Decarbonising the Grid: What Role for Great British Energy?

David Simmonds says that to encourage the private investment needed to realise the transition away from fossil fuels, the UK government must first overcome key flaws in its decarbonisation plan

THE NEW UK government is looking to accelerate the decarbonisation of our grid from the originally planned 2035 target to 2030 through more rapid deployment of renewable and nuclear energy technologies under the auspices of Great British Energy. This will figure prominently in this week’s king’s speech, while Chris Stark, the prior CEO of the UK Committee for Climate Change, was recently appointed head of the government’s Mission Control, a new control centre focused on accelerating the transition away from volatile fossil fuel markets to clean, homegrown power.

Electrification of our economy will undoubtedly improve energy efficiency and, longer term, reduce costs to the consumer and encourage wider investment in our economy. Nonetheless, securing this requires substantial upfront investment and, as we have seen, the new government has cut back on its investment targets, and is looking to the private sector to fill the gap. This investment, anticipated to be in the order of £300–500bn (US$390–649bn), will only materialise if the vision is backed by a workable transition plan.

Government policy advisors believe they have a plan, but it is beset with challenges. Firstly, scale. Widespread deployment of heat pumps and electric vehicles will dramatically increase power demand, from 300 TWh today to approximately 700 TWh by 2050. Secondly, seasonality, as heat pump deployment will markedly increase winter demand. Thirdly, while renewables are cheaper than nuclear, they are subject to intermittency; the Germans have a word for this, dunkelflaute, meaning when the wind does not blow or sun shine. Fourthly, location, as major offshore wind farms require expensive tiebacks to bring that power to consumers. Lastly, skills and jobs, as we need to invest in developing a cadre of engineers and technicians to deliver the change, while simultaneously turning away from the oil and gas sector.

The current grid has evolved over the last century to meet relatively “steady” demand from “steady” supplies – coal and then gas-fired power stations, located close to demand, while large baseload nuclear plants have increased grid resilience. As I have explained in my recent series Engineering Net Zero in TCE, without significant intervention and support, current plans for the transition neither stack up for private sector investors at the supply end, nor for consumers at the demand end, leading many to question the viability of our net zero agenda. Our chemical engineering community must help provide that support.

Current planning

The first steps of the transition have been manageable with renewable energy projects now meeting almost 50% of power demand, with surviving coal- and gas-fired power plants coping with dunkelflaute. With the rollout of energy efficiency measures, demand has actually dropped since 2000, avoiding need for grid reinforcement. The main downside has been that consumers are now paying hundreds of millions of pounds each year as compensation to wind farm owners to switch off supplies when the grid is oversubscribed. Along with the out-of-date balancing point price mechanism, these payments have led to the UK being saddled with Europe’s highest priced electricity.

To decarbonise the remaining 50% of our supplies and meet the growing demand from electrification, we will need the equivalent of either 20 new Dogger Bank wind farms or 15 new Hinkley Point nuclear plants by 2050. Unleashing solar or promoting onshore wind farms will contribute to the goal but private investment in any of these technologies will only materialise alongside offtake guarantees. Major power investments are auctioned under “contracts for difference” agreements guaranteeing payment. To avoid the situation where we continue to pay hundreds of millions or even billions of pounds annually to shut in supplies, we must have a strong and flexible grid system with energy storage capability to match supplies to demand throughout the year.

Policymakers are looking to consumers to change their patterns of use, and smart meters, smart chargers, and dynamic pricing are all tools being developed for this purpose. To a greater or lesser degree these require changes to the way we lead our lives, but, more fundamentally, they do not address the seasonal demand challenge.

As I discussed previously, other countries have differing strategies. With less seasonal demand, much of the US is looking at “cheap” solar to support an “over-supply” strategy, building surplus capacity and vast battery banks to match demand. Scandinavia and Canada have hydroelectricity and will use this to store energy to heat their well-insulated homes, while France has a higher level of baseload nuclear. The UK, Germany, Netherlands and even Japan and Korea are in more challenging positions.

