Irrational Energy Policy - FES and DESNZ Reviewed

Irrational Government policies and National Grid plans do not align and will not deliver what we need to run a modern economy.

Introduction

Last week, I revisited Sustainable Energy Without Hot Air (SEWTHA) and looked in detail at what David Mackay had to say about a rational energy policy 15 years ago. I concluded that his Plan E, for economics, was the only viable plan. The other plans either relied too much on wind power that requires an unfeasible amount of storage or on solar power from deserts in North Africa that in my view can never deliver energy security. Now as promised, it is time to look at what National Grid ESO and the Government itself are saying about our future energy demand and their plans to deliver it.

This article looks at their recommendations from a number of different perspectives:

• Overall electricity demand

• Generation capacity

• System Costs

• Storage Requirements

• Changes to Consumer Technology and Behaviour

Planning for Electricity Scarcity

In the last article, we covered David MacKay’s estimate of how much energy we would be using by 2050 in his book SEWTHA. He estimated we would need 70kWh/p/d overall energy, with 50kWh/p/d coming from electricity (See Figure 1). 50kWh/p/d amounts to 1,338TWh for a population forecast to be 73.3m by 2050. Overall, this represents a reduction of around 44% from the energy used in 2008, but a significant increase in electricity generation.

Figure 1 - David Mackay Changing Energy Production 2008-2050

Bearing that in mind, let’s take a look at what National Grid ESO are planning in their Future Energy Scenarios report and data workbook. Helpfully, National Grid give their estimate of electricity demand in 2050, See Figure 2. I think comparison that comes closest to a like-for-like comparison is the total of Industrial & Commercial, Residential and Transport electricity demand in 2050. These range from 598-810TWh in 2050, or 45-61% of MacKay’s estimate. Their scenarios also include losses (from hydrogen production) and some export of electricity that I have excluded from the comparison because MacKay did not include those elements in his analysis.

Figure 2 - FES UK Energy Demand 2020-2050

The Department of Energy Security and Net Zero (DESNZ), in an Annex to its recent Powering Up Britain report, is planning for 575-700TWh of electricity generation (see Figure 3), in the same ballpark as National Grid ESO, or about half of MacKay’s estimate.

Figure 3 - UK Government DESNZ UK Electricity Generation 2050 (GWh)

The differences between SEWTHA, selected scenarios from FES and the Government are shown in the Figure 4 below.

Figure 4 - UK Electricity Delivered by Scenario 2050 (GWh)

All of the SEWTHA, FES and Government scenarios are predicated on a move to heat pumps and electric cars. The underlying assumption is that overall energy consumption will fall because of improved efficiency but electricity consumption will rise because we have electrified society.

What is more difficult to understand is the 25-36% reduction in industrial demand (see Figure 2). Yes, there may well be some efficiency improvements from using heat pumps in offices, but it looks like such a large-scale reduction relies on there being a further hollowing out of industrial capacity.

Already, it is clear that both the Government and National Grid are planning for scarcity. Are we really supposed to believe that our understanding of the efficiency gains that might come from heat pumps and EVs have improved by a factor of two in the past 15 years? It does not sound likely to me. Remember, Professor Sir David MacKay was Chief Scientific Advisor to DECC (forerunner of DESNZ); he was not some random lightweight who happened to write a book.

Generation Capacity Confusion

It is also interesting to look at the mix of generation capacity proposed by MacKay, National Grid and the DESNZ as in Figure 5.

Figure 5 - UK Electricity Generation Capacity by Type and Scenario 2050 (GW)

In his Plan D for “Domestic Diversity,” Mackay had a broad mix of generation capacity encompassing Nuclear, Wind, “clean coal” or what we would call today coal with carbon capture or CCUS, domestic solar PV and waste incineration. The other capacity is from tidal, wave and hydro (using my estimates of load factor). Plan E, the Economists plan, was very highly skewed towards nuclear power, requiring less installed capacity than most of the FES and DESNZ scenarios even though it produces twice as much electricity. This is because nuclear power has a high load factor (I assumed 90%), whereas intermittent renewables like wind and solar have low load factors and need much more installed capacity to produce the same gross output.

