From a coal-free fortnight to a coal-free forever

For a two-week period in May 2019, Britain met its electricity needs without burning coal. This was the longest period that the country has gone coal-free since the 1880s. The coal-free fortnight followed a period of one week without coal earlier that month, and a further period of 90 hours without coal over the Easter weekend.

According to Finton Slye, the Director at the National Grid Energy System Operator (ESO), this trend of providing for Great Britain’s energy needs without coal is the ‘new normal’.

The coal-free periods benefited from some favourable weather; sunny conditions reduced demand as many enjoyed being outside and helped to boost solar PV output.

The UK has committed to eliminating coal completely from its energy mix by 2025. In 2014, coal produced 30% of GB’s energy; by 2019 there are just seven coal-fired power stations still operational, together contributing around 11GW of generation equivalent to ~13% of installed capacity of major power stations (2018 figures) and around 5% of UK electricity generation.

While coal is only the sixth biggest contributor to the UK’s power needs today, it is used to generate some 40% of power worldwide and is responsible for 80% of carbon emissions in the power generation sector. Burning both gas and coal fossil fuels to generate electricity accounts for 90% of power generation emissions worldwide.

Global carbon emissions from power generation continue to grow, despite the explosion of renewable generation deployment, simply because demand is increasing at such a fast rate and coal is still the fuel of choice in some countries. China alone has over 1,000GW of coal capacity. Whilst energy demand in GB is falling due to the use of more efficient appliances, we are embarking on a drive to electrify heat and transport which will increase electricity demand.

The question is, can the UK ditch coal and keep the lights on without having to build new, large gas power stations?

No dash for gas

In 2015, the then Secretary of State for Energy and Climate Change declared that ‘in the next 10 years, it’s imperative that we get new gas-fired power stations built’. At the time, it was widely anticipated that the successful decommissioning of coal power stations would require a large, if temporary, switch to gas.

Just four years later, as the first major economy in the world to pass net zero emissions law, the UK has signalled its intent to eliminate its dependence on fossil fuels. Despite the net-zero target being some years away, we need to start making progress now.

Committing to net-zero legislation means finding alternative capacity to replace coal-fired generation without a dash for more gas. Despite being cleaner than coal, gas still produces around half the emissions that coal does. Today, building new, large gas plants is incompatible with the UK’s climate change targets.

Replacing coal capacity

With no recourse to new large gas plants, the question remains as to how the UK can replace existing coal capacity with cleaner alternatives.

In fact, contracts have already been signed to replace the capacity of five of the seven coal stations due for retirement. Whilst some of this capacity will come from new efficient large gas stations (e.g. SSE’s Keadby), other gas generators have not made it off the drawing board. Half of the new capacity will come from combining interconnectors (new links to Belgium and France), demand-side response (DSR) and batteries. The remainder will come from small peaking gas generators.

While the UK looks to be on track to replace coal without resorting to major new gas plant, meeting our carbon goals on the path to net-zero by 2050 looks less certain. The next question is whether we are building enough renewable capacity to achieve a sustainable and credible long-term replacement for coal?

Unleashing renewables

The WWF’s May 2018 report ‘Coal to Clean’ makes five key recommendations. Aside from rebutting policy that supports new gas plant, the number one proposal is to ‘unleash the potential of solar and onshore wind’.

The report notes that this strategy would be fast (short construction lead times), cost-effective (subsidy-free, as onshore wind is demonstrably cheaper than UK wholesale prices) and would ensure we continue to reduce greenhouse gas emissions through the 2020s.

However, as well as legislating for cleaner energy, if we are to increase renewable generation, we need to ensure that there is backup capacity to accommodate the real-time variations in renewables output as well as multi-day wind lulls and cloud cover.

Maintaining gas capacity is one way to provide backup. A likely scenario is that by 2025 the UK will still need a large number of gas power stations connected to the grid, although few will run continuously, and many will sit idle for long periods of time, so extending the life of these large plants and reducing the needs for new large gas plants.

Preventing blackouts

Thermal power stations use fossil fuels or nuclear energy to heat water. Other than providing power, such generators provide valuable electrical inertia, which act like shock absorbers to keep the grid stable when frequency changes. The August 2019 GB power outage was partly as a result of not having enough inertia in the system at the time.

As we close or mothball thermal plant, the grid loses its inherent inertia, making it more challenging to maintain stability. As we lose inherent inertia from thermal assets, we need clean technology solutions in the form of fast-responding assets like battery storage and inverters on wind and solar generation to provide synthetic inertia.

Using battery storage to provide the fast response required to prevent blackouts is realisable both technically and economically. Recent cost and performance projections for utility-scale lithium-ion battery systems show a downward cost/kWh trajectory through to 2030. This trend will further increase the cost competitiveness for a variety of storage applications and increase its attractiveness.

