The Roman philosopher Seneca is often quoted as saying “Luck is what happens when preparation meets opportunity”. But then Seneca never attempted to analyse energy markets… Having said that, the statement certainly holds true for the recent success of battery technology in the GB energy market. This success did not happen overnight but rather through a long journey filled with missteps, brave choices, technological breakthroughs and opportunity. In the first of a three-part series, we will first analyse the how this opportunity came about.
It all begins with a policy
In February 2003 Patricia Hewitt, then Secretary of State for Trade and Industry, presented the Energy White Paper, which laid the foundation for the UK’s energy policy for the coming decades. The paper was criticised at the time as ambitious, but indecisive and without any specifics. However, it did set the target to reduce UK’s carbon emission by 60% by the end of 2050 and increase the contribution of renewable energy. Subsequent papers such as the Energy Review Report of 2006 reaffirmed the Government’s 60% carbon emissions target and focused more on the need for cleaner energy. The Energy Bill of 2012 went further to set the target to produce 30% of electricity from renewable sources by 2020. These policies along with others combined to change the landscape of UK’s energy market and paved the way for batteries.
Out with the old
The Energy Bill of 2012 proposed the closure of several coal power stations to reduce dependence on fossil fuels. It also recommended the construction of a new generation of nuclear power plants to ensure the security of energy supply. Even before the publication of that Energy Bill, a combination of Government policies, public attitudes and price changes had combined to reduce coal’s contribution to the UK’s electricity supply. Figure 1 below shows UK’s energy generation in 2002 before the release of the 2002 Energy White Paper. In 2002, coal contributed 36% of the electricity produced in the UK. By 2017, this had been reduced to 9%.
Source: Figure generated by Flexitricity with data from BEIS - Historical electricity data: 1920 to 2017
In fact, the decline of the UK coal industry began long before 2002. The trend started after the second world war with the Clean Air Act of 1950 and accelerated after the coal miners’ strike of 1984. The high cost of domestic production coupled with policies such as the privatisation of the electricity industry and the Dash for Gas all contributed to the decline of the industry.
The closure Longannet power station in 2016 – at the time Britain’s second-largest coal burner at 2.4GW – marked a watershed moment for the coal industry. Further closures followed, including Eggborough at 2GW and Rugley at 1GW.
Figure 2 shows how the contribution of coal to the UK’s electricity generation has changed since 1990. From contributing 65% in 1990, coal provided only 9% of the nation’s electricity in 2017. On 21st of April 2017, for the first time in 135 years, the country went a whole 24 hours without using coal to generate electricity. The UK is now on track to close the remaining seven coal power stations by 2025.
Source: Figure generated by Flexitricity with data from BEIS - Historical electricity data: 1920 to 2017
The closure of coal power stations has not been the only change in the UK energy landscape. Traditional oil power stations have essentially been wiped out. A few notional dual fuel stations remain open, but none of them are burning heavy fuel oil. Another big change in the energy landscape was the rise of combined cycle gas turbines (CCGTs) in the production of electricity. In 1991, the repeal of a directive that prohibited the use of gas in power stations as well as the privatisation of the electricity industry led to the ‘Dash for Gas’, as it was called.
Initially, the rise of gas was the biggest factor in the decline of coal. But more recently, another force has become dominant, pushing coal off the system and taking market share from gas at the same time. Enter the new kids on the block: large-scale renewable generation, and batteries.
In with the new
Of all the government policies that have contributed to the rise in renewable generation, the Utilities Act 2000 is arguably the most significant. It created the Renewable Obligation, which required electricity suppliers to source a certain proportion of their electricity from renewable sources. This created a market for ROCs (Renewable Obligation Certificates) and meant that investors looking to support renewable projects could expect a base level of return. A renewable generator therefore had two revenue sources: income from the sale of the electricity in the wholesale market, and income from the sales of ROCs. The effect of the scheme was immense, with wind development benefiting the most. In 2001, before the scheme came into effect, the total energy generated from wind was 965GWh. By the time the scheme closed to new capacity in 2017, this had risen to over 50,000GWh, a fifty-fold increase. Though the scheme was not solely responsible for this growth, it was by far the dominant factor.
Wind energy is not the only technology to see a massive growth in the last two decades. Solar energy and energy from waste (EfW) have both benefited. Figure 3 shows the new makeup of electricity generation in the UK. The contrast in fortunes between coal and renewables is obvious.
The growth of renewable energy in the UK has been astonishing. Here are some of the major milestones:
- Installed capacity of offshore wind hit the 1GW benchmark in April 2010; a huge milestone at the time.
- On 28 December 2011, wind power contributed 12.2% of UK’s energy generation. A record at the time.
- Scotland produced enough energy from wind to meet all of its demand on 7th of August 2016.
- In February 2018, installed wind capacity in the UK hit the 20GW mark after the installation of Ørsted’s 659MW Walney Extension wind farm. This is enough to meet the annual needs of 14 million homes.
- Renewable generation capacity exceeded that of fossil fuels for the first time in November 2018.
Source: Figure generated by Flexitricity with data from BEIS - Historical electricity data: 1920 to 2017
Most renewable energy comes with two problems. First is the weather – sunshine and wind are variable, and so is renewable output. Second is the lack of inertia: the majority of renewable resources do not come with lumps of spinning metal coupled synchronously to the heartbeat of the grid. Both of these shortfalls are, in different ways, opportunities for batteries.
Where’s my inertia?
Inertia is important to the stability of the electricity we consume. Inertia is the resistance of a body to any change in its momentum – in this case, we’re talking about the angular (rotating) momentum of electricity generators. They resist changes to their speed of rotation. The electricity we consume in the UK is delivered to us as an alternating current at frequency of 50Hz, which means that the electrons inside your wires surge back and forth 50 times each second. What’s less well known is that this 50Hz is hard-coupled to the spin of traditional generators. When more electricity is used than being generated at any moment, turbines slow down, and mains frequency drops. Our electricity system is highly interconnected, and its ability to resist these changes in speed, comes from inertia spread across the network.
Coal produces electricity by producing steam which is used to drive a turbine. These turbines are physically large and heavy, which means that they can better resist changes in speed. This provides the inertia which keeps the system stable. The value of inertia to National Grid is that it buys the operator time to take other actions to balance the generation and consumption. The loss of inertia-rich coal means that there is now a need to provide faster response to keep frequency stable.
Batteries to the rescue
The industrial-scale batteries now entering the UK scene were developed with renewable energy in mind. Along with demand response, batteries can deliver energy very quickly. As part of a mixed DSR portfolio, batteries can help to make flexible decentralised energy systems a reality. This is the future of our electricity system.
Electricity is the only traded commodity which can’t be stored in its raw form. The history of large-scale energy storage in the UK energy market is a short but dramatic one. One of the first major battery to provide response and reserve services to National Grid was a 6MW/10MWh battery developed in 2015, with Ofgem support, by distribution utility UK Power Networks. In 2016, National Grid recognised the potential for batteries to deliver frequency response and held its first ever Enhanced Frequency Response auction. The auction was massively oversubscribed, and led directly to contracts worth £66 million being awarded to 201MW of new battery capacity.
Batteries are now active in a variety of roles across the electricity market and Flexitricity works with a range of front-of-the-meter and behind-the-meter batteries to optimise the revenue these assets can earn (click here to watch a case study about our work with Anesco). In the second part of this series, we will analyse how batteries have performed in the UK energy market and the challenges they currently face.