“Energy security is not all about building big legacy projects”: notes from a Select Committee enquiry

Emily Cox, Sussex Energy Group

As seems more and more the case in recent years, energy security is top of everyone’s agenda, probably at least in part due to recent reporting of increased risk of the lights going out this winter. Kent County Council decided to hold a Select Committee enquiry into energy security, to which myself and Professor Gordon MacKerron were invited to give evidence on behalf of the Sussex Energy Group.

The officials at Kent County Council were especially interested in two topics: ensuring that electricity supply can meet demand, and nuclear power. Electricity is an interesting case at the moment, with widespread fears about UK electricity security being sparked by recent unexpected power plant outages, impending closures of old nuclear and coal stations, and challenges caused by integrating intermittent renewables. On November 4th, the electricity system was once again in the news as the National Grid implemented so-called ‘emergency’ measures to keep the lights on. Nuclear power has also been receiving lots of attention recently, as a result of the ongoing discussions around the proposed new plant at Hinkley C which is, for the umpteenth time so far, now awaiting a supposedly imminent final investment decision.

At first glance, it was challenging to know what to tell the Kent Select Committee, because energy security for Kent is largely synonymous with energy security for the UK as a whole. Large-scale electricity generation is connected directly to the centralised transmission network, meaning that a new power station in Kent will have far more impact on national energy than on security in the local area. However, on closer inspection, some of the most interesting dynamics in energy security are taking place at the local level. According to UK Power Networks, Kent has seen one of the greatest increases in distributed generation (i.e. generation which is small-scale enough to connect directly to the low-voltage local distribution network). Distributed generation can be seen as both positive and negative for energy security, depending on what the important issues are perceived to be. On the one hand, distributed generation is beneficial because it adds supply capacity, and can also improve public engagement and understanding (which can in turn support acceptability for additional measures such as demand reduction), and can reduce fuel poverty for vulnerable households. On the other hand, distributed generation is problematic because it connects directly to the distribution network which means that the supply is invisible to the National Grid (thus causing complications for grid balancing), and it creates a two-way power flow which is a new engineering challenge for the local network operator. Distributed renewables such as rooftop solar could also potentially increase market uncertainty by dragging down wholesale prices (as has been experienced in Germany). This example is a good illustration of the importance of looking at energy security from multiple different perspectives.

The Select Committee, along with everyone else, wanted to know whether the lights are going to go out this winter. There is a lot of conflicting information about this, and of course none of us can predict exactly what electricity demand or supply will be this winter. However, a declining spare capacity margin doesn’t necessarily translate into an insecure capacity margin (it’s not possible to say exactly what level the capacity margin should be); in fact, it probably makes sense from an efficiency perspective to slightly reduce the very high margins which the UK has experienced over the last couple of decades. UK demand has been decreasing steadily, and I’ve not come across any really convincing predictions that this year it will suddenly rebound. Moreover, there is probably ‘hidden’ margin out there from distributed generation and flexible demand. The measures taken by the National Grid on 4th November actually illustrated that the UK electricity system is resilient at present. The interconnectors worked effectively (we imported around 200MW from Ireland), and the interruptible demand contracts which have been agreed by large consumers acted as a reliable means of reducing demand when necessary. The price of the extra electricity was extremely high; however, when averaged out over the year, even a wholesale cost of several thousand £/MWh for several hours makes very little difference to the overall cost of electricity. Contrary to popular belief, November is actually a challenging month for the electricity system, because despite the warm weather many stations which have been closed for maintenance over the summer are switched on again in early November, which can result in unexpected breakages.

So on to the topic of nuclear power, on which the Select Committee had many questions. Foremost in their minds was the question of a new nuclear power station at the existing Dungeness site. However, Prof. MacKerron noted that in 2009 the Government announced that Dungeness was not being considered as a site for a new nuclear plant because of coastal erosion and flooding concerns.  While there has been some publicity about the possible suitability of Dungeness for a small modular reactor, this seems a long shot, as the concerns about the site would apply to any kind of reactor. The discussion around the Dungeness site actually gets very effectively to the root of the issue as far as I’m concerned – which is that energy security is not necessarily all about big legacy projects such as nuclear power stations. Nuclear power provides capacity; but then again, not all capacity is created equal, and building a new reactor on a site at risk of coastal erosion and flooding would quite possibly be a detriment to energy security. The vast majority of actual electricity shortfalls are caused not by a lack of generating capacity, but by problems on the transmission and distribution networks, most often caused by the weather. It might not be exciting, it might not be sexy, but some of the most important actions for improving energy security involve ensuring that networks are less vulnerable, for instance by cutting trees back and protecting against flooding. This is a timely take-home message: the recent floods which caused such chaos in Cumbria were, according to some quick modelling by the University of Oxford, 40% more likely due to climate change. Energy security clearly matters, but is a complex and multifaceted issue, and the major risks are often not those which first spring to mind.