I have added an additional DESNZ scenario to this chart from the Powering Up Britain Technical Annex. All of the FES and DESNZ plans include massive wind capacity (85-158GW) through a combination of onshore and offshore developments. This compares to the ~28GW of installed capacity today. The “Other” capacity in the FES and DESNZ scenarios is generation of electricity from hydrogen produced from curtailed wind power. Note the big variation from zero to 45GW depending upon scenario.

What is troubling is the big differences in capacity of various sources that the Government is assuming and what the National Grid are planning for. For instance, the Government is assuming far more nuclear power (25-40GW) than the people who actually run the grid (8-15GW). The Government is also assuming far more Gas with CCUS capacity (10-30GW) than in the FES report (3-14GW). FES is assuming far more from low EROEI sources such as energy sink BECCS (3-12GW) and solar PV (57-92GW), whereas the Government is assuming only 0-2GW or 15-40GW respectively. It is clear that the National Grid and the Government are not communicating well. The FES report was produced less than a year ago in July 2022 and the Powering Up Britain Report came out only last month, although the grid analysis report that is referred to in their Technical Annex was published in December 2020.

The build rate required to hit the high-end targets for wind and solar is far in excess of what has been achieved in the past five years, see Figure 6. Essentially, wind capacity will have to expand three times faster than we achieved from 2017-2021 and solar capacity at more than ten times the rate. This calculation does not include the capacity that will have to be replaced between now and 2050, so the real situation is even worse.

Figure 6 - Required Build Rate of Wind and Solar GW per year to meet targets

To hit the high-end target of 40GW of nuclear power would require >1.2GW/year, or a single large reactor to come on stream every year from 2021 to 2050. I will argue in a subsequent article that we need even more nuclear power than that. The only nuclear activity we have got is Hinkley C (3.2GW) under construction, plans for Sizewell C (3.2GW) and delayed plans for Small Modular Reactors. Much of the existing ~5GW of capacity will be retired in the next few years.

Planning and building power plants is a very capital intensive and time-consuming activity. Investors need a credible, coherent and consistent plan if they are to have confidence to invest the billions of pounds required to reconfigure the grid. It looks to me like the plans lack the required credibility to tempt investors to come forward. None of the Government policies are remotely credible without a massive change, so we are not well equipped to even compete in the global race for investment mentioned at the Spectator Energy Summit.

System Costs Very High

Although the FES report talks a lot about the cost-of-living crisis and utilising “low-cost, low-carbon electricity” it does not sully itself with anything so vulgar telling us how much we will be paying for electricity under its plans.

To its credit, DESNZ did estimate the system costs in its report, from which it is possible to derive (flawed) costs per MWh at 2012 prices (see Figure 7). Their high demand scenarios (surely the low demand scenarios can be discounted) produce remarkably stable results with costs of around £90-94/MWh in 2012 prices.

Figure 7 - DESNZ System Costs and Cost per MWh 2050 in 2012 prices

This compares to a range of £39-47/MWh in 2018-prices for solar and both onshore and offshore wind plants commissioning in 2030 in their 2020 Electricity Generation Cost report. Even their 2016 estimate of nuclear was £78/MWh in 2014 prices for plants commissioning in 2030. Something does not add up when system costs are much higher than the biggest component costs. I think the difference is a reflection of the hidden costs of curtailment and grid balancing.

Storage Requirements

Short-Term Storage Inadequate

Let us look at the storage requirements for each of the scenarios. First, there is the storage required to cover a short-term wind lull of 5 days. If we have say 60GW of wind capacity installed and we are expecting 20GW on average, then a wind lull would mean a shortfall of 20 * 5 * 24 = 2,400GWh that would need to be covered by storage. We currently have around 30GWh of pumped storage. With a bit of luck, we might get to 100GWh of storage by 2050. To that we might add roughly 500GWh of energy stored in 33m electric vehicle batteries, or around a quarter of the total capacity of vehicles with an average 60kWh capacity. That gives us a total of 600GWh of storage (red dotted line on Figure 8 below). The figure shows how the requirements of the various scenarios dwarf what we might expect to have available.

