Amid the soaring gas prices, the bankrupting of small energy companies, and the growing awareness of the need to rapidly decarbonise our energy sector, the energy regulator, Ofgem’s chief executive, Jonathan Brearly, has said that the way it regulates the energy market needs to change, to build an energy market that is more resilient in future.
Resilience is just another way of describing the UK’s energy security – the uninterrupted availability of energy sources at an affordable price. Recent events have shown just how weak that energy security is, and its consequences. Several retail energy suppliers have gone bust from the rapid jump in gas prices, and the UK came perilously close to running out of fertiliser and industrial CO2, needed for transporting fresh food and even medicine. Consumers will eventually see the price hikes reflected in their energy bills too.
Several factors have combined to create this perfect storm. Domestically, gas reserves were depleted by a cold winter, and then went unreplenished as gas power stations made up the shortfall for a relatively windless summer. Chinese demand for energy is soaring, while Russia stands accused of throttling gas supplies to Europe.
There are also long-term domestic factors, including a lack of gas storage capacity. The UK has only enough gas storage capacity to meet the demand of about four or five winter days, significantly less than our European neighbours. During the cold snap in March 2018, the UK came alarmingly close to running out of gas altogether. But we have continued to rely on gas imports to cushion any spikes in demand.
Fundamentally, the UK remains too dependent on gas. 87% of the UK’s homes use gas for heating, and it provides roughly half our electricity too. It isn’t just climate change that should compel us to wean ourselves off gas as soon as possible, but also the fact that North Sea production could cease by around 2030, leaving the UK entirely reliant on imports for half a decade until the UK’s energy supply is planned to become fossil-fuel free, and remaining gas users even more exposed to global gas market shocks.
Part of the answer to this conundrum must be faster development of domestic renewable energy generation, using the resources we the UK has in great abundance – wind, sun and sea – and faster decarbonisation of heating. But to increase the pace of development, we need to see more frequent wind farm auctions, and a concerted effort to remove major obstacles, such as dealing with the lack of capacity in the electricity grid.
But that is not the whole story. More wind and solar energy might make us less vulnerable to global energy market shocks, but it will make us more susceptible to changes in the weather. That is why we come back to the subject of storage, but of electricity rather than gas.
According to Wärtsilä, the UK needs to reach 49.5GW of energy storage this decade, from just 1.3GW of operational storage capacity today. Fortunately, the pipeline for utility-scale battery storage is growing rapidly, and is now over 20GW, across more than 800 different projects.
When coupled with developments in other low carbon technologies, the rapid development of renewable generation and storage will establish the energy resilience that the UK currently lacks. With all these opportunities, experienced developers and asset managers are essential for getting the most out of your investment. If you have a project or asset that Eco2 could help with, get in touch.