Bishop Hill An analysis of the energy crunch
Nov 16, 2015 Energy: grid 
Over the weekend, Jonathan Leake wrote a trailer for Amber Rudd's speech on energy later this week, in which she is apparently going to signal something of a change in direction in government policy, with a shift of the focus from decarbonisation to consumer bills. As Matt Ridley pointed out in the Times a few days earlier, the government is running a real risk of getting landed with the blame if and when the energy grid goes pearshaped, so it's nice to think that the message might be sinking in.
And the risk of chaos still looms large, as the power price spike last week made clear. There is some very interesting, if rather technical, analysis of those events at the blog of Timera Energy, a firm of energy consultants, and one that carries a fairly firm warning for Ms Rudd:
Wednesday’s events are an indication of more to follow as the system capacity margin continues to tighten over the next two winters. The more enduring impact of this event is likely to come from the news headlines it attracted. It is this unwelcome media attention that is set to increase the UK government’s focus on security of supply, particularly as more plant closures loom in 2016.
Timera reckon that the availability of mothballed* power stations ("SBR" in the jargon), will be enough to see off the possibility of power cuts, but they seem to hint that we should expect more price spikes in future. And there is a decidedly gloomy view of the efficacy of the capacity market itself:
The UK capacity market is yet to deliver a price signal that covers the fixed costs of existing CCGT capacity (let alone the delivery of new capacity). That shifts the focus of plant owners & investors on to the energy and balancing markets.
Timera's blog is worth an explore, if you have the time. We read, for example, that the Trafford CCGT plant, the only new gas station to win in the last capacity auction has failed to get investment, leaving a 1.5GW hold in future capacity. We also learn why investors are not interesting in paying for new gas capacity:
Market players are also increasingly wary of taking on tolling contract exposure beyond a 5 year duration. This is due to a combination of:
- regulatory uncertainty (e.g. lack of clarity around SBR contracting, Capacity Market changes, abolition of LECs)
- the threat of other new entrant capacity (e.g. peakers, interconnectors)
- CCGT load factor erosion by renewables
Most of which can unequivocably be categorised as "government trying to rig the market in favour of renewables". Another way of looking at it would be "short-termism in government getting in the way of long-term investment by businesses".
Either way, you can see why Amber Rudd might think a bit of a change was necessary. I wonder whether she has the gumption to go for the status quo ante though. My guess would be not.
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[Update: *not strictly mothballed, but it's a snappier way of referring to them than "assets taken out of the wholesale markets]
Reader Comments (38)
It's not like we sceptics haven't been telling them this for a while.
What's been happening is that they just were not listening.
For a less technical discussion, see Emily Gosden in the Telegraph.
Amber Rudd: end to pursuit of green energy at all costs
Keeping the lights on is now top priority, energy secretary to say, as she warns that households face paying over the odds for energy for years to come due to poor value green subsidies handed out by her predecessors
Britain will no longer pursue green energy at all costs and will instead make keeping the lights on the top priority, Amber Rudd, the energy secretary, will vow this week.
Households already face paying over-the-odds for energy for years to come as a result of expensive subsidies handed out to wind and solar farms by her Labour and Lib Dem predecessors, Ms Rudd will warn....
I have read the Tele article, its a change in tone only, it still commits to get rid of coal before new capacity is available so is next to useless.
Cameron can't be blamed for the stupidity of Ed Miliband (although we know he was an enthusiastic supporter of the absurd Climate Change Act), but Ms Rudd's Lib Dem predecessors peddled their lunatic policies under Cameron's coalition government. If Cameron really has seen the light (or, rather, the prospect of the lights going out), and really is serious about cutting 'the green cr*p', then fine; but I'll believe it when I see it.
So all the claims made by the Guardian (and others) that the UK Government subsidises power generation from fossil fuels, should be fossilised, or at least carved into tablets of stone, to be used as wrecking balls for wind farms and solar farms.