Recent UK studies indicate that up to 15% of our power must be stored within the annual cycle, equating to some 100 TWh by 2050. Planned battery bank projects are targeting just 150 GWh, while current hydro schemes offer 4 TWh. Innovators are looking to compressed air or thermal heat storage alternatives, but it is difficult to foresee any of these measures working at the required scale. In a recent report, the Royal Society concluded that the most resilient solution is to produce hydrogen from surplus power which can be stored and later utilised to meet seasonal demand. Today we do not have hydrogen storage at scale, but the UK and Western Europe have much experience storing natural gas in underground reservoirs, and, among others, Centrica is looking to convert their Rough natural gas facilities to store hydrogen. The hydrogen cycle is inefficient, and, as many commentators note, expensive. However, the cycle will be driven by dynamic pricing – using low-cost summer power to produce hydrogen to meet high-priced winter demand.

Current plans have yet to address the skills shortages or the impact on our current oil and gas sector. The latter has seen much change over recent years, with oil and gas majors selling their stakes onto smaller entrepreneurs, the imposition of windfall taxes, and differing political views over whether to abruptly curtail fossil fuel production, maintain what we have, or continue investment to support energy security. It now looks as though we will track a central path, viewed as a compromise, but yet to be fully modelled into the transition plans. If hydrogen is to play a role in our future energy system, then oil and gas can greatly assist the transition, reducing the impact of decommissioning costs. Further hydrogen can also help diversify jobs and skills, for, as I have outlined previously, we have yet to realise the skills needed to deliver the transition to fully electrified heating and transport.

So, what is the role for Great British Energy?

The government’s plans for Great British Energy and their Mission Control must embrace energy balancing to ensure private sector investment in new generation capacity. It must help deliver the complex pieces in our transition jigsaw puzzle. Specific areas include:

• Focusing on designing an integrated grid/energy storage system, connecting renewable energy supplies to markets. Energy storage could be provided on a project-by-project basis, but it is much more efficient and cost effective to provide hydrogen production and storage at scale on a grid level under regulated tariffs.
• Considering how hydrogen can be better utilised to meet winter energy demand. Currently, policymakers are considering using stored hydrogen to inefficiently generate power to run our heat pumps at peak times during cold weather. As I have explained it would make much more sense to adopt hybrid heat pumps, a conventional heat pump supported by a small hydrogen boiler. The efficient heat pump runs routinely, with the boiler kicking in to maintain temperatures during cold periods. Hybrid heat pumps have been tested and their boilers typically need to meet only 30% of a household’s annual heat demand, and will dramatically reduce the scope of property modifications, allowing heat pumps to become consumer-friendly plug-and-play units. Hydrogen-ready gas boilers already exist, and the possibility of converting the gas grid to hydrogen was on the old government’s agenda for a decision in 2026. That decision was likely to be regional, only converting a few areas, and binary, offering a choice of either electric or hydrogen heating. This is the wrong answer, as the option of widespread hybrid heating will substantially reduce power grid upgrades, offer most consumers savings and flexibility, and avoid costs for decommissioning of the gas grid.
• Restructuring electricity pricing and the energy retail market. Historically, electricity prices have been fixed for extended periods and currently Ofgem sets three-monthly capped rates. However, the market is looking at dynamic, hourly, pricing to balance supply and demand, under new tariffs such as Octopus’ Agile package. Without care, implementing this across the board in a competitive marketplace is going to create another hurdle for our energy transition. Great British Energy must consider a role in the retail market to deliver lower and consistent pricing to consumers.
• Developing a jobs and skills programme. Any plan for the transition must be accompanied with a “people” agenda looking at how we can develop the new skills required while, simultaneously, managing the downturn in the oil and gas sector which still employs many thousands.
• More widely planning for the transition of the UK’s oil and gas sector. Beyond jobs, this must ensure energy security and minimise decommissioning costs, for both production and grid facilities.

Current plans anticipate a tripling of our power grid by 2050 with all the local planning implications that holds for new facilities, pylon routings, etc. As highlighted by Imperial College London’s Energy Futures Lab, yet to be evaluated are the extensive local street upgrades and associated disruption needed to boost low voltage supplies to our homes and businesses to meet peak demand for heating.

Great British Energy needs a robust energy balancing plan to attract private sector investment into our energy system. This plan must also look to reducing the scope of grid and low voltage upgrades by reuse of the existing gas grid for hydrogen, particularly to manage energy demand during winter’s dunkelflaute. In turn it will reduce the financial burden on consumers, helping them to embrace “change”. Our chemical engineering community has a key role to play to realise a successful and safe transition to a hybrid energy system.