Emily Cox 2015Emily Cox is a Research Assistant and PhD student with the Sussex Energy Group at the University of Sussex. She is a researcher on the ‘DiscGo’ project on discontinuity in socio-technical systems, with a focus on power and incumbency in the UK nuclear industry. For her PhD she is researching electricity security in the context of a low-carbon transition, developing a methodology which can be used to assess low-carbon transition pathways for their resilience, affordability and sustainability. Emily is also currently a research intern at Oxford University, examining the role of the public in meeting the UK carbon budgets. Emily has 3 years’ experience as an Associate Tutor at the University of Sussex, tutoring an MSc in Energy Policy and an undergraduate module in energy transitions. She recently worked for the Royal Academy of Engineering, undertaking research into the social and economic impacts of electricity shortfalls. She has also spent time working for E.ON Technologies at the Ratcliffe-on-Soar power station, researching energy security, district heating, distributed storage, and the UK Capacity Market. She previously worked as an area coordinator for Greenpeace. She holds an MSc in Climate Change and Policy, a BSc in International Relations, and half of a rather ill-advised BA in music. 

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Stimulating ‘creative destruction’ to transform how we use energy

By Paula Kivimaa & Florian Kern, Centre on Innovation and Energy Demand, SPRU

white CIED logoGiven the urgency of climate change, it is unfortunate that the recent ‘reset’ of UK energy policy missed a big opportunity. That is to take a more strategic approach to developing public policies to drive the rapid, transformative change required to reduce energy use and decarbonise its supply in order to reduce greenhouse gas emissions. Research has shown that public policies can be influential drivers of innovations in multiple sectors ranging from manufacturing to transport. However, transformations originating from technological innovation often take decades, time that we simply do not have. One reason for the slow progress is that some – or even many – of the institutions and policies in place delay change by favouring established unsustainable technologies and practices, for example the indirect and direct subsidies to fossil fuels and energy intensive practices.

The kind of transformative change we need is going to be dependent on system innovation as indicated by the OECD in its recent report ‘Governance of Innovation Systems’. This has three features: 1) disrupting or complementary types of knowledge and technological capabilities, 2) fundamental changes in consumer practices and markets, and 3) novel types of infrastructures, institutional rules and skill sets.

Schumpeter coined the term of ‘winds of creative destruction’ to describe a process which revolutionises the economic structure from within, making certain skills and capabilities redundant and creating new ones at the same time. He argued that the process of creative destruction is “the essential fact about capitalism”. In our recently published research, we show that this idea is still valid and can benefit thinking about transformative change towards low carbon energy systems.

How policies can drive creative destruction?

illustration 2We propose that for the rapid uptake of innovations contributing to transformative change, policy portfolios need to include two types of measures. Firstly, innovation policies that support research and development, experimentation and market entry as well as guiding innovation towards societally important thematic areas (such as energy demand reduction). This includes the mobilisation of resources for these purposes. Secondly, broader, often sectoral, policy measures are needed that “destabilise” the non-sustainable institutional structures and practices. They reduce barriers for the wider diffusion of more sustainable technologies, services and practices.

On the creative side, policy instruments include R&D funding, innovation platforms, educational policies, labelling, feed-in-tariffs, public procurement, deployment subsidies, advice for SMEs, venture capital funding and regulation. On the destructive side, possible policy measures include taxes and regulations setting limits on energy use or carbon dioxide emissions, reduction of subsidies for polluting technology and practices, structural reforms of legislation enabling system change, policy advisory councils with new actors involved, or even outright technology bans.