Shame it took so long for this message to get past the Civil Service common sense censors. Maybe some of them need to develop their narrow minded opinions outside the Civil Service.
Anyone who thinks this apparent change in policy by Rudd will save the day and keep the lights on in future winters is being a tad optimistic. Browned-off laid the figures bare in a few comments on the recent Lynas sophistry thread (Nov 13th 2015), which I think are worth repeating here:
As many on here have been saying for years, buy your generator now, if you haven't already.
The crunch date, according to NG, is Jan 11 2016. Get your generator ready if we get a cold January. My oil tank and logstore are full. I'm thinking I will need to get some much bigger gas bottles for the generator for future winters.
It occurred to me over the weekend that contracts for new generation capacity should be obliged to provide a minimum service level, along the lines of 'we will supply 220MW +/- 3% with at least 99% availability'. Anyone choosing to build a wind farm or other unreliable source to produce the bulk of their supply would therefore be obliged to build, or at least sub-contract, sufficient back-up generation capacity to cover periods when the wind isn't blowing, and the actual supplied energy at the point of connection to the grid would be much more stable.
Has this been proposed/tried anywhere before? Why wouldn't it work? That is, why wouldn't it work for the consumer - obviously it wouldn't be popular with wind/solar companies who would find the economics of providing reliable power difficult to explain to their shareholders.
Are the mothballed CCGT plants included in the calculations? I read something (possibly in GWPF) that added to the Telegraph article by Ms that reported Ms Rudd was going to tell Cameron that the CO2/Climate Change link is somewhat dubious. If that happens then maybe we get rid of the Climate Change Act finally? We would get all the CCGT capacity being fully utilised.
Could someone translate this last para of the Timera analysis into English, please?
I think that "A recovery in forward market generation margins (sparkspreads) is required to stem the tide of plant closures and encourage new investment." means that unless we get our subsidies back soon then the whole thing will go tits up ^.^
"Cameron can't be blamed for the stupidity of Ed Miliband (although we know he was an enthusiastic supporter of the absurd Climate Change Act)" but he fired Owen Paterson as Environment Secretary. Owen Paterson suggested to The Guardian that "David Cameron's decision to sack him as environment secretary was driven by his desire to appease the "powerful, self-serving" environmental lobby – dismissed by Paterson as "the green blob". That was when Cameron should have showed his mettle (if he has any).
http://www.theguardian.com/politics/2014/jul/20/owen-paterson-sacked-cabinet-appease-green-lobby
There is no difference between Miliband/Davey/Cameron/Brown/Salmond and all the rest. They are all guilty of gross negligence in failing to look after the real interests of this Union. Cameron has been in charge since 2010. He cannot escape blame. Furthermore,Osborne could have withheld the subsidy money if he had the guts to do so.
Something else for Amber Rudd to look at.
Arising out of an interesting article in "Notrickszone" about Germany foisting excess unreliable juice onto their neighbours networks:
"However these eastern neighbours are refusing to allow all the excess electricity to flood into their national grids unhindered.
Die Welt reports: “Beginning next year Poland and the Czech Republic want to prevent German green power from coming into neighboring countries by employing power blockers at their borders, so-called phase shifters.”
http://tinyurl.com/ptjf4m7
These "power blockers" are known as "Quadrature Boosters" in the UK so I googled for them and got these three items:
(A) "24/02/2011
National Grid has awarded Alstom Grid a significant contract for the design, supply and commissioning of two 400kV
2750MVA Quadrature Boosters, valued at £18 million.
The North West of England is experiencing a huge surge in the growth and development of wind farms located off the shore of Cumbria. The Quadrature Booster implemented at Penwortham will allow National Grid to control the increased power flows generated by them and optimise the load sharing in this part of the network."
http://www.alstom.com/press-centre/2011/2/booster-contract-250211/
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(B) "24/06/2014
Special delivery for Preston
Special delivery to Penwortham substation will help keep the lights on.
