A flexible future
Britain’s energy system is changing at an astonishing speed. As a result, there is a growing need for flexibility in the way we supply our energy. National Grid Power Modelling Manager, Alex Haffner explains why and where future supply-side electricity flexibility might come from.
A flexible future
"Gas continues to provide a low-cost source of electricity and is likely to have an important role as a flexible generation source as we move to a low-carbon future due to its ability to flex to meet demand"
Alex Haffner, National Grid Power Modelling Manager.
The highest level of total storage is seen in our Consumer Power scenario, with 10.7GW by 2050.
Source: National Grid 2017 Future Energy Scenarios.
One of the most striking messages to emerge from National Grid’s 2017 Future Energy Scenarios (FES) is the transformation in electricity generation over recent years.
Renewable generation made up 34% of total installed capacity in 2016. Such a figure would have been unthinkable even a few years ago. Yet renewable capacity could reach 60% by 2050. It’s clear that the dramatic shift in the way we produce our power is here to stay.
There’s a catch though. Solar and wind power are intermittent, meaning that they can only generate when the wind is blowing or the sun is shining. So, as System Operator, we need to find ways to deal with this intermittency. It’s our job to ensure that supply and demand are balanced in real-time, second-by-second across the day.
This job is made more challenging because far more generation is connecting at distribution level. This could be, for example, customers with solar panels producing and consuming their own power. This means that power sometimes flows from the distribution system onto the transmission system rather than the other way round.
In short, the whole energy system is becoming more dynamic. The ability to flex generation and demand will keep the network stable and balanced.
Sources of flexibility
In this article, I want to focus mainly on potential sources of flexibility on the supply side, but of course there’s a huge amount of innovation taking place on the demand side too. Demand side response (DSR) – where organisations can shift, reduce or increase the demand they place on the power system – has a very important role to play in helping to operate the system. Storage, especially behind the meter, also features heavily on the demand side.
The Power Responsive programme, facilitated by National Grid and supported by a growing group of stakeholders, is helping to galvanise efforts in this area. Meanwhile, the roll-out of smart meters, increasing availability of appliances that can be switched on and off remotely, and innovative tariffs will all contribute to greater flexibility.
But what of the supply side? What do the 2017 scenarios tell us about where system flexibility might come from?
The storage story
All our scenarios point to strong growth in storage capacity through to the early 2020s. New storage is now being deployed, with over 550MW of battery capacity contracted in 2016 to come online by 2020.
Battery technology continues to develop rapidly and new commercial opportunities are emerging. For instance, growth in the electric vehicle market has also encouraged greater production of batteries and the cost of such technologies is falling.
The highest level of total storage is seen in our Consumer Power scenario, with 10.7GW by 2050. In this scenario, high levels of distributed generation such as solar support storage growth. In contrast, our Steady State scenario shows initial growth tapering after the early 2020s as little money is available for investment and there is less intermittent generation on the system.
Our analysis assumes that storage providers will need several revenue streams to be viable. For example this could include revenues from the provision of balancing services to the System Operator and revenues from providing asset services to Distribution Network Operators and Transmission Owners.
We have been actively collaborating with industry, BEIS and Ofgem to develop regulatory arrangements which facilitate storage. Potential measures currently being considered include a modified generation licence for storage, improving the connections process for storage developers and potentially incentivising Distribution Network Operators to meet customer needs more effectively. You can access more background on plans to embrace smart systems and flexibility here.
Where next for interconnectors?
Interconnectors are a valuable source of flexibility. They allow power to be imported or exported when demand changes and pricing makes it cheaper to do so.
Our analysis currently assumes tariff-free access to EU markets, although there is clearly still a lot of negotiation to take place on this until the future arrangements become clearer.
Our 2017 scenarios show interconnector capacity increasing. Growth is lower than projected in 2016 due to further improvements to our modelling and stakeholder feedback.
Interconnector capacity is highest in the Two Degrees scenario, with 13 new projects built by the mid-2030s compared with only five in Steady State. In all scenarios, no new interconnectors are built after the late 2030s as we assume that the market becomes saturated.
There continues to be a net annual import of electricity in the 2020s. This is due to GB prices being generally higher due to the carbon price floor and cheaper low-carbon generation in other countries. However, post 2030 we see sustained exports in Two Degrees as more renewable generation is built in GB, leading to lower prices than other countries for long periods across the year.
In April 2017, Great Britain experienced its first ‘coal free’ day since the 1880s. This milestone underlined the shift in the generation mix. It’s clear that large thermal plants face tough economic headwinds, including environmental policy and increasing competition from generation with zero fuel costs.
Our scenarios show all unabated coal plants closed by 2025 in line with government commitments, but with timings differing for each scenario.
In contrast, gas continues to provide a low-cost source of electricity and is likely to have an important role as a flexible generation source as we move to a low-carbon future due to its ability to flex to meet demand.
The scenarios show variation in the amount of new capacity from combined cycle gas turbine (CCGT) plants. By 2030, Steady State has this figure at 15GW, while Two Degrees calls for just 5GW of additional transmission connected CCGT capacity due to strong renewables growth, supported by greater interconnection to provide flexibility.
Role of small-scale thermal generation
Small-scale thermal generation can also be an important source of system flexibility. This includes gas turbines, diesel and gas engines, gas combined heat and power stations (CHPs), fuel cells and fuel oil generators. Our Consumer Power is our ‘high case’ scenario for small-scale thermal plant, which grows steadily to the mid-2030s, reaching over 24GW by 2050.
The lowest growth is seen in Two Degrees, where green ambition limits the deployment of small-scale thermal technology.
Meanwhile, upcoming regulatory changes may impact the growth of decentralised technologies. In June, Ofgem announced changes to the value of embedded benefits, to be implemented over three years. Embedded benefits refer to the exemptions and payments that on-site and distributed generators plus storage can receive in relation to avoiding certain network-use charges. You can read more about Ofgem’s decision here.
Ofgem has also announced a Targeted Charging Review to consider network charging arrangements more generally that may affect the growth of decentralised technologies.
So, in summary our need for flexibility in managing electricity supply and demand is higher than it’s ever been and is likely to continue to grow. The supply-side is only one part of this equation, but continued technological development should help in our aim to ensure that end consumers continue to have access to the electricity they need when they need it most, no matter how and where it was generated.