What’s holding the British power sector back?

The head of the Institute of Mechanical Engineers’ energy department is eager to see what Theresa May’s government’s much awaited industrial strategy has in store for the energy sector, given the lack of clarity in recent years, and how it will be viewed in engineering circles.

Dr Tim Fox wrote an article for Power Engineering International magazine edition four years ago and laid out what he felt was holding the British power sector back and the implications for engineering.

We caught up with his successor in the role of head of energy and environment at the Institute of Mechanical Engineers, Dr Jenifer Baxter, to find out her views on the current landscape.
Dr Jenifer Baxter
In a nutshell the clarity required for investment isn’t there and hasn’t been there for some time.

“I hear people expressing concerns that they don’t want to make an investment in case the technology they invest in is superseded by something better that can do the job easier but cheaper so their investment is therefore lost. But we can’t develop an energy system based on the idea that something might be circumvented because otherwise you create more inertia.”

This inertia has been all too evident in the sector since the 2008 credit crunch, and demonstrated most recently by dropping policies and loss of subsidies to some renewables such as onshore wind.

In addition to that there’s been the removal of the reduction in tax for insulation and the cancellation of the competition for negative emission technologies like carbon capture and storage.

Apart from the mixed messages policy-wise there are other layers to consider

“I think there are a lot of things as a nation we are not clear on whether we are policymakers, engineers for National Grid. There are new technologies coming online that look at the way in which we balance electric generation on the grid, things like demand side response (DSR) and digital technologies that can manage the demand and supply side better, we are not sure what technologies that would favour.”

All of the UK’s coal-fired power plants are set to be phased out over the next decade, and the majority of the old civil nuclear stock set to be decommissioned. Could advances in DSR complicate matters further?

“We know with the new nuclear programme they are talking of bringing online 16 GW, with Hinkley and Wylfa the first two of the process but that is still 8 to 10 years away. We still don’t know whether that 16 GW will be necessary once we understand the efficiencies that can be made possible with DSR.”

This is not to mention the management of excess electricity in the form of battery or liquid storage, meeting carbon budgets, whether to promote combined cycle gas or CCS or continue to focus on renewables, while also presenting a system affordable to the consumer.

Some of the bigger projects take a long time to achieve economies of scale, or to be fully accepted, and cheap enough for domestic consumers and industry.

“The final element of the trilemma is ensuring the supply doesn’t stop. We had two very cold winters in a row a few year ago and we need to understand how we manage the extra electricity needs that come with that.”

What comes through strongly from LinkedIn forums is that there is a great deal of scepticism about the motives and aptitudes of policymakers in their approach to the energy sector generally. Baxter says all the stakeholder industries need is an attempt at clarity of vision.

“Almost no major infrastructure can be built without some form of government subsidy. If people feel it is obvious what the government is trying to achieve they will make that investment into technologies particularly new and emerging technologies allowing them to develop more smoothly.”

“What happens when we get flip-flop decision making in government, where we go from quite green policies that we had around energy efficiency and renewables to then focusing more on capacity market, creating a situation where small (heavily polluting) diesel generation became the main beneficiary, is the vison becomes unclear. Therefore there is a limited investment because no one is sure of whether they’ll have a place in the future energy system.”

One of the biggest issues the government acknowledges it must face in the coming years is dealing with the difficult task of forming a coherent heat strategy. As Minister of State for Energy, Baroness Neville-Rolfe, herself said in London last week, “Heat is very difficult to decarbonise and no consensus is yet reached on the mix needed for the long term and you will have seen that from the various different reports on the subject. We need to be clear on the challenges, clear on the things we start to make progress on now and we need to agree on a long term direction.”

To the industry or casual observer it may sometimes appear that there is a lack of joined up thinking in government, but Baxter is sympathetic. There are broader problems, she says, such as the fact that most energy policy is focused towards electricity when 40 per cent of our energy use is in heat. Some of that is down to the heat network developing separately from the electricity network.

“We need to look at how different parts of the energy system connect to each other and that the policies are talking to each other and are interconnected. There are opportunities to look at using waste heat more successfully for example but because the system is so complicated and built up in a certain way over a number of years, we haven’t learned to look at it holistically.”

With electric vehicles set to go mainstream, the pressure on grid planners increases.

“For people who make policy that is a challenge- making it in a coherent and consistent way that allows for those things to happen and I accept very much that it is very difficult to do.”

Despite the daunting task of creating an energy system fit for purpose for the next century, she is enthused about the positive soundings emanating from government regarding just such a lucid policy direction, new Prime Minister Theresa May’s grand industrial strategy.

“The really interesting thing will be is to see how they manage the industrial strategy. If you imagine the strategy could connect with all of these different things, everything from how we manufacture goods and services, how we share energy systems across industry, how energy itself can be an industry creating skills and jobs and manufacturing to support that whether centralised or more decentralised- whether housebuilding can be part of an industrial strategy.”

“We have to be quite bold if we are committing to larger agendas like the Paris agreement ” if all of these are goals we are trying to achieve, industrial policies, energy policies and transport policies across the whole system have to talk to each other and have to be connected. Having energy and climate change mixed with industrial strategy and skills could offer a really unique opportunity if the government is able to grasp that.”

The area of energy efficiency represents one problematic area that the UK could learn to improve through looking at the experience of other jurisdictions. The ambivalent policy in recent years has been particularly visible in this area.

“The mixed message there is you want things to be more efficient but then remove a tax incentive ” such as insulation being subject to 5 per cent VAT but now it’s back to the regular rate from last year. It’s a mixed message as to importance and the other interesting factor is that fuel is at 5 per cent VAT so you’re saying fuel is very important so we give it a very low tax ” but insulation products are less important. These should be on an equal platform “mixed messages mean people are not always clear on what the vison is.”

“Germany has given clear direction of travel (in its policy on combined heat and power) and there are a number of EU countries that are really quite committed to making sure projects do use CHP and that heat isn’t wasted. When we talk about bold policy making and putting pressure on companies to make sure those technologies are considered it is something our government could do more of.”

“There will never be a situation where everyone is satisfied, there will be groups of people who will be looking at low carbon and low emissions generally as the most critical thing we can do and other that look at it from the point of view of energy security, always having enough gas petrol whatever it is ” and there are other groups that are about the socio- economic side of things “that people can afford to get energy or else they’ll be prejudiced about it being too expensive.

“It’s hard to see a set of circumstances where everyone is satisfied but what we can do is look for a way to do the best by each of those parts of the trilemma.”

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