Energy secretary Clare Coutinho today pledged to build new CCGT power stations as replacements for ageing gas generators. The new plant, Coutinho accepts, is likely to remain without carbon extraction or sequestration beyond 2030.
The move calls into question the Sunak administration’s declared commitment to purge carbon dioxide from Britain’s electricity by 2035, against Labour’s goal of 2030.
At least one green supplier, as well as environmental campaigners, have been dismayed by Conservative pre-briefings of Coutinho’s announcement today.
But her intention comes with Rishi Sunak’s personal backing. In a statement made in advance of his appointee’s address, the premier declared: “Britain needs to reach our 2035 goals in a sustainable way that doesn’t leave people without energy on a cloudy, windless day.
“I will not gamble with our energy security. I will make the tough decisions so we can always power Britain from Britain”.
In her Chatham House speech, Coutinho was expected to say direct replacements will be needed for as many as four gas-powered generators, covering for intermittent renewables, which are as yet inadequately supported by battery storage.
At the same time, D-ESNZ’s secretary signalled that imminent market reforms must enact locational pricing of power, in a move colleagues claim will itself incentivise more clean generation.
Secretary Coutinho today launched the second phase of public consultation over REMA, the government’s Review of Energy Market Arrangements. The reforms are billed as the most radical overhaul ever of Britain’s electricity trading and delivery.
Locational or ‘zonal’ pricing will be their centrepiece. Supporters claim the measure can avoid costly network upgrades and pylon re-fits, potentially spurring investment in localised green supply, particularly in areas of unfulfilled need such as the South-East. Sharper customer sensitivity to regional or faster changing prices will result too, say advocates.
Ever since power became a tradable asset, Britain’s system of marginal or ‘spot’ national pricing has dictated that the most expensive new unit of electricity available at any given time sets prices to meet increased demand, no matter where it arises.
Gas plants’ unmatched speed of response for big volumes drives market-makers to choose the fuel as the default solution. Gas is preferred too, due to the UK’s scarcity of battery-stored power at scale, yielding cleaner but intermittent wind and solar.
Locational costing could, the ministry calculates, cut up to £45 off typical annual bills per household. But even with REMA, new gas plants will be needed to cushion its introduction, officials believe, as Britain’s nascent electricity storage sector grows to meet demand. Coutinho claims new gas plants would be ‘NetZero ready’, but her statement today confirms they will be unabated.
Last year, gas turbines generated 32% of the UK’s electricity, ahead of 29% from wind. Nuclear met 14%. Prices for long-term supply stand at record levels. Last month, deals to supply power in 2027-28 closed at an unprecedented £65 per MWh.
“Without gas backing up renewables, we face the genuine prospect of blackouts,” Coutinho said this morning. “Other countries in recent years have been so threatened by supply constraints that they have been forced back to coal”.
“If we cannot retain control of energy prices, if we cannot protect families and businesses from the threat of future shocks, then we are not really secure. So, we must be hard-headed about the future of our energy system”.
Nigel Pocklington, CEO of green supplier Good Energy, was scathing about Coutinho’s favouring of unabated new gas.
“In scaremongering about ‘blackouts’ from renewables, the energy security secretary appears to be getting her energy policy advice from conspiratorial blog posts published circa 2010,” the Good Energy boss stated.
“It makes no sense to be promising new gas generation when we are still recovering from the shock of the UK’s unique exposure to global gas prices. Let alone when the UK’s cheapest source of power, onshore wind, is effectually blocked.
“Her announcements on locational pricing have the potential to help make our energy system more fit for a lower carbon future”, Pocklington conceded.
“This is the real energy security measure announced today — more local, home grown clean renewable power brings down bills, carbon and our reliance on volatile gas markets.”
From the Association of Decentralised Energy, policy head Sarah Honan backed REMA as a means to create a more flexible and transparent electricity market, powered more by renewables.
She said: “If we don’t place the demand-side at the heart of electricity market reform, we will need to build four new gas plants by 2030.
“The UK has one of the strongest offshore wind markets in the world. And yet, during the energy crisis, we were also one of the countries most exposed to high gas prices, leading to record levels of fuel poverty and debt in the energy system.
“Transforming our energy markets is not a story of balancing the books between fossil fuels, renewables and wires to transport it all. It is a story of how UK homes and businesses are empowered to participate in these markets on equal terms, with equal rewards”, said the ADE official.
“Rather than continuing to focus on a handful of generation assets dotted around the country, we must turn our gaze to the millions of electric vehicles, heat pumps, and industrial processes that can balance the books, if only the markets allowed them to.”
Greg Jackson, founder of market-disrupting green generator Octopus agreed. “Our ridiculously distorted energy market