Figure 8 - Storage Required for 5-day Wind Lull by Scenario (GWh)

Of course, the other way of covering this shortfall is to have interconnectors or dispatchable thermal capacity available from coal, natural gas, hydrogen or biomass. We would need idle dispatchable capacity of roughly one third of wind capacity to cover a wind lull. Interconnectors from countries that also rely heavily on wind will be practically useless when there is a high-pressure system over the North Sea. Only the System Transformation FES scenario meets this criterion and only if you assume that the dispatchable plants could also meet peak demand without wind or solar. The FES scenarios have non-wind and non-solar capacity of 33-49GW. Most of the DESNZ scenarios have non-wind, non-solar capacities of 50GW. However, the DESNZ Net Zero Generation capacity scenario has a non-wind, non-solar capacity of 89GW, excluding the 25GW of interconnectors that will be largely wind dependent.

Current peak demand is around 45GW. If we add to that 94GW of power required by 23.6m homes each with an average 10kW heat pump operating at a COP of 2.5 when it’s very cold outside, then we get a peak demand of around 140GW, with no recharging of cars, vans, buses or HGVs going on at that time and no factories using electricity instead of gas to provide industrial heat. None of the scenarios can get anywhere near the required capacity on a cold, calm winter’s evening. The lights will go out.

Pitiful Long Term Storage Plans

That is before we even get to the requirements for long-term storage to cover inter-seasonal demand variations. Our demand for heat increases massively during the winter months and so energy consumption rises. Conversely, in the summer months, we do not need as much energy. The FES report estimates we need 11,000-56,000GWh (well off the scale of the chart in Figure 8 above) of hydrogen storage to manage this variation in demand across the seasons.

We only have a small amount of hydrogen storage at the moment used as a buffer for industrial processes. The plans for very large-scale underground storage in salt caverns appear to have stalled. So, the long-term storage requirement is reliant upon a technology that we have not yet delivered at scale with unknown cost.

The DESNZ modelling did not even consider long-term storage. With this statement they declared their whole exercise to be worthless (see Figure 9).

Figure 9 - DESNZ We have not included long term storage

Costs of Battery Storage?

It would be theoretically possible to store more energy in large standalone battery storage units. However, a cursory look at the maths reveals this to be uneconomic (see Figure 10). Using the South Australian Mega-Battery as a cost yardstick, a battery sufficient to deliver 20GW for 5 days would cost over £600bn and take up space equivalent to over a quarter the land area of Greater London.

Figure 10 - Cost of Battery to store 2400GWh of energy

We could build 20 Hinkley Cs for that amount of money and deliver 60GW reliably for 60 years. The price of these batteries would have to come down by more than a factor of 10 or more before they are even worth considering. So, battery storage is not an option.

Customer Changes Required to Deliver the Plan

The FES report implicitly recognises these problems with short and long-term storage. Its response is what it calls Demand Side Flexibility, or the changes consumers need to make to give its plan a chance to work. For domestic consumers this means spending on heat pumps, even more on domestic battery storage and on large tanks to store thermal energy in hot water. For transport this means smart charging of electric cars, or restricting the times when you can recharge at a reasonable price as well as vehicle-to-grid (V2G) technology to use your car to power the grid at times of high demand or low supply. For businesses it means industrial process flexibility or getting paid to turn off factories so they do not consume power at peak times. Not exactly a great advertisement for building state of the art manufacturing facilities here. They expect these measures to reduce unmanaged peak demand by 27-44% in 2050 (see sheet FL.09 in the data workbook).

Conclusions

In short, they are planning to generate the minimum amount of electricity they think they can get away with, or about half as much as what David MacKay thought we would need. This is planning for scarcity. In addition, they are planning on restricting access to electricity and force consumers to buy expensive heat pumps, thermal storage and domestic batteries to help manage the peaks and troughs.

The Government is hinting that costs are going to be very high and National Grid do not even attempt to cost out their plans.

The generation mix is totally up in the air, with the Government and National Grid being out of alignment on the types of power plant we need to power the economy. The only thing they agree on is that we will build lots of wind and solar, but they are not building at a rate anywhere near to what is required to meet their own plans. Moreover, they do not have a clue where the storage is going to come from to get us through wind lulls or through periods of high demand in winter.

Overall, it is a mess of epic proportions. As Churchill might have said, never in the field of energy policy has so much damage been inflicted on so many by so few.

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