Harnessing smaller energy assets

Smaller assets have a huge role to play in a future energy system dominated by distributed and clean generation, where there are likely to be increasing network constraints. Flexible energy assets, both demand and generation will be needed to help manage the constraints.

Simply put, there is likely to be more untapped flexibility in smaller assets in an area with network constraints than in larger assets, which are likely to be already utilised, generating value and delivering services.

There are millions of assets with small amounts of flexibility on the grid today, compared to thousands of assets with large amounts of flexibility. In today’s world, flexibility from larger assets is valued the same as flexibility from smaller assets. As the cost of enablement to deliver flexibility services is much higher for smaller assets, they tend to be overlooked. Finding a cost-effective means of enabling and using smaller assets to deliver flexibility services could be transformative to a network that needs increasing amounts of flexibility. Technology has a huge role to play in reducing enablement cost and harnessing smaller assets to deliver value.

As well as replacing coal capacity with new generation, we can also more optimally match demand to clean generation through demand side response (DSR) schemes.

National Grid ESO contracted 1.4GW of DSR for 2021/22, up from 135MW in 2017/18. Today, much of the DSR in the Capacity Market is provided by participants disconnecting plant from the grid while using on-site generation to keep the site operational. This approach is unsustainable as a credible, net-zero replacement for coal and in light of the Medium Combustion Plant Directive introduced in 2018.

However, the Association for Decentralised Energy (ADE) believes the potential for turndown DSR capacity to be even greater. It estimates that the UK could deliver some 3.5x more turndown capacity from industrial, commercial and public sector plant, totalling around 5GW of clean, flexible capacity in 2020.

While there is significant, unrealised DSR capacity that could help to support the phase out of gas faster than is currently planned, supporting regulation is required to realise the value of DSR. Regulation should provide a level playing field for DSR in market opportunities.  Technology will also play a crucial role in enabling latent flexibility to be intelligently used, and also enabling participation without requiring engagement by consumers and businesses.

Domestic flexibility is a largely untapped market, assuming 20+million households with even a small amount of flexibility, there could be several gigawatts of available flexibility.

The growth of electric vehicles (EVs) is sometimes cited as a potential problem for the electricity system, particularly as we move towards using greater amounts of less predictable clean generation. However, the reverse is true – vehicle-to-grid technology can provide valuable flexibility where it is most needed. EV growth stands at 92% over the last three years (from a small base), EVs and adoption is growing at 60% annually.

Managing financial volatility

The record coal-free period in May 2019 was characterised by some extraordinary volatility in the energy markets, including around 11 hours of negative pricing in one 24-hour period. Negative prices are a function of high and inflexible power generation corresponding with periods of low demand. The growth of renewable energy, particularly wind (which often has high generation when demand is low) and the move in 2018 to change how system prices for imbalance cost is calculated, has made negative pricing increasingly common.

A problem for renewable generators, particularly solar, is that when weather conditions are favourable and they have plentiful supply, so too do other solar generators. This leads to price cannibalisation and lower margins.

The consequence of increased market volatility that comes from increasing renewables penetration is that energy traders are exposed to higher levels of risk in an environment with lower margins. This is then reflected in prices for customers. The rise of renewables brings a new level of complexity to energy trading and forces decision-making closer to real-time, where forecasts are more reliable.

Energy traders now need to manage diverse portfolios with more complexity, less predictable assets and value streams. In facing lower trading margins, they must operate more efficiently to improve risk-adjusted returns, which drives a need for technology.

Enabling the coal-free transition

Government has pledged no coal use after 2025. Transitioning away from coal without a new dash for gas is viable but requires an appropriate fusion of policy and technology.

The capacity gap can be filled by a combination of renewables, energy storage and harnessing valuable latent energy flexibility through the use of new technologies with no recourse to new large gas plant. Interconnectors will also play a big role. Demand is set to increase with the electrification of transport and heat, which will require a shift in how we view and value energy flexibility.

In order to enable the growth of renewable energy, we need to ensure our energy systems become smarter. Using smart technology will help to:

• Keep our energy systems in balance and the lights on, partly by enabling new cleaner assets to provide the flexibility and inertia of large thermal plant.
• Maximise use of green energy, by providing greater real-time visibility of clean generation and demand while increasingly controlling demand to meet clean generation.
• Harness all useful flexibility at our disposal, including smaller assets like electric vehicles and other sources of domestic flexibility. These smaller assets should be part of the solution, rather than the problem.
• Manage assets as efficiently as possible, ensuring that they are used for their most valuable use case and that they are used to their maximum potential by stacking use cases, or value streams on the same assets.
• Reduce energy trading risk, which in turn will help reduce energy costs and create a fairer and more reliable energy system. Energy companies can do this by enabling real-time visibility of energy assets and markets alongside the tools (e.g. better forecasts, decision support and automated control) to make and execute decisions as efficiently as possible.

Photo Credit – Pixabay.