Our research analysed all national-level policies potentially reducing energy demand in two European countries – the UK and Finland. We assessed to what extent the objectives of the policy measures can be expected to support innovation or contribute to the ‘creative destruction’ of high energy practices. We found that there are dozens of policies focused on creating low energy innovations (innovation which reduce energy demand or increase energy efficiency) but that there is much less attention on the destructive side of creative destruction.

In the case of the UK low energy transition, the Climate Change Act started a destabilisation process. The Act introduced a longer term policy framework than is typical for election-cycle based policies, set up targets for binding carbon cuts, and created new organisations around it. Other disruptive policies we identified include the ban of incandescent light bulbs by the EU, new organisations changing established policy networks (such as the Committee on Climate Change) and policies changing crucial rules or significantly controlling the environmental impacts of activities (such as energy efficiency requirements of building codes or car fuel standards). The origin of many of these measures lie in the European Union.

Importance of policy mix

What matters is the interaction between the different policy measures and how they jointly support innovation and disrupt unsustainable systems in the long term. In light of the latest UK policy developments, for example, the success of such disruptive policies as the Climate Change Act and the Committee on Climate Change will be limited when many other potentially disruptive policies, including the zero carbon homes target, have been removed from the policy portfolio. Examples from elsewhere indicate that the recent changes in UK energy policy may reduce opportunities for transformative change towards low energy. For example, the German experience shows that a “well-orchestrated combination of policy measures” including technology push, demand pull and systemic policies is crucial for low energy transitions. The nuclear phase-out – a clearly disruptive policy measure – was found to be the most impactful by German companies in creating room for renewable energy options. The commitment of the UK government to phase out the use of coal over the next ten years will hopefully provide a similar stimulus to alternative options.

Our work shows that for transforming the energy system, we need a policy portfolio that includes both innovation support and disruptions to the current high energy economy. This type of ‘creative destruction’ can bring many benefits beyond decarbonisation. It enables new innovation opportunities with export potential for frontrunners, reduced policy costs as a result of removing costly unsustainable or conflicting policy measures, and long term benefits through avoided environmental and health consequences associated with the existing high energy building stock. Just abandoning targets and instruments will not make the problems go away.

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Dr Paula Kivimaa

Dr Paula Kivimaa is a Senior Research Fellow at SPRU and the Centre on Innovation and Energy Demand (CIED). She is also a Senior Researcher at the Finnish Environment Institute SYKE. Paula has worked 13 years in research in the area of evaluating environmental, climate and innovation policy and examining their effects on innovation in energy and transport. Her work on policy evaluation, eco-innovation and socio-technical low energy transitions has been published in academic journals, including Research Policy, Environmental Policy and Governance, Environmental Politics, Journal of Transport Geography and Journal of Cleaner Production. Paula leads several projects on topics such as low energy housing innovation and energy services for building energy efficiency.

Dr Florian Kern

Dr Florian Kern

Dr Florian Kern is a Senior Lecturer at SPRU and Co-Director of the Sussex Energy Group (SEG). He has more than ten years of experience in research, consulting and teaching in the area of energy, climate and innovation policy and socio-technical transitions. Florian’s research focusses on policies and policy processes aimed at stimulating the transition to a low carbon economy. His work draws on innovation studies as well as policy analysis and political science. He has published in journals such as Research Policy, Technological Forecasting & Social Change, Energy Policy, Policy & Politics, Environment & Planning C, Policy Sciences and Environmental Politics. Florian is leading a cross-cutting project of the Centre on Innovation and Energy Demand on policy synergies and trade-offs.

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Whither energy policy: Is the government getting the worst of two worlds?

Gordon Mackerron, Claire Carter and Florian Kern of Sussex Energy Group, SPRU, University of Sussex

Photograph of Professor Gordon MacKerron smiling

Professor Gordon MacKerron

What do the pre-Spending Review announcements from DECC –  and the Review itself – mean for UK energy and climate change policy?  The upfront statement that energy security is now prioritised while climate goals need to be met more cheaply is nothing new – as far back as the 2008 White Paper Gordon Brown announced security to be an ‘imperative’ while climate change was a ‘challenge’[1].  So: no real change at the top, rhetorical level. But it is clear that the Government’s take on the security agenda is now in almost absolute control, with few visible signs of concessions to the climate agenda.  But addressing energy security can mean tackling a range of potentially competing issues. Security concerns can be strategic and long-term including worrying about imports, and/or shorter term worries about adequacy of electricity supply with possible problems in the intermittency of renewable power.  The government’s new priorities seem to encompass both these concerns.

