Future Energy Scenarios Brainstorm

New energy pathways unconstrained by reality filters

Introduction

When you are running a brainstorming session, you create an atmosphere where every idea is welcome and insist that nobody shoots down even the most hare-brained notion, because there might be the kernel of brilliance buried in there somewhere. The objective is to foster an environment of free-thinking to stimulate innovation. However, at the end of the session, or afterwards, someone goes through all the Post-it notes and applies a reality filter so only the best ideas get further investment of time and money.

Well, when producing the latest Future Energy Scenarios (FES) report, the National Grid ESO (NG ESO) seem to have come up with a way to shoehorn in every wacky energy idea but have failed to apply the economic and thermodynamic reality filters.

They have subtly altered the report now to discuss “Pathways” instead of “Scenarios,” but confusingly the report is still called “Future Energy Scenarios,” not “Future Energy Pathways.” These new pathways are supposed to provide a narrower strategic range of outcomes and instead of being “cost agnostic” they are supposed to bring in “additional economic modelling.” Said modelling is conspicuous by its absence. They are also supposed to have considered “whole system optimisation fundamental to finding the most efficient future energy system across all energy vectors.” Although this latter objective is reserved for future iterations, so we must assume that what they have produced is not the most efficient energy system.

Let us see how well they have done exploring “a narrower range of outcomes to drive more strategic, credible routes to net zero.”

Energy Demand

Despite brainstorming every single energy supply technology, they have not extended this thinking to their estimates of energy demand in 2050. They are still projecting per capita energy use to be halved by 2050 (see Figure 1).

Figure 1 - National Grid ESO Propose Halving Per Capita Energy Use by 2050

As part of that, energy consumed by the residential and transport sectors falls by nearly two-thirds in two of their pathways. As I never tire of saying, halving energy use is extremely dangerous. According to Our World in Data, there are no rich countries with such low energy use (See Figure 2).

Figure 2 - Energy Use Per Person vs GDP per Capita (Source - Our World in Data)

We are already using 61.8% less energy per capita than the USA and 16.8% less than the EU 27. We are even using less energy per capita than China. Halving our per capita energy use would mean consuming less energy per capita than Mexico, Brazil, Algeria and Uzbekistan use today. All those countries have GDP per capita much less than half of the UK, with Algeria less than a quarter of ours.

Surely, the first reality test of any energy plan should be that it delivers a growing and prosperous economy.

Deindustrialisation Built In

The economic decline inherent in their energy plan is further illustrated by the amount of energy they think will be used by the Industrial and Commercial (I & C) sector. The headline figures show a 14-17% reduction in energy use by the I&C sector, but the headline figures mask what is going on beneath the surface (see Figure 3).

Figure 3 - Holistic Transition I&C and Datacentre Energy Use by Year (TWh)

In their Holistic Transition pathway, as overall I&C energy use falls from 390TWh to 331TWh, the energy consumption of data centres rises from 5TWh last year to almost 62TWh in 2050. So, by 2050, data centres will consume 19% of all I&C energy (and 24% of I&C electricity). This effectively means that the energy consumption of other industrial users like steel, automotive, fertilisers and chemicals will have to fall even more dramatically. However, with such expensive electricity, it is unlikely these datacentres will arrive. They are more likely to locate in countries with low energy costs.

Hydrogen Bubble

We know that deindustrialisation will be the outcome because all the pathways utilise considerable amounts of hydrogen (see Figure 4).

Figure 4 - Hydrogen Demand by Pathway and End User (TWh) (Source - NG ESO FES 2024)

The planned use of hydrogen is particularly evident in I&C and in power generation. They plan to make this hydrogen primarily from two sources, steam methane reformation (SMR) with carbon capture (CCUS), otherwise known as blue hydrogen, and electrolysis using otherwise curtailed electricity from renewables, also known as green hydrogen (see Figure 5).

Figure 5 - Hydrogen Supply by Technology in 2050 (Source - NG ESO FES 2024)

There are many problems with this idea. First, SMR is only about 60-65% efficient. SMR with CCUS is unproven and is bound to be even less efficient because of the extra energy required to capture the CO₂ emissions and pump them underground. If we are generous an say the overall process is 50% efficient, then hydrogen produced by this method must cost at least twice as much as the gas it is made from. At the time of writing, UK and Continental European gas costs about 4.5 times more the gas in the US (see Figure 6).

Figure 6 - Comparison of UK, US and European Gas Prices 16 July 2024 (Source - Trading Economics)

This means that blue hydrogen would be at least nine times more expensive than US gas. No energy intensive industry will want to locate in the UK if their main input cost is nine times more expensive than in America.

It is an even worse story with green hydrogen. Late last year, the Government announced the results of its Hydrogen Allocation Round and agreed contracts for green hydrogen at £241/MWh. This is more than nine times the cost of UK gas and some forty-two times the cost of gas in the US. Yet, NG ESO claim “a fast rollout of clean hydrogen production capacity and adequate network could catalyse industrial decarbonisation.” With such an energy cost differential, industries are going to dematerialise to cheaper locations rather than decarbonise here. Again, the economic reality filter has not been applied. Of course, this commitment to hydrogen was published just as billionaire Andrew Forrest scaled back his ambitions for green hydrogen with the loss of 700 jobs.

As can be seen from Figures 4 and 5, all three of the pathways that achieve net zero envisage significant power generation from hydrogen, and significant amounts of that hydrogen to be blue hydrogen made from methane. They are proposing to take methane, lose at least half the embedded energy to make hydrogen and then burn the hydrogen to make electricity. Of course, it is far more thermodynamically efficient to simply burn the methane to produce electricity. Clearly, the thermodynamic reality filter has not been applied either.

