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Forward energy thinking on renewables and nuclear

18 Jul 2018 Dave Elliott

There have been blasts of sense on UK energy policy from the National Infrastructure Commission (NIC), the government’s advisory body, and also from its advisory Committee on Climate Change (CCC), in relation to the relative prospects for nuclear and renewables.

In its new National Infrastructure Assessment, the NIC said the government “should not agree support for more than one nuclear power station beyond Hinkley Point C before 2025”, since their cost seemed unlikely to fall, while renewables were getting cheaper and could prove a safer investment. The CCC, in an annual progress report, although more circumspect on nuclear, said, while Hinkley was going ahead, “limited progress has been made with other new nuclear projects”, and concluded that “if new nuclear projects were not to come forward, it is likely that renewables would be able to be deployed on shorter timescales and at lower cost”.

There does seem to have been a shift in view. Whereas a decade ago few thought that renewables could be affordable and play a major role in electricity generation, the NIC said that the sector had undergone a “quiet revolution” as costs have fallen. It suggests that by 2030 a minimum of 50% of power should come from renewables, up from about 30% now, and calculates that the average costs for a 2030-50 scenario with 90% renewables and less than 10% nuclear would be slightly less than for a scenario with 40% renewables and around 40% nuclear. It adds “the higher cost of managing the variable nature of many renewables (‘balancing’) is offset by the lower capital cost, which translates into lower costs in the wholesale market”.

 The NIC looks to wind and solar PV playing leading roles, both being “allowed to compete to deliver the overwhelming majority of the extra renewable electricity needed as overall demand increases, with measures to move them to the front of the queue for Government support”. The CCC, however, complains that, given the block on access to the Contract for Difference (CfD) support system, at present “there is no route to market for cheap onshore wind”. It’s the same for large-scale PV solar. The fact that these options are now cheaper seems to have been used as an excuse to remove access to the CfD market, without which, even if they get zero subsidies, they are finding it hard to expand.

The NIC wants a revamp of the CfD system, with “technologies that have recently become cost competitive, such as offshore wind”, moved to the “Pot 1” category of “developed” options, from the Pot 2 category of “still developing” options, following the next CfD auction, which is set for the spring of 2019. It says “Pot 1 should be used for the overwhelming majority of the increase in renewable capacity required”. It seems to suggest that onshore wind should be re-included: it is in Pot 1, but is being treated as an outsider. The NIC doesn’t look much at Pot 2 options, which include wave and tidal power, except to say that some support should be offered especially where they are likely to be able to contribute to the reduction of system costs in future”. However, it suggests that tidal lagoons are unlikely to be cost-effective or a significant option (see my next post), but nevertheless says tidal power “should be allowed to compete on an equal basis with other technologies for Contracts for Difference”.

One of the NIC’s main concerns, however, seems to be to slow down nuclear aspirations. Sir John Armitt, NIC’s chair, said: “We’re suggesting it’s not necessary to rush ahead with nuclear. Because during the next 10 years we should get a lot more certainty about just how far we can rely on renewables. One thing we’ve all learnt is these big nuclear programmes can be pretty challenging, quite risky – they will be to some degree on the government’s balance sheet. I don’t think anybody’s pretending you can take forward a new nuclear power station without some form of government underwriting or support. Whereas the amount required to subsidize renewables is continually coming down. We’ve seen how long it took to negotiate Hinkley – does the government really want to have to keep going through those sort of negotiations?” By contrast, he says, renewables offered us a “golden opportunity” to make the UK greener and make energy affordable.

That applied to heat as well as electricity. The NIC says the government needs to make progress towards zero carbon heat by establishing the safety case for using hydrogen as a replacement for natural gas, followed by trialling hydrogen at community scale by 2021 and then, if all is well, a trial to supply hydrogen to at least 10,000 homes by 2023, including hydrogen production with carbon capture and storage (CCS). In parallel the NIC says, by 2021, the government should establish an up-to-date evidence base on heat pumps performance within the UK building stock and the scope for future reductions in the cost of installation.

So the UK government is backing both main horses in the green heat race – green gas, in the form of hydrogen, and electrification, via heat pumps. Though oddly there was no mention of the third possible option, local green heat networks, something the government is beginning to take seriously, at long last starting up its £320m heat net support programme. That, admittedly, is small, but the Department for Business, Energy and Industrial Strategy (BEIS) has claimed that heat nets could expand from only supplying 1% of building heat demand now, to meet 17% of heat demand in homes and up to 24% of heat demand in industrial and public-sector buildings by 2050. So it’s an odd infrastructure omission by NIC. Maybe since it is only relevant to urban/industrial areas, whereas gas and electricity reach all consumers.

The NIC also wants the government to move more on what is done with this energy once it’s delivered – cutting energy waste. It wants the rate of installations of energy efficiency measures in the building stock to rise to 21,000 measures a week by 2020, “maintained at this level until a decision on future heat infrastructure is taken”. It says that policies to deliver this should include allocating £3.8 billion between now and 2030 to deliver energy efficiency improvements in social housing.

That’s a quite ambitious series of proposals. But, as the CCC makes clear, the UK does need to get moving on the heat side, as well as on power and transport, if it is to meet its climate targets. The NIC says “highly renewable, clean, and low-cost energy and waste systems increasingly appear to be achievable”. It notes that its modelling “has shown that a highly renewable generation mix is a low-cost option for the energy system. The cost would be comparable to building further nuclear power plants after Hinkley Point C, and cheaper than implementing CCS with the existing system. The electricity system should be running off 50% renewable generation by 2030, as part of a transition to a highly renewable generation mix”.

That’s a pretty good package, at least for starters. Though Richard Black, from the Energy and Climate Intelligence Unit, claimed that, if the nuclear programme is slowed as NIC suggests, even with a 50% renewable contribution by 2030, the UK will miss its non-fossil energy target. So it would need more than 50% renewables. That depends on what happens to power demand. If the “decarbonisation by electrification” programme is slowed (not so many heat pumps), then power demand would no doubt continue to fall, as it has been over recent years. So there would be less need for new nuclear or extra renewables. But there would then be a need for green gas or green heat networks, or both. Biogas from farm and home waste anaerobic digestion is one obvious source in either case, but may be limited, so a bit of solar heat and geothermal heat fed into heat networks would also be useful. As well as biomass used in combined heat and power (CHP) plants.

Interestingly, a new study for the CCC from Imperial College looks at hydrogen gas grids and also domestic electric heat pumps and says that a hybrid mix may be the least cost option, with the “hydrogen alone” route being the most costly. Oddly, as with the NIC study, and also the new set of fascinating scenarios from National Grid in its Future Energy Scenarios series, there’s not much on heat grids or CHP. And one version of the hydrogen route they all look at relies on CCS to limit emissions, since the feedstock source is fossil fuel. They also look at the alternative carbon-free route, “power to gas” conversion of surplus renewable electricity to hydrogen, via electrolysis. It’s more expensive than the fossil route, but it avoids costly and as yet unproven CCS. With 50% of variable renewables on the grid (or 75% in one of National Grid’s scenarios) there would certainly often be plenty of surplus output.  Though some of that would perhaps be better used for (later) power generation to balance lulls in renewables. But there may be enough for both uses – heat and power. Lots of possible paths ahead then, and maybe a bit of a squeeze – though that could perhaps be avoided if the blocks on PV solar and onshore wind were removed.

This post replaces one promised on oil company views. That will follow, but after another intervening post – on the tidal lagoon decision.

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