• Two major pieces of new equipment delivered by road, sea and river
• Combined weight of trailer and load nearly 400 tonnes
• Early morning weekend deliveries arranged to avoid disrupting traffic
Two massive transformers designed to increase the capacity of Penwortham substation and to help keep the lights on have been delivered – by road, sea and river."
http://www2.nationalgrid.com/Mediacentral/UK-Press-releases/2014/Special-delivery-for-Preston/
This means that even more unreliables can be plonked in the sea off the shore of Cumbria.
Trebles all round for Dong, Vattenfall, SSE and Scottish Power et al.
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(C) Here is something for the with it yoofs who visit BH:
Case study for a Quadrature Booster installation at British Sugar's CHP Plant at Wissington, near Downham Market in Norfolk - labelelled "Flexible Plug and Play" - dearie me, what a load of tossers.
Apparently British Sugar were suffering a loss of subsidy (oh no!) because the local network could not support the full output of their CHP.
So, helpfully, in the cause of keeping the lights on, and British Sugars' trouser pockets, this mob provided a gizmo (free of charge to British Sugar) in order to boost their ill-gotten gains. Truly trebles all round! This free gadget came in at only £1.8 million.
"Flexible Plug and Play
A key milestone of this project was to install and deploy a Quadrature-booster and demonstrate that this could be used to
increase the export capacity of the site. It is reported that power generation on this site achieves the best Combined Heat and Power (CHP) rating under the government CHP environmental quality assurance scheme, further increments of generation exports would therefore contribute to low carbon generation."
http://tinyurl.com/od6dpsc
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Is it not amazing what can be achieved with OPM?
Nov 16, 2015 at 2:23 PM | Unregistered CommenterJohn Peter
Well said and bang on the money
Blessed are the Unreliable, for they will cost the earth.
"Cameron can't be blamed for the stupidity of Ed Miliband (although we know he was an enthusiastic supporter of the absurd Climate Change Act)"
Cameron, all politicians, are irrelevant when technical issues are concerned because they just don't understand. Our (world-class hahaha) civil service is behind matters of this sort. It is not ministers who need to be put in tumbrils and hauled towards Mme Guillotine, but the Sir Humphreys, who are behind all the disasters that have befallen our poor country in the last 50 years, including the forthcoming blackouts. I suppose ministers deserve at least a thrashing for being prepared to be such enthusiastic mouthpieces for matters they do not understand.
Whats instructive is how much appalling legislation from one government gets repealed by the next.....hardly any if you didn't know. Now why would that be?
Go to DECC Management . Try and spot anybody with a science or engineering background. Only the adviser has any knowledge and he is not an insider and so gets ignored.
Chris Long
Minimum service level is fine.
But if you were to ask me if I would be good enough to build a CCGT station guaranteeing you 99.9% availability and then you tell me that with any luck you'll only need to call on me two-thirds of the time at very short notice but I need to be on standby for the other one-third just in case, I'll give you one guess what my answer will be.
Actually you can have two guesses. The other answer is "yes, but you won't believe what it will cost you!"
[Update: *not strictly mothballed, but it's a snappier way of referring to them than "assets taken out of the wholesale markets]
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I'm not sure what this means, but if they are not to be operated for a while, labor will go elsewhere. Restarting and running a power plant requires skilled labor. Every plant shutdown disperses more of that specialized labor.
The longer the government waits, the more expensive and painful it will be to entice the private sector into building those gas-powered generators that already have permission.
Time for some stronger signals to be sent to the market. Disband DECC (or at least remove the second C-word), repeal the climate change act, and re-task some of the civil servants. Dave has the mandate from this voter. I mainly voted for his party for the first time because he was bold enough to use the "green crap" phrase.
I said before that the 2015 election might be a good one to lose. That prediction could still come true unless they bite the bullet.
