On the 12 October, National Grid published their annual Winter Outlook Report. We asked Dr Aidan Rhodes, author of our recent report on electricity supply security to have a look and give his opinion on it.
The Winter Outlook Report from National Grid lays out their analysis on how secure the UK’s electricity and gas systems will be over the winter. Winter is the time of highest peak energy demand across the UK, as the early evenings, long nights and cold weather lead to heating being turned up and lights being turned on. As such, it’s the period in which the UK’s system is under the most stress, with the system’s capacity margin, (the difference between peak demand and available supply), becoming a focal metric for commentators when discussing the health of the system and the likelihood that the lights will go out this winter.
In the last few years, the capacity margin has drastically reduced, from approximately 17% in the 2012/13 winter to just over 1% over the most recent winter, 2016/17. This has led to a flurry of reports and news headlines suggesting that the UK is heading towards an electricity security crisis, where we will not have enough power generation to match peak demand, leading inevitably to blackouts. The sharp drop in the margin is often blamed on government policies to decarbonise the electricity system, incentivising the construction of intermittent renewable generation such as wind and solar at the cost of more reliable conventional generation such as gas and coal. The Government and the system operator, National Grid, strongly disagree, saying that the system has produced reliable and uninterrupted supplies over the last few years and is well placed to do so into the future.
We at Energy Futures Lab decided to review this contentious topic as the subject of our first briefing paper. Over the course of several months, we collated and sifted through over three hundred sources, from academic journal articles on system and market design to technical operation reports produced by National Grid and others. On the 11th October, a day before National Grid published the Winter Outlook Report, we launched our Briefing Paper, ‘Is the UK facing an Electricity Security Crisis?’.
What did we find out? Firstly, over the past decade, the UK’s electricity system has remained secure and reliable. The absolute vast majority (99.9%) of blackouts have been caused by faults in the distribution network, either by weather or by component failure. During this time, we’ve seen a substantial shift in how our electricity is generated, as can be seen in the figure below. Coal generation has fallen almost to nothing, from an average of 15-20GW in 2013, and wind and solar have increased markedly, leading to over half the UK’s electricity being provided from renewables (including hydro and biomass) in June 2017. Gas generation has filled a lot of the gap left by coal, rising over 50% since 2013. Peak winter demand is also dropping slowly, with a clear trend downwards over the past five years. Many factors could be contributing to this reduction, but two primary reasons are progress in energy efficiency, primarily lighting, as well as a series of mild winters.
With the generation mix changing so rapidly, how has National Grid managed to balance the system and keep the lights on over the last few years? As discussed earlier, the capacity margin has fallen significantly over the past few years, driven mainly by the EU’s Large Combustion Plant Directive forcing older coal (and a few gas) plants to close or limit their hours, combined with cheap gas prices and the Carbon Price Floor often making coal plants uneconomic to run. In response, National Grid introduced the Strategic Balancing Reserve, which paid some of this older plant to remain available to generate in case of a shortfall instead of closing or being mothballed. This scheme ran for three years, from 2014-17, and raised the capacity margin to a healthier 5-6% during this time. Though the reserve was available, it was never called on to generate, and the scheme closed in 2017.
There is also a useful question to ask as to how useful the capacity margin is as a measure of grid security. The capacity margin measures the difference between the total available generation and peak demand, a metric which is useful for a system with large conventional generators supplying large demand centres, but less useful for today’s system with its large quantities of small-scale distribution-network connected generation. As the proportion of distributed generation grows, it makes it more difficult to compare traditional capacity margins between years, making it less useful as a comparison metric. From this winter, National Grid are introducing a new calaculation of capacity margin, measuring total underlying demand and generation instead of that just connected to the transmission network. This should make the capacity margin a more useful metric for the security of the system going forward.
So, what is going to happen this winter, given the low margins seen in the last few winters? The good news, as discussed in the report and confirmed in the Winter Outlook Report, is that the system will have the largest margins since 2011/12 going into this winter. The Winter Outlook Report gives this winter’s margin as 11.5% on a transmission basis or 10.3% on an underlying demand basis. This increase in margin is mainly down to the introduction of the Capacity Market, which starts operating this winter. This is an auction-based market in which generators bid to provide guaranteed capacity (they will be available to provide electricity) over the winter period. Auctions take place four years in advance to allow time for new power stations to be built, and have now been completed for the winters up until 2020/21, and sufficient capacity has been procured to cover anticipated peak demand until then. The Capacity Market has been criticised for allowing more polluting plant to stay on the system and for incentivising the use of polluting smaller diesel generators, as well as not doing as much as it could to incentivise demand-side management. However, with its operation, it is unlikely that we will see blackouts caused by lack of supply in the next few years.
Larger questions loom when considering the next decade or two .What happens with new nuclear power? Can the UK continue guaranteeing security and low-carbon generation? We’ve covered these in the report, so please have a read if you’re interested. However, the answer to the central question ‘Is the UK facing an electricity security crisis?’ is ‘almost certainly not’. As we’ve explained in our report, and National Grid has confirmed with numbers, the chances of the UK facing serious blackouts in the next few years is very low indeed.