High Electricity Costs

We also know electricity costs are going to soar because of the vast amounts of curtailment they envisage. Curtailment means that wind farms are turned off, or curtailed, when the wind is blowing because there is insufficient demand for their output. Wind farm operators will either demand to be paid for this curtailed electricity or will adjust the prices they bid into auctions to take this curtailment into account.

Figure 7 shows that two of their net zero pathways envisage curtailing over 60TWh of electricity in the late 2030’s, or over 20% of generation last year.

These curtailment levels are presented after allowing for some of the surplus electricity is used to make hydrogen and capture CO₂ from the atmosphere using Direct Air Capture.

Carbon Capture Unicorns

Despite all the spending, the carbon reduction measures set out in their pathways do not get us to net zero. There will be residual emissions in sectors such as aviation and agriculture. They are planning to offset these emissions by spending even more on unicorn technologies such as Bio-Energy with Carbon Capture and Storage (BECCS), BECCS enabled hydrogen and BECCS for biofuels. As discussed elsewhere, BECCS is the process of chopping down trees in North America, pulping and drying them into pellets, then shipping them to power stations like Drax to be burnt to produce electricity.  It is enormously costly and the Royal Society of Chemistry produced a report that suggested BECCS using willow pellets from Louisiana in America would have an EROI of less than one, making the whole process a net energy sink. Moreover, the supposed negative emissions arise because the CO₂ emitted by burning the trees is not included in the calculations. Both the economic and thermodynamic filters have not been applied again. They also plan to utilise Direct Air Carbon Capture and Storage (DACCS) to capture CO₂ from the air and pump it into permanent storage. They plan to use industrial waste heat and renewable electricity when the wind is blowing too hard and supply exceeds demand.

They also plan to use something called, LULUCF, which means Land Use, Land Use Change and Forestry to sequester more CO₂ out of the atmosphere. Basically, this means planting more trees and restoring peatlands. It is rather odd that they plan to chop down loads of trees for BECCS to produce negative emissions and also plant more trees under LULUCF for even more negative emissions.

Collision Course with Labour Policy

There are some clouds on the horizon for NG ESO now the new Labour Government is in place. First, Labour have committed to decarbonise the grid by 2030, however, all of the FES pathways show there will be significant CO₂ emissions from the electricity system by 2030 (17-44 Mt, compared to 55Mt last year). Presumably, NG ESO does not believe Labour’s plan is a “credible route to net zero.”

Second, Ed Miliband is stopping further exploration of the North Sea, meaning our domestic gas supply will fall faster than anticipated. However, NG ESO forecast that we will still be using gas beyond 2050 on all net zero pathways and we will be importing almost all of it. Something must fuel those gas plants with CCS and make all that blue hydrogen. Figure 8 shows the annual supply and import dependency for the Hydrogen Evolution pathway.

Figure 8 - Annual Gas Supply and Import Dependency in Hydrogen Evolution Pathway (Source - NG ESO FES 2024)

The scale of the import dependency shows the stupidity of stopping new North Sea exploration and development and banning fracking.

Another source of friction may be what Miliband might see as a lack of ambition about the installed capacity of renewables. In their manifesto, Labour promised to double onshore wind, triple solar and quadruple offshore wind capacity by 2030. As Figure 9 shows, all the pathways miss Labour’s target except for onshore wind under the holistic transition pathway.

Figure 9 - Current and Planned Renewables Installed Capacity 2030 (GW)

This further illustrates that Miliband’s targets are not credible.

Big Brother Controls

The report also recommends widespread use of time-of-use tariffs (TOUT) stating: “consumers need to be rewarded for turning down demand at peak times and turning up demand when there is excess generation”. In other words, consumers need to organise their lives around the grid rather than the grid being designed to meet the needs of their customers. They also call for appliances to be controlled automatically to “optimise” demand and coordinate with price signals in the TOUT tariffs.

Totalitarian control of energy use is bound to be a feature of an energy scarce environment, not a bug.

Demands for Even More Subsidies

The FES 2024 report claims they will “deliver a future where everybody has access to clean, reliable, affordable energy.” They also claim that solar, onshore and offshore wind “remain one of the lowest cost options to meet our energy needs.”

However, the document makes a direct call for subsidising the cost of hydrogen and makes further demands for policy support, financial support, incentives, price signals, business models and market mechanisms. These are all code words for subsidies. They also make the explicit demand for levies on electricity bills (another word for the renewables subsidies) to be “rebalanced” on to gas. In other words, most of the proposals they have put forward are not viable without subsidies and the true cost of those subsides must be shifted from electricity on to gas. We know that if any technology needs a subsidy, it is not cheaper than the alternative, now we have NG ESO implicitly acknowledging that reality.

It is clear our bills are going up, and NG ESO has not applied an economic reality check to its work.

Conclusions

Despite claiming their new pathway approach has created “credible” choices to propel us on the route to decarbonisation, it is clear the opposite is true. This is a report where all technologies must have prizes regardless of the technical or economic viability. Many of the technologies they are recommending are unproven at scale and woeful economics.

They have clearly simply brainstormed all the potential technologies and shoe-horned them into their pathways without applying any kind of economic or thermodynamic reality filters.

They are obviously somewhat concerned about energy scarcity and intermittency because of their emphasis on TOUTs and automatic control of appliances. Instead of re-thinking and coming up with a plan for energy abundance, they continue down the path of expensive, scarce energy and Big Brother controls.

If this were just another think-tank spouting nonsense it would not matter very much, but the National Grid Electricity System Operator (NG ESO) is transforming into the National Energy System Operator (NESO), where they are supposed to be planning the entire energy system. If this is the best they can do, we are in big trouble. And now Labour is in power, things can only get worse.

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