Renewables such as wind and solar are a UK success story. Their share of total electricity generation has increased from 9% in 2011 to 25% in 2015. Over the same period, prices have fallen by 50% for solar and 43% for onshore wind. Yet, despite this rapid improvement, critics of renewable energy continue to ask two questions: First, how do you keep the lights on when the wind isn’t blowing and the sun doesn’t shine? Second, what is the cost of maintaining security of supply while increasing renewable capacity? There are convincing answers to both that should help meet such understandable concerns.
Ministers are clear that maintaining security of supply is the government’s first priority for energy policy. A large expansion of renewables must be consistent with that aim.
Renewables supplied a quarter of the UK’s electricity last year. But the lights still stayed on because government and National Grid plan ahead by commissioning back-up or balancing capacity to complement high levels of renewables. This additional capacity falls into two categories:
- Fossil fuel back-up generation. Currently, this includes gas-fired power stations, diesel generators, and coal-fired power stations. Diesel and coal cause significant environmental harm, both in term of carbon emissions and air pollution. That’s why the Government has committed itself to phasing out all coal-fired power stations by 2025 and why Defra is investigating tighter emission regulations for diesel generators. As gas emits less carbon than either coal or diesel, it can play a medium-term role in backing up intermittent renewables as the power sector decarbonises. In our report, Keeping the lights on, we called for smaller-scale, flexible gas capacity in particular to be incentivised, through technologies such as reciprocating gas engines, so the grid can better respond to variable supply from renewables.
- Flexible ‘smart power’ technologies. These include interconnection (transmitting low-carbon power from Europe to the UK through sub-sea cables), storage (saving surplus power and deploying when demand rises) and demand-side flexibility (shifting non-essential demand away from peak times). The National Infrastructure Commission recently produced a report on the potential of these technologies, finding such a system could provide an additional £8 billion of savings to consumers every year by 2030. These technologies are still developing, but interconnectors already provide over 4GW of capacity, with plans for that to increase almost three-fold by the early 2020s. Storage capacity is currently over 3GW, but with rapidly falling battery costs, this will also increase significantly in the coming years.
System costs of intermittency
So the lights can be kept on, even with lots of renewables on the grid. But how much does this cost bill-payers? In her energy policy reset speech last year, the then Energy Secretary, Amber Rudd, argued that both the social cost of carbon and the system costs of intermittency should be included within the overall costs of different forms of electricity generation.
The system costs of intermittency are defined as the external costs imposed on the electricity grid as a result of integrating variable generation, including the cost of back-up capacity and the cost of balancing services. These system costs are highly contested and rely on a number of assumptions. A couple of trends can be observed, however. First, system costs for a particular renewable technology rise as the total capacity of that technology on the grid increases. Second, the costs decrease as the total capacity of balancing technologies, such as storage, increases.
For context, at the last auction for new capacity in 2015, onshore wind projects were awarded an £81 per MWh average strike price and solar projects £64.50 per MWh. Three recent reports have sought to quantify the system costs for intermittent renewables:
- First, Imperial College London’s report for the Committee on Climate Change provides estimates for the system costs of different intermittent technologies, assuming the power sector achieves its 2030 carbon targets. In this central scenario, they find that wind and solar would have a system cost of between £6 and £9 per MWh.
- Second, Nera’s report for Drax, which owns a biomass power station, estimated the system costs of intermittency are between £12 per MWh for onshore wind, £12 per MWh for solar, and £10 per MWh for offshore wind.
- Third, a recent report by Aurora Energy Research for the Solar Trade Association found that the intermittency of the currently planned 11GW of solar on the grid will cost around £1.40 per MWh. This would rise to £6.80 per MWh if solar capacity reached 40GW by 2030. But with additional wind on the grid (a total of 45GW by 2030), the figure falls to £5.10 per MWh. In a scenario where there is 8GW of batteries on the grid by 2030, intermittent solar would actually provide a net benefit of £3.70 per MWh by optimising the use of these batteries.
Technologies are available to enable a high volume of renewables to be deployed on the grid while keeping the lights on. Intermittent renewables do carry a cost to the system, although it is a small proportion of the overall cost of building and operating them. Along with the cost of carbon, this can be included in the price of new generating capacity to ensure a level playing-field for mature technologies. System costs can be significantly reduced by encouraging storage, flexible gas, interconnection, and demand-response flexibility alongside renewables.
Sam Hall is a researcher at Bright Blue