interesting debates within the industry on the specifics of this system, how it might evolve and how it balances the risks of overpaying for idle capacity versus the risk of system problems, but any suggestion that we are somehow sleepwalking into system failure without understanding the nuance of this system is misleading.
Rationing or efficient use?
The next misleading argument comes from the spectre of rationing.
A major factor that must be considered, principally with solar and wind, is: What happens when the sun doesn’t shine and the wind doesn’t blow? Too often this is left as a straw man rhetorical question without beginning to address the complexity and opportunities posed.
If intermittent non-dispatchable generators such as solar and wind aren’t generating sufficient power to cover demand, the slack is picked up by a range of other technologies, including batteries, nuclear, hydro power, interconnectors from other countries, gas power and demand side response (DSR). The last of these, DSR, is often vilified as a penalty or imposed restriction, but this is misleading because it’s a source of great opportunity.
With the transfer to large-scale wind and solar, there is an increasing amount of power available very cheaply as the price of these energy sources has fallen dramatically in recent years. The downside of this is that it’s time-dependent; it can’t be switched on and off at will, a problem that the world has until recently spent little time considering and has a lot of chance to improve on.
A great deal of expense from the transition comes from the extra infrastructure that it takes to spread that load out over time and keep working in the old ways. Minimise this and the cost drops – a real opportunity to be a differentiator between countries that can exploit the new cheap power and those that dumbly stick to paying extra for the privilege of power whenever.
DSR is all about that intelligent energy use. Through DSR services, businesses and consumers can turn up, turn down or shift demand in real time. They are encouraged to do this, not forced.
Under DSR, businesses and consumers increase, decrease or shift their electricity use in response to a signal to help balance Britain’s electricity system. In return they receive strong financial incentives, can lower their bills, reduce their carbon footprint and play an important role in the transition to a low-carbon energy system dominated by renewable energy.
Making the most of this requires smart thinking, often aided by innovative and tech-savvy solutions, so that we shift power use to match power supply and all that extra infrastructure with all the additional cost becomes less and less.
How do commercial and industrial users make use of this?
The above users have tended to be the biggest adopters of DSR. They have much more opportunity to work with the electricity market, with predictable energy use cycles that can be adapted to profit from their flexibility. Those not capitalising on this flexibility are missing out.
The possible benefits are varied and depend on the industry, energy use pattern and other flexibilities, but there is a wealth of ingenuity and innovation to make the most of these opportunities. Typical methods include changing the profile of power use such as off-peak heating, storing energy thermally or with batteries, using behind-the-meter generation, and changing operations to reduce demand on the grid at peak periods.
Rather than force critical industries to operate in a different manner, this offers an opportunity to save money by making use of cheaper power periods and avoiding expensive periods.
Does this apply to everyday home users?
While industry and commercial users are often ahead of the game in terms of enjoying flexibility benefits, everyday home users are also starting to benefit from shifting demand away from peak times for those who want it with special tariffs and cut-price periods.
Octopus Energy has introduced a “flux” import and export tariff optimised to give consumers the best rates for using and selling energy during peak periods. They can power their home with 100% renewable energy on this tariff, designed exclusively for solar and battery owners.
Meanwhile, NESO has introduced its Demand Flexibility Service (DFS), which allows suppliers to offer occasional periods (an hour here and there when capacity margins are high) when additional power usage is free.
British Gas has deals including ‘half price on a Sunday’ which you might know through their adverts with Olympic diver, Tom Daley, &Paralympian swimmer, Ellie Simmons, doing their chores when electricity is cheap.
Offering real cut-price sessions shifts demand to off-peak times, reducing the need for electricity at peak times, which in turn will reduce the need for those expensive dispatchable systems. This will help to cut prices for us all.
This is all about DSR, encouraging people to switch away from peak times. So, when you hear of “rationing”, be aware this term has a very different meaning that doesn’t reflect reality.
Where does this go?
These behavioural patterns will continue to evolve as new initiatives come on line and more consumers and businesses benefit. This is a far cry from disingenuous talk of blackouts, rationing and bans of energy use at specific times. Instead, considered capacity analysis and cut-price incentives to move demand to non-peak times will bring benefits in the form of lower prices for everyone, even at peak times.
