Keeping the lights on is a balancing act

“It is now well documented that by 2015, a third of the UK’s power stations will have closed as a result of EU laws to help reduce carbon emissions. Less well known however is the impact of these closures and the resulting effect on our generation capacity over the coming years. In a recent interview with the Daily Telegraph Alastair Buchanan, Chief Executive of Ofgem described our spare capacity in the next three years as being ‘uncomfortably tight’. In fact, the UK will sustain a fall in its reserve margins of around 9% during this period, presenting a real risk of the lights going out due to a prolonged period of reduced capacity.

“But how did we get to this point? Well a number of factors are influencing the market place with legislation playing a key role in the form of the Large Combustion Plant Directive. It is this piece of legislation which will force the closure of some of the most inefficient UK plants by 2015. Under the legislation, all combustion based plant i.e. coal and oil fired power stations in the UK, would either have to install emissions abatement equipment or opt-out of the scheme. If they opted out they would be forced to either restrict their operation to a set number of operational hours or close by the end of 2015.

“UK government had hoped that Carbon Capture and Storage (CCS) technology would provide the solution at some plants such as Kingsnorth in Kent, but this was not to be and the technology remains unproven on a large scale. To fill the gap the government also had plans for new nuclear power stations and renewable technologies, both of which have been hampered by the economic climate and a reluctance to invest.  While EDF still has plans in place to build four new reactors at two UK sites, it is unfeasible that they will be online to support the UK’s capacity reduction by 2015. 

“And so, with the closure of coal and oil fired power stations under the LCPD, the UK government becomes reliant on gas once more for the majority of the UK’s power. This predicament is further confounded due to the intermittency of renewable energy and namely wind power. Despite its benefits, wind energy remains intermittent and while it may supply a decent proportion of energy at times, it does require some back-up. For the UK, without nuclear our backup comes in the form of gas, and we need lots of it but with Britain at the mercy of the East when it comes to gas supplies, it is likely our energy bills will feel the full brunt of the shortage.

“For the foreseeable future and the next five years at least, the best possible solution to help keep rising energy bills at bay is energy efficiency. Improving the performance of our building stock must be a priority while wider industry continues to invest in our energy future.

“While blackouts may seem like a possibility, government is working with industry through a raft of reforms to help incentivise the development of new energy solutions whether that is CCS, new nuclear, renewables or gas. Despite tight margins I have to say I cannot imagine a government that would or could allow blackouts.

“The next two to three years therefore will be a testing time but also incredibly interesting for anyone working in the industry. There are two things that we can be sure of and that is the growing need for large scale investment and rising energy bills to help pay for it.”