Andrew Normand of Encora Energy, explains why he believes talk of blackouts and rationing of energy use are being misused to stigmatize the opportunities of the energy transition
In the latest round of political wars, Net Zero has become a hot topic amid conflicting views on the benefits versus the costs. As part of this, several apocalyptic scenarios have been thrown around as probable outcomes of the drive for a clean power system by 2030.
While the energy transition is complex and it will have to evolve to ensure that it manages costs and risks effectively, these dire predictions imply unmanaged risks and frame opportunities as disadvantages. While this is mainly just political posturing, pandering to this will delay a necessary transition and miss huge opportunities in improved competitiveness.
What will prevent a blackout?
The most apocalyptic prediction being passed around is the danger of blackouts, periods where the supply doesn’t meet demand and the electricity grid fails, leaving homes without power. However, most talk seems to ignore that we have a Capacity Market specifically designed to avert such a scenario.
The Capacity Market is an ongoing initiative designed to ensure that there is enough supply capacity in the UK electric power market so that electricity is available when called for and the system doesn’t fail. Essentially, it’s a payment for projects in a range of technologies that can affect supply/demand on the grid by either exporting to the grid or reducing demand from it, along with an obligation to do this on demand from the National Energy System Operator (NESO).
As part of a full range of scenario plans conducted every year, future capacity requirements are modelled and then an auction is conducted to subsidise capacity to ensure that we have spare capacity ready to go when required. The NESO constantly monitors demand and supply balance for margin and loss of load probability and if there is a danger of demand not meeting supply, NESO issues a Capacity Market Notice which acts as a warning that if the system does become stressed, all contracted projects must work to balance the system or lose their payments.
Over the ten years that this system has been in place, there have been a total of 14 capacity market notices and all have worked as required to bring capacity available and have all been cancelled prior to expected point of low supply.
There are plenty of interesting debates within the industry on the specifics of this system, how it might evolve and how it balances the risks of overpaying for idle capacity versus the risk of system problems, but any suggestion that we are somehow sleepwalking into system failure without understanding the nuance of this system is misleading.
Rationing or just efficient use?
The next misleading argument comes from the spectre of rationing.
One of the major factors that must be considered, principally with solar and wind, is: what happens when the sun doesn’t shine and the wind doesn’t blow? Too often this is left as a straw man rhetorical question without beginning to address the complexity and opportunities that this actually poses.
If intermittent non-dispatchable generators such as solar and wind aren’t generating sufficient power to cover demand, the slack is picked up by a range of other technologies, including batteries, nuclear, hydro power, interconnectors from other countries, gas power and demand side response (DSR). The last of these, DSR, is often vilified as a penalty or imposed restriction, but this is misleading because it’s a source of great opportunity.
With the transfer to large-scale wind and solar, there is an increasing amount of power available very cheaply as the price of these energy sources has fallen dramatically in recent years. The downside of this is that it’s time-dependant, it can’t be switched on and off at will, a problem that the world has until recently spent little time considering and has a lot of chance to improve on. A great deal of the expense from the transition comes from the extra infrastructure that it takes to spread that load out over time and keep working in the old ways. Minimise this and the cost drops which is a real opportunity to be a differentiator between countries that can exploit the new cheap power and those that just dumbly stick to paying extra for the privilege of power whenever.
DSR is all about that intelligent energy use. Through DSR services, businesses and consumers can turn up, turn down or shift demand in real time. They are encouraged to do this, not forced. Under DSR, businesses and consumers increase, decrease or shift their electricity use in response to a signal to help balance Britain’s electricity system. In return they receive strong financial incentives, can lower their bills, reduce their carbon footprint and play an important role in the transition to a low-carbon energy system dominated by renewable energy.
Making the most of this requires smart thinking often aided by innovative and tech-savvy solutions so that we shift power use to match power supply and all that extra infrastructure with all the additional cost becomes less and less.
How do commercial and industrial users make use of this?
Commercial and industrial users have tended to be the biggest adopters of DSR. They have much more opportunity to work with the electricity market and have predictable energy use cycles that they can adapt to profit from their flexibility. Those that aren’t capitalising on this flexibility are missing out.
The possibilities to benefit from energy flexibility are varied and depend on the industry, energy use pattern and other flexibilities, but there is a wealth of ingenuity and innovation being called on to make the most of these opportunities. Typical methods for flexibility include changing the profile of their power use such as heating away from peak time, storing energy either thermally or with batteries, using behind-the-meter generation, and changing operations to reduce their demand on the grid at peak periods.
Rather than force critical industries to operate in a different manner, this gives them the opportunity to find ways to save money by making use of the cheaper power periods and avoiding times when it is more expensive.
Does this also apply to everyday home users?
While industry and commercial users are often ahead of the game in terms of enjoying flexibility benefits, everyday home users are also starting to benefit from shifting demand away from peak times for those who want it with special tariffs and cut-price periods.
Octopus Energy has introduced a “flux” import and export tariff optimised to give consumers the best rates for using and selling energy during peak periods. They can power their home with 100% renewable energy on this tariff, which is designed exclusively for solar and battery owners.
Meanwhile, NESO has introduced its Demand Flexibility Service (DFS), which allows suppliers to offer occasional periods (an hour here and there when capacity margins are high) in which any additional power they use is free.
British Gas has deals including half price on a Sunday which you might know of because of the adverts with former springboard diver, Tom Daley, and former Paralympian swimmer, Ellie Simmons, who do their laundry and wash the car on a Sunday because the electricity they use is cheap.
Offering these real cut-price sessions shifts demand to off-peak times, reducing the need for electricity at peak times, which in turn will reduce the need for those expensive dispatchable systems. This will help to cut prices for us all.
This is all about DSR and encourages people to switch away from peak times. So, when you hear of “rationing” be aware that this term has a very different meaning that doesn’t reflect reality.
Where does this go?
These behavioural patterns will continue to evolve as new market initiatives come on line and more consumers and businesses benefit from them. This is a far cry from disingenuous talk of blackouts, rationing and bans of energy use at specific times. Instead, considered capacity analysis and cut-price incentives to move demand to non-peak times will bring benefits in the form of lower prices for everyone, even at peak times.