Dr Florian Kern

Dr Florian Kern

The top technological priorities are plain: continuing commitment to nuclear power including large consumer subsidies for Hinkley C until around 2060, a new £250m to spend mostly on small modular reactors (SMR); and a reinforced commitment to shale gas development, including a new Shale Wealth Fund for the north of England. When security is seen through the lens of minimising import dependence, these are classic security-enhancing ideas.  The long-held policy commitment to develop carbon capture and storage technology in the UK through a £1 bn commercialisation programme fund has however now been abandoned. Given the troubled history of the programme in the UK while other countries like Canada are making progress[2], this cancellation of the second attempt to fund large scale demonstration projects in the UK adds insult to injury.  CCS was a major plank in the idea that the electricity system could be mostly decarbonised by 2030 and almost fully decarbonised by 2050 without too much pain in terms of rapid withdrawal from fossil fuels. These ambitions for the electricity system now look more remote.

Fiddlers Ferry Power Station, Mersey © Copyright Alan Godfree and licensed for reuse under this Creative Commons Licence

Fiddlers Ferry Power Station, Mersey © Copyright Alan Godfree and licensed for reuse under this Creative Commons Licence

One of the most striking announcements before the Review from DECC was an apparent commitment to phasing out coal-fired power by 2025. However this is with the caveat that enough mostly gas-based power can be built as a large part of the replacement power needed. What the Review signals is that – whether or not coal is phased out by 2025 – there is now no serious expectation that fossil-based power will need to have CCS fitted (or retro-fitted).  So even if gas replaces coal, this is still problematic in terms of cutting carbon emissions – especially in the absence of CCS.  Gas is about half the emissions of coal fired power but a full order of magnitude worse than nuclear or renewables.  So a gas-based bonanza to 2025 cuts a swathe through the idea that electricity will be effectively de-carbonised by 2050.

It is also worth looking at nuclear and shale from a quite different security perspective – the risk of delayed delivery.  Large conventional reactors are proving hard enough to deliver. The Hinkley point reactors were originally due to help us cook Christmas turkeys by 2017, and now they might just do the same job by 2025. The third station down the line of EDF plans is now due to be Chinese-owned and Chinese-designed, and the politics of that are hardly going to be straightforward. The new commitment to SMRs means that there is now to be a competition to find the best design and build it in the 2020s. This timetable looks tight but could be technically feasible. But even if it is, one of the main advantages claimed for SMRs – proximity to urban areas to allow heat to be utilised – is subject to quite untested public acceptability.  Shale may fare a bit better but this is not clear either. Government is taking powers to over-ride the kind of decision recently made by Lancashire to disallow two fracking projects in their area. But here the Government is engaged in a major contradiction: trying to push through fracking projects irrespective of local opinion, while allowing local opinion free rein to oppose wind power projects, all in a context where ‘localism’ is an avowed objective.  Even if projects are pushed through the predicted contribution from fracking is not expected to dent gas import bills any time soon[3].

This means that the nuclear and fracking prongs of the Government’s security strategy are potentially not secure at all because of a high risk of late and limited delivery.  Ironically the technologies now being reined in by policy – renewable energy and energy demand reductions – offer security both in the sense of being domestic, and in principle more deliverable because they attract relatively little public opposition and are, especially in the demand area, often cheap.  They also of course offer major contributions to emission reductions.

Photograph of Claire Carter

Claire Carter

So the risk that the Government is currently running in its particular take on the security priority is high.  Not only is the achievement of emission reduction commitments significantly less likely than before, but delivery of nuclear and fracking are problematic. Thus imperiling the security objective that is their inspiration. Truly, current policy has a real chance of getting the worst of both security and carbon reduction worlds.

Gordon Mackerron, Claire Carter and Florian Kern, Sussex Energy Group, SPRU, University of Sussex

[1] Department of Business Enterprise and Regulatory Reform ‘Meeting the energy challenge: a White Paper on nuclear power ‘ Cm 7296, London, January 2008, page 4

[2] See Florian Kern, James Gaede, James Meadowcroft, Jim Watson, The political economy of carbon capture and storage: An analysis of two demonstration projects, Technological Forecasting and Social Change, Available online 26 September 2015, ISSN 0040-1625, http://dx.doi.org/10.1016/j.techfore.2015.09.010.

