UK government’s energy market reforms overshadowed by call to build new gas power stations

Article by Adam Duckett

Clare Louise Jackson /
Gas generated 38% of electricity in 2022 and the government estimates that by 2035 almost half of the current plants could retire

ENGINEERS are pushing the UK government to do more to support CCUS and hydrogen following its highly politicised spin about the need to build new gas plants that overshadowed a much wider package of energy market reforms.

On Tuesday, the UK government announced proposals for the “biggest electricity market reform in a generation” yet energy security and net zero secretary Claire Coutinho spent much of her speech discussing plans to build new unabated gas-fired power plants.

The Review of Electricity Market Arrangements – or REMA for short – is consulting on options to redesign the electricity market so it maintains energy security and affordability for industry, businesses, and households as the power system is decarbonised.

The government’s consultation falls into several key areas. These include how to reform pricing mechanisms to attract the investment in renewables projects needed to increase installed capacity by 150200% by 2035. It is also asking for feedback on how to cost-effectively operate a renewables-based system, including whether to introduce zonal pricing that would see power prices vary by region. This would encourage companies to build infrastructure closer to energy demand in a move that could reduce the cost of operating the electricity system by £5bn£15bn (US$6.3bnUS$19bn) between 2030 and 2050.

Transitioning to a decarbonised electricity system

A key point of interest for chemical and process engineers is the challenge of how to transition away from an unabated gas-based system to a flexible, resilient, decarbonised electricity system as more intermittent renewables are introduced and electrification of transport, heating, and industry is increased.

The government estimates that the electricity system could require up to 55 GW of short-duration flexibility and between 30 and 50 GW of long-duration flexibility by 2035 to ensure security of supply.

In light of the government’s existing and proposed policies on pricing and financial schemes to convert to low carbon generation, the consultation asks for experts to provide feedback on the remaining challenges of converting unabated gas plants into low carbon alternatives. Ultimately, the pace of clean transition is too slow to avoid  the construction of new unabated gas plants. These are needed to fill any lengthy gaps in renewable output such as during long periods of low wind.

The consultation says that gas-fired plants are the only mature technology capable of providing sustained flexible capacity while we wait for the scale up of low carbon, long duration alternatives, such as power plants with CCUS, hydrogen-fired power plants, and long duration energy storage. Gas generated 38% of electricity in 2022 and the government estimates that by 2035 almost half of the current plants could retire.

Coutinho said: “We expect all new gas power stations to be built net-zero ready. That means companies must build power plants which are ready to connect to carbon capture technology or that can be changed to burn hydrogen instead of gas.”

The consultation notes that proposals on these requirements will be published “shortly”.

Reactions to the market reform consultation

The responses to the announcement range from outright alarm about the construction of new fossil-fuelled plants, through to pragmatic calls for faster action on CCUS and hydrogen scaleup, and for the government to do more to support the use of insulation to reduce demand and batteries to store surplus renewable power.

Nilay Shah, a chemical engineer and vice-chair of the National Engineering Policy Centre’s net zero working group, said: “In principle, a net zero energy system requires low carbon flexible generation to cover periods of low generation from intermittent renewables. Integration of combined cycle gas turbine generation with carbon capture and storage into the system is a way to ensure high penetration of renewables while ensuring energy security and affordability. The number and location of such generation units should form part of the strategic spatial plan and should be considered in parallel with long-duration electricity storage such as batteries, pumped-storage, and hydrogen. It will be important, though, to ensure that carbon capture is fitted as soon as is practicable.

“There is no time to spare in applying all the available low carbon technologies at our disposal to meet our legally binding emission reduction targets and it is vital that government provides policy stability that transcends electoral cycles and administrations to enable business to plan with confidence and invest in generation equipment that will enable us to reach net zero carbon emissions by 2050.”

Iain Staffell, senior lecturer in sustainable energy at the Centre for Environmental Policy at Imperial College London, said: “Plans to build more gas-fired power stations will keep us exposed to the geopolitical and economic risks of importing foreign fuels to power our country. There’s also the risk that new gas power stations become a very costly white elephant. They are built to last for 30 years or more, but what if we have no need for them beyond the next decade as better solutions are built?”

Callum MacIver, research fellow at the University of Strathclyde, said: “We must guard against ‘baking in’ a delay to our decarbonisation process. If we do build new unabated gas plant[s], it is essential that we don’t waste money by building too much and that it is genuinely ‘hydrogen ready’ or ‘CCS ready’ with a clear pathway to actually using low carbon hydrogen or CCS.”

Stephanie Baxter, head of policy at the Institution of Engineering and Technology, said: “The transition to net zero must be driven by an effective strategic planning process to ensure efficient and timely delivery, with consistent direction, clear investment signals, appropriate incentives, and active skills development. This highlights the fundamental need for new whole-system coordination and accountability mechanisms that are not currently a feature of the energy sector. An adaptable and modern energy infrastructure is critical to achieving a broad mix of energy capacity and security.”

Johnny Gowdy, director of energy think tank Regen, said: “We welcome this consultation and its explicit objectives to make a net zero power system work and accelerate the transition away from unabated fossil fuels. It’s disappointing that the consultation launch has been somewhat hijacked to make a political point about gas generation but, once the spinning subsides, we can get on with the important task of working through the options for market reform.”

The full consultation documents are available to read here.

Article by Adam Duckett

Editor, The Chemical Engineer

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