2030 Pipedream?

Back in August, Energy Secretary Ed Miliband wrote to Fintan Slye, Director of then National Grid ESO, now NESO – the National Energy System Operator – asking them to provide practical advice on achieving clean power by 2030 for Great Britain. Today NESO published their Clean Power 2030 report, and it lays bare the challenge ahead.

Full disclosure, I come at this as a 2030 sceptic. And with good reason. The report tells us early on that unabated gas – gas-fired power production where some limited emissions go directly to atmosphere – will continue to produce up to 5% of our energy production.

The previous Conservative government was committed to fully decarbonising the grid by 2035, with the Climate Change Committee recognising that that unabated gas generation would need to continue into the 2030s as a back-up, to ensure energy security and reduce costs.

In March of this year the government committed to the building of new gas power stations, while broadening existing laws requiring new gas plants to be net-zero ready by being able to switch to low carbon fuels, such as hydrogen, or by adding carbon capture. Then Prime Minister, Rishi Sunak, said that “we need to reach our 2035 goals in a sustainable way that doesn’t leave people without energy on a cloudy, windless day”, going on to say that he would “make the tough decisions so that no matter what scenario we face, we can always power Britain from Britain”.

That was, of course, a response to recent energy price shocks caused primarily by an over-reliance on imported energy as Putin invaded Ukraine; France saw a number of concurrent nuclear outages; and the Germans took the decision to close down their domestic nuclear power production entirely. But despite the UK still reeling from increases in energy costs, that message has gone awry in the dash to decarbonise by 2030.

In 2023, imported power accounted for 23TWh of UK demand (8.9%). Despite an expectation of a trebling in installed solar capacity, a trebling of offshore wind, a doubling of onshore wind, and a 4-5x increase in battery capacity, in NESO’s ‘Further Flex and Renewables’ pathway imports still account for 19TWh/year (6.6%), while in the ‘New Despatch’pathway it’s 20TWh (6.9%) - leaving the UK still dependent on other countries, and vulnerable under-sea cables. But it perhaps makes us even more vulnerable to short-term shocks given that imported electricity can’t be stored in the way that imported fuels can. The post-2030 imports in the report are on top of increasing installed battery capacity and would therefore be drawn on when our own battery reserves are depleted.

Given the task set by Ed Miliband – to provide practical advice on achieving clean power by 2030 for Great Britain, you’d be forgiven for thinking that this was purely about supply-side barrier-busting and reform. But fear not! Consumers must play their part too, with ‘demand flexibility’ appearing no fewer than twenty times in main report, accounting for ~4% of total demand (~11TWh).

‘Demand flexibility’, of course, is a euphemism for supply-side failure. It’s more palatable than ‘supply restriction’. It’s an admission that being able to produce by 2030, the clean power that consumers and businesses need at a time of their choosing, is simply not feasible.

I feel the need for further disclosure here – I’ve used demand flexibility. Not because my electricity price was changed at short notice by my supplier, which the report envisages, but simply because they paid me to turn off my TV and read a book, or to switch my laptop to battery power for an hour. I also use it to charge my hybrid car on my off-peak tariff.

But both NESO pathways require a 4-5x increase in ‘demand flexibility’ and envisage it partly through increased use of legislation to nudge consumers in the required direction. Troll spoiler: some of this legislation was introduced by my government, and serves to remind us to be careful of the future consequences of any legislation. The report also expects that my car and domestic appliances will choose when to use electricity. But it also tacitly acknowledges that consumers aren’t enamoured by having decisions taken away from them, choosing to override any such defaults, so are clear that:

“to increase participation in smart technologies and demand side flexibility, innovative tariffs and other retail market offerings will be needed”.

Which brings us neatly back round to dynamic pricing to force consumers to reduce demand.

If only there was some form of low-carbon, low land-use power generation, that generates reliable baseload – such as nuclear. I know you’d expect me to say that - I’ve worked in nuclear (and gas-fired power production while I’m in the confessional). It is almost 25 years since I first attended the Sellafield training centre as part of my apprenticeship. But I don’t say it without good reason, or suggest building it at any cost.

In 2012 I thought the Hinckley Point C strike price of ￡92.50 was ridiculous, and it was the consequence of ridiculous policy decisions that various UK governments had found themselves taking, but today it looks very reasonable for what is effectively First of a Kind (FOAK) technology. It is the fourth of its kind in the world, but the first built to UK standards (more on that another time) and the first nuclear power plant built in the UK since 1987.

￡92.50 (2012 prices) is reduced by ￡3 (2012 prices) if Sizewell C goes ahead, making the current strike price ￡124.65/MWh at today’s prices. As I write this, the current price of electricity is ￡176.05/MWh. The last week has seen electricity prices at ￡91.99/MWH. The current nuclear fleet is generating at ~￡45/MWh, and still going more than 40 years after they started generating in some cases.

The cost of offshore wind increased at the last auction round to ￡59/MWh, for a technology that is now mature. Add to that, the life of a wind farm is much lower than that of nuclear and will have to be rebid at least twice in the life of a nuclear plant.

But there are current offshore wind projects where the government is guaranteeing operators ￡208/MWh well into the foreseeable, and that doesn’t include the additional costs that wind intermittency adds to transmission, or the constraint payments to turn wind farms off when we’re over-producing.

New nuclear is widely expected to be much lower than the cost of Hinckley Point C, with the cost of construction of the second reactor there coming in at 20-30% lower than the first. So what does the NESO report make of it?

It tells us that:

“Nuclear power will play an important role in achieving a clean power system by 2030 and beyond into the 2030s, when a new generation of nuclear plants can help replace retiring capacity and meet growing demand as the economy electrifies”

which sounds like good news.

It assumes the first Hinckley Point C reactor will be ‘on the bars’ (generating electricity to grid) by 2030, and that at least one of the AGRs will see a life-extension. But increasing the life of more of our existing fleet would reduce the requirement for ‘demand flexibility’.

On SMRs, the report sets a hopeful tone on the role they can play in decarbonisation but assumes that none will start generation by 2030. While it is at pains to make suggestions for speeding up renewable deployment and grid reform, it makes no such suggestions for nuclear past:

“Government could consider the value of this rollout forward to 2030”.

Finally it does say that:

"including 1.8 GW of additional firm capacity in 2030, such as from nuclear small modular reactors, would provide around 13 TWh of generation and reduce the share of unabated gas by 0.9 percentage points (3 TWh).”

But continues with:

“Much of the remaining 10 TWh would be lost to curtailment or exported at low cost, implying an increase to overall costs of the power system”

which would be to attribute renewable intermittency costs to the costs of nuclear, and is unhelpful to the debate on decarbonisation – it may also be suggestive of the wider institutional thinking that has seen the government delay decisions on new nuclear and slow down the UK SMR programme. Only time will tell.