Posted: 22 July 2013

Building our future

The publication of National Grid’s 2013 UK Future Energy Scenarios (FES) paints a picture of how the UK’s energy landscape might look in 2035 and as far out as 2050. But how are these scenarios developed, and why is stakeholder involvement in their creation so important? Our Head of Energy Strategy and Policy Richard Smith unpicks some of the complexity.
FES conference

2013 FES conference

When I spoke at the launch of our 2013 UK Future Energy Scenarios, I made a simple statement that it is very difficult to predict the future. I also reflected on how much easier it would be for all of us in many aspects of our lives if we could.

For the energy industry, understanding what the future will look like is vital if we are to meet the long-term challenge of providing safe, reliable and secure energy in a sustainable and affordable way. To help visualise this future and to plan effectively, we develop scenarios that consider a range of potential factors that might influence the future of energy.

Putting the scenarios together

It’s worth dwelling for a moment on the process that we go through each year to develop these scenarios.

Stakeholder engagement is at the heart of our approach. Why? Simply because the dialogue we have and the feedback we receive from hundreds of stakeholders is incredibly valuable in shaping our projections.

Richard Smith

Richard Smith, National Grid’s Head of Energy Strategy and Policy

In the past 12 months we have held bilateral meetings with 31 different companies, held four dedicated stakeholder workshops and sought views from across the industry via questionnaires.

Without this input we would be voicing National Grid’s viewpoint alone, when in fact the issues we face affect all of us. We welcome the challenge to our thinking that rigorous debate brings. So, consultation is key.

Planning in uncertain times

To put our FES into context, we live in a world where uncertainty seems to be the new reality. The UK will have a general election in 2015. Which party will be in power? Will it be another coalition? And of what shade? There is social uncertainty; we are unclear about the choices consumers will make in the future and this uncertainty is echoed in the world of technology and in the global economy.

Against this backdrop, we have published two scenarios that offer contrasting views of how the future of energy in the UK might play out. Our goal with these scenarios is to ensure that they are both plausible and credible and so each of them is based on a set of axioms – starting points for our reasoning. These are logical statements assumed to be true and have been developed through our stakeholder engagement programme.

The Slow Progression scenario is based on comparatively slow developments in renewable and low-carbon energy, and a situation where the UK’s renewable energy target for 2020 of 15% of all energy coming from renewable sources is not met. The carbon reduction target for 2020 is achieved but not the indicative target for 2030.

Under the Gone Green scenario the UK meets its key environmental targets by 2020, greenhouse gas emissions meet the carbon budgets out to 2027, and an 80% reduction in greenhouse gas emissions is achieved by 2050.

This year we have retired the Accelerated Growth scenario, under which the UK is ahead of these key environmental targets. Consistent feedback from stakeholders over time has told us that this scenario is no longer credible.

Within each of our scenarios we have introduced two power supply case studies: in Slow Progression we assess both a high CCGT case and a high coal case, testing the envelope on fuel prices; under Gone Green our case studies examine the potential impact of a high offshore wind and also a high onshore wind scenario.

Bringing these case studies into the equation, while keeping all other parts of the scenario static, enables us to capture potential outcomes versus key uncertainties that push the boundaries of a credible scenario.

One area that we have put considerable effort into improving further is our demand analysis. We’ve taken a hard look at the tools and techniques we use and concluded that it is right to move away from a pure econometric analysis technique, which we believe is no longer a reliable enough method of making future projections.

In recent weeks we have seen a lot of announcements from government in the energy arena including the publication of the Draft Delivery Plan for Electricity Market Reform, which was launched the day before our UK FES annual conference.

This momentum, together with our own scenarios should give us much greater confidence in what the future looks like in the medium to long-term. Confidence is what’s needed to drive some of the tough decision-making across the industry in the months and years ahead.

While our scenarios highlight the complex task ahead of the UK in meeting its environmental commitments, I will leave you with a positive thought: to steal a line from my colleague Gary Dolphin who addressed the conference in his role as Market Outlook Manager, our assessment is still that those targets are “challenging but achievable”.

• Click here to read National Grid’s Future Energy Scenarios 2013 document.

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One area that we have put considerable effort into improving further is our demand analysis.

Richard Smith