System flexibility is the UK’s next big energy challenge

While UK Prime Minister Theresa May has been battling to finalise and win support for her Brexit deal, the past few weeks have also been busy for UK renewables.

Two weeks ago, the European Court of Justice suspended the UK’s capacity market for back-up power after annulling the European Commission’s decision to not object to the scheme. Essentially, the ECJ has ruled the capacity market is too weighted in favour of fossil fuels.Check out what this means for renewables and storage here.

Following this, the UK Government last week published the draft budget notice for its £557m Contracts for Difference auction in May, where only £60m has been allocated to support offshore wind projects totalling up to 6GW.

Both could be important for how renewables shape up in the UK in the next decade, and particularly in how much green energy and flexibility is in the energy system.

This was also the topic of a report published by power management company Eaton, Norwegian utility Statkraft and Bloomberg New Energy Finance last week. In it, the three firms said that organisations in the UK needed to address a system flexibility challenge if they wanted renewables including wind to play a central role.

The report analyses seven scenarios that all show how adding more energy storage, electric vehicles and interconnectors would be key in a renewables-led system.

It forecast the share of renewables in the UK energy mix would exceed 70% by 2030 in all scenarios, up from 27% in 2017, as wind and solar become dominant as costs fall. However, without flexibility, the system would be “oversized and wasteful”.

Here are the report’s main conclusions.

First, investment in energy storage and the displacement of fossil fuels as backup capacity would be key for a cost-effective integration of renewables including wind farms into the energy system.

Second, electrification of transport, and particularly a larger fleet of electric vehicles, would benefit integration by helping to manage electricity demand more efficiently.

Finally, the report highlights the importance of interconnectors, with Scandinavia in particular, as “a powerful source of flexibility for decades”.

The report raises very valid and relevant points, but it still leaves us a bit sceptical.

Our first question is whether the UK will reach 70% of its energy from renewables, mainly wind and solar, by 2030? Really?! We’re not that bullish.

For example, government support for wind is far from encouraging. Political support for onshore wind has stalled, with the only exception of wind farms in remote islands, which alone won’t be enough to drive growth in the sector. Offshore wind is set to get just £60m of backing for projects to be commissioned between 2023 and 2025. This could go a long way given that costs are falling – but not that far.

Of course, we might be wrong. MHI Vestas CEO Philippe Kavafyan told attendees at our Financing Wind Europe conference this month that, “We don’t care about Brexit.” That remains one of my highlights of the year.

The role of interconnectors is interesting too.

It’s ironic that the UK is leaving Europe but will need to be more interconnected with European countries to make its power system more efficient. Currently, there are 12 interconnectors at various stages of development and construction, which would be able to transport over 16GW of power from and to the UK. The most advanced ones might well be completed, but their cousins at a an early stage of development could need a higher level of political certainty and clarity to proceed.

Finally, will the UK be able to stop using fossil fuels as back-up power source, and move towards energy storage? In the short term, we doubt it. As soon as the ECJ announced its decision, business secretary Greg Clark said the government was in talks with the European Commission to have the capacity market reinstated. We can understand that the priority of the government is to keep the lights on, but it hasn’t jumped on the opportunity to invest more in grid flexibility to support renewables.

The UK government has a lot on its plate right now, but the energy sector is set to remain a key focal point.