Energy News – 27/06/2017
A deal with the DUP may be yet to materialise, but that hasn’t stopped the Queen’s speech going ahead, wit...Read More
Predicting the future of energy is always tricky. The 2015 Future Energy Scenarios (FES) offers insight into the complex and changing energy landscape.
The energy industry in the UK is changing, with lower fossil fuel prices, renewable energy increasingly important and moves towards a smart ‘supergrid’. The interaction of these and other factors makes predictions on the future shape of Britain’s energy landscape extremely challenging.
Arguably the most detailed analysis of the UK energy landscape to date comes from the National Grid’s (NG) Future Energy Scenarios (FES), the latest version of which offers a fascinating insight into how our electricity and gas industries might change until 2035.
The FES offers four scenarios – Consumer Power, Gone Green, No Progression and Slow Progression – based on how well the economy will far and how much of a priority ‘green energy’ is. Pressures from energy security, affordability and greenhouse gas emissions, collectively referred to as the ‘energy trilemma’, are all considered:
Interestingly, the UK remains a net importer of electricity in three out of our four scenarios – only under the Gone Green are there exports by mid 2030s. As NG points out, this highlights the benefit interconnectors provide for nuclear and renewable generation, with low carbon generation able to reach a wider customer base across Europe.
All scenarios highlight the challenges the electricity industry faces, including summertime periods of low demand due to the increasing amounts of small scale generation through solar panels. This is already becoming an issue: on 11 August 2014, minimum demand fell to 19 GW, which led to 13 consecutive half-hour periods of negative generation prices.
Innovative solutions will be required to address these challenges: greater flexibility from existing sources of generation and demand, better interconnection, the development of energy storage and greater consumer efficiency through smart meters, energy efficient equipment and energy saving behaviour.
The ‘dash for gas’ means that gas supplies are sufficient in all scenarios, although different outcomes for UK fracking mean uncertainty over whether gas is produced domestically or imported.
The report offers some specific findings on business electricity and gas trends (as opposed to the domestic / consumer market).
The demand for industrial electricity declines in all four scenarios from approximately 90 TWh/year today to between 72–79 TWh/year in 2035. This is mainly due to the changing mix of industrial sub-sectors (such as an expected shift away from energy intensive industries) and their relative energy intensity.
Annual industrial electricity demand
There is also expected to be a change in demand side response (DSR), defined as “a deliberate change to an end user’s natural pattern of metered electricity consumption”. In plain English that means that businesses will reduce their own energy usage. One important driver of this will be more sophisticated electronics and smart meters, which allow companies to take advantages of cheaper business electricity with off-peak tariffs.
This reduction will be most evident when a modification to the Balancing and Settlement Code starts to take effect. This requires certain businesses to billed for electricity on a half hourly basis, meaning different rates within a single 24-hour period. This will incentivise businesses to use less electricity at peak periods when prices are highest.
Power: industrial and commercial demand side response peak power reduction
Commercial energy usage, meanwhile, is relatively flat across all scenarios. The contribution of commercial organisations to UK economic growth allows investment into technologies to cut business electricity bills like combined heat and power (CHP). This proactive approach is encouraged by the influence of energy prices on demand in the commercial sector.
Industrial and commercial demand side response peak electricity reduction
Annual commercial electricity demand
“[U]ncertainty is here to stay,” said Roisin Quinn, head of National Grid’s Energy Strategy and Policy. “Without question there are some significant challenges ahead, including plenty to be positive about. By sharing insight, collaborating and taking action together, we can help the UK to meet its 2020 and 2050 energy targets, whilst at the same time ensuring security of supply for both electricity and gas. It is really important to me that consumers are at the heart of this debate to ensure they continue to enjoy secure, sustainable and cost effective energy.”
But what about what matters most for most UK SMEs? Unfortunately, business electricity prices are expected to rise across all scenarios. While the Consumer Power scenario sees a slight reduction then plateau in business gas prices, all other scenarios see increased gas prices.
In the face of upward pressure on business energy prices, the UK’s small to medium sized enterprises, which are likely to lose out amid the complexities of the non-domestic energy market, need assistance.
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