News : Paris pared back
Quote * focus on the negotiations,
* and "a whole series" of side events will be cancelled, the French prime minister said on Monday.
* everything which was outside of the COP (climate talks), a whole series of concerts, of rather festive events, will be without a doubt cancelled," ##
The news went straight up on the normal activist sites : Grist, ABC, Sci-Am etc.
## I suppose the activist NGOs will be giving the EU some of its money back.
(Earlier incorrect news was that the Climate Change Talks would be suspended
.... until the climate actually changes)
Words fail me ...
Ben Caldecott and Nick Hurd MP: Why coal-fired power stations have to go
"Eliminating emissions from coal is by far the cheapest way of reducing carbon pollution and can reduce the costs of meeting necessary emission reductions. It is far cheaper than almost any other option available to the UK economy.
Finally, there is a significant political legacy of being the first industrialised country and first to use coal for electricity (since 1882) to be the first major country to completely phase it out. This is something that the Conservative Party can be proud of in the future.
The signal before the Paris climate change negotiations later this month would be significant and it would positively influence the outcome, and levels of ambition from other countries.
The benefits of phasing out coal in a managed way over the next five years are overwhelming: it would ensure security of supply, reduce the costs of tackling climate change, and potentially save the NHS billions of pounds each year.
We urge the government to grasp this political and economic opportunity now."
http://www.conservativehome.com/platform/2015/11/ben-caldecott-and-nick-hurd-mp-why-coal-fired-power-stations-have-to-go.html
Just to repeat: This [to be the first major country to completely phase out the use of coal for electricity generation] is something that the Conservative Party can be proud of in the future.
And how is progress on building those gas fired power stations (as reported on Bishop Hill) that will consume gas from the Middle East?
Timera document dated 08 Jun, 2015:
"Capacity fallout in the UK power market"
The UK power market cannot afford to lose 10 GW of flexible thermal capacity. So the stage is set for a game of political and commercial brinksmanship to determine which plants will survive. As this plays out the UK system capacity margin is likely to remain very tight for the next three winters.
http://www.timera-energy.com/capacity-fallout-in-the-uk-power-market/
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National Grid, TEC register dated 16 November 2015, are expecting 8.09 GW "of flexible thermal capacity" to be gone by April Fools Day, 2016.
http://www2.nationalgrid.com/UK/Services/Electricity-connections/Industry-products/TEC-Register/
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michael hart on Nov 16, 2015 at 3:24 PM
"The longer the government waits, the more expensive and painful it will be to entice the private sector into building those gas-powered generators that already have permission."
Does this government want power generation in the private sector? With a nationalised power industry, and a reawakened nationalised shale industry, it could be run (very badly) from Whitehall or (even worse) by the local authorities. Much of the industry is nationalised already, it just isn't owned by us. If DECC can be run by non-'Scientists and Engineers', I am sure the National Grid can be. After all, Railtrack has been run without any Engineers.
Then again, does the Government want a power industry at all?
It doesn't want to govern; it doesn't want to protect our borders (or us) from anything; it doesn't want to help our strategic industries, so why is our National Grid any different? And power cuts will help to reduce bills, because consumers won't be able to consume!
Robert Christopher, I think the biggest problem is that the government really doesn't have a clue about what they want, or even what they ought to want, long term. It has been thus for many parliaments.
What it really needs is for a government to realise that, as with Bank of England monetary policy, energy policy should be removed from the short term meddlings of politicians. It also requires a certain maturity of mind to realise that the current schemes to reduce or phase-out fossil fuels are badly thought out and will drive the economy into such straits that serious hardship and civil unrest is probably guaranteed.
Like many a five year old, "green" activists and politicians need to be educated to want what they can have.
Owners of Unreliable wind turbines, really ought to compensate owners of reliable power generators, for those times they are not required, but are on standby.
The financial incentives, consequences and costs, for forecasting the inability of unreliables to deliver, should not rest with the National Grid, or their reliable suppliers, but with those that fail to deliver.
This could be dealt with by a surcharge to customers obtaining electricity from suppliers, who claim to be Green, but just get their electricity from the same source as everybody else, the National Grid.
The person responsible within DECC appears to be Dan Morzani (hiostory graduate) job title 'Head Security of Electricity Supply' and career civil service administrator. DECC organogram downloadable here.
No problems then, we're in safe hands.
They could have saved themselves a lot of time and money, and read Notalot!!
Just for good timing, I ran my post on the latest coal power situation yesterday
https://notalotofpeopleknowthat.wordpress.com/2015/11/15/britains-rapidly-disappearing-power-stations/
GC
"suppliers who claim to be Green"
Including the improbably named Dale Vince, who still claims that his electricity is ethically sourced (although not Fairtrade, obviously) and magically redirected to the 13A sockets of his own customers.
"...It is this unwelcome media attention that is set to increase the UK government’s focus..." --Timera
Aha! The solution is simple. A few words in the right ears will free us from this unwelcome media attention. Problem solved.
"Has this [minimum service level guarantees] been proposed/tried anywhere before? Why wouldn't it work? ...[O]bviously it wouldn't be popular with wind/solar companies who would find the economics of providing reliable power difficult to explain to their shareholders." --Chris Long
Have you not answered your own question, Chris?
Whats instructive is how much appalling legislation from one government gets repealed by the next.....hardly any if you didn't know. Now why would that be?" --bill
"Two cheeks of the same arse" explains it succinctly.
...there is a significant political legacy of being the first ...
Dr. Frankenstein was "the first." His legacy involved pitchforks and torches.
The sooner sharp and painful power shortages arrive the better.
That would be one of the few things that could result in the end of the hysteria of the climate mass delusion, which, if it continues, will lead to far worse things in coming years.
The Germans could see this coming, that's why they made the dash for Lignite [dirty coal] - otherwise they'd realized that, their industry was ****ed, back here in Blighty................................ it seems we no longer bother, even care about base load capacity.
Rudd, needs to halt and asap any and all further coal plant closures and inform the EU with its LCPD to fork off smartly, further to that, unless the green agenda is trashed NOW .......as soon as next year, some politicians suspended torsos will be decorating street lamp posts.
The Law of Intended consequences, de industrialisation, low paying jobs, few people at the top, Rest at bottom... Communism really - the intent!
Trouble is we're preaching to choir here...
jamesp, what a coincidence that you should think of wealthy Labour donor Dale Vince aswell. I don't know how many hundreds of millions of pounds of taxpayers money he has now had, but he probably regrets not having bunged a bit more of it, back to Labour for the General Election
I'm only surprised they haven't scrapped these 'mothballed' plants like the Sea Harriers we now discover we should have kept because the vastly overpriced US replacements are crap. For the total sale of 77 Harriers we might be able to afford a single US plane. All par for the course for Tories. They can't lampoon Millibandian stupidity as they are collectively as dumb as a bag or rocks themselves and all but 4 voted for Millibands lights-out, gdp-killer plan anyway.
I just finished reading about the fiasco that was the nuclear industry sell-off. Yet more short-term thinking - pretending publicly that the market provides competition and innovation and blathering about investment while knowing full well that nobody but the CEGB ever intended to build more PWR's and that the ideal situation for a cartel is the capacity crunch we now enjoy. Maybe there should be less P and more E in those PPE's. But then again, maybe not, since none of the pro Economists at the BoE seems to have been capable of imagining that house prices fall as well as rise and that when your entire economy is based on rising house prices (thanks to the industrial decline under the last lot of Tories) then you are in the sh*t.
How does a firm of energy consultants survive when nobody listens to them? The government gets all their advice from either the WWF or academics with zero experience of business, engineering or of employing common sense.
Sadly, its going to be a case of: 'We hate to say we told you so, but - we told you so...'
old story from Tamsin's blog commenter