[3] See Claire Carter, Dr Aaron Goater ‘Future of Natural Gas in the UK’ POST note no. 513 http://researchbriefings.parliament.uk/ResearchBriefing/Summary/POST-PN-0513#fullreport

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SEG responds to Government inquiry into the future of the UK electricity infrastructure

Dr Ralitsa Hiteva has written a blog about the recently submitted SEG Response to the Energy and Climate Change Committee’s inquiry into the future of the UK electricity infrastructure. 


In November 2015, the Sussex Energy Group submitted written evidence to the Energy and Climate Change Committee’s inquiry into the future of the UK electricity infrastructure. The team, including Dr. Ralitsa Hiteva[1], Prof. Tim Foxon, Prof. Paul Nightingale and Prof. Gordon Mackerron, used research carried out in several projects to reflect on the limitations of today’s electricity infrastructure and made recommendations for addressing these limitations. The full document can be found on the ECC’s webpage, and is available for download here: Sussex Energy Group Response to the Energy and Climate Change Committee [PDF 37.6 KB].

The submission discusses a range of institutional and governance challenges of upgrading the UK electricity infrastructure. It highlighted the importance of flexibility and support for non-traditional business models for energy, especially in the context of municipal energy management, for developing a low carbon network. Three economic values were identified that could be realised by a more strategic approach to smart-grid investment on a city-region basis: (1) Renewable energy connection co-ordination; (2) Inward investment stimulus; and (3) Municipal supplier load control.

The SEG submission also argues that a low carbon network in the UK will introduce more flexibility in the governance of demand and supply, and will involve a higher number of mechanisms, and actors, some of which are not-traditional, for the electricity sector. Prosumers (for example, electricity consumers with solar PV on their roofs who produce electricity, sell electricity to the grid and even buy electricity from the grid) are one such category.

A low carbon network will also imply a more advanced level of integration between several sectors (for example, ICT, electricity and vehicles), alongside more symbiotic interactions and spill-overs between them. This will require creating a space for the utilisation of what Ofgem terms ‘non-traditional business models’ (NTBMs) for energy: a term describing a range of business models that differ from conventional forms of generation, distribution and supply.
The paper calls for the Government and Ofgem to further incentivise innovation and development of smart grid technologies by proactively supporting the development of non-traditional business models in low carbon energy networks, along with more traditional models. New business models could include process innovations enabling new ways of distributing value in the supply chain and introducing innovations that create social and environmental benefits. These have the potential to allow new value to be captured from new technology in new ways. This argument builds on a more extensive discussion of NTBMs in the energy sector submitted in response to an Ofgem inquiry (insert link here) in May 2015.

[1] The contribution to this response is accredited to work funded through the Infrastructure Transitions Research Consortium (ITRC) and the International Centre for Infrastructure Futures (ICIF) on the governance for smart grid innovations and business models transformations in UK infrastructure sectors.


About the author:

Dr Ralitsa Hiteva Dr Ralitsa Hiteva is part of a team in the International Centre for Infrastructure Futures (ICIF) which investigates changes to the business model of infrastructure delivery and operation at national and urban scales. She is working on developing comparative case studies between sectors and countries. Previously, Ralitsa was part of the UK Infrastructure Transitions Research Consortium (ITRC) and worked on governance and regulation related to interdependencies between UK Infrastructures for the energy, water, transport, waste and ICT sectors.

Ralitsa’s research focuses on development of low carbon energy infrastructure, particularly smart grids and low carbon vehicles; connection and transmission of renewable electricity and natural gas; and smart cities. Ralitsa is a member of the Sussex Energy Group.

 

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Has the Spending Review delivered a coherent approach to energy innovation? – Jim Watson writes for UKERC

In his new blog for UKERC, Jim Watson reacts to the energy policy implications of the UK Government Spending Review. One of the prominent themes of the review is the need for innovation in energy technologies and systems, which has also been highlighted in the long-awaited energy policy speech by Amber Rudd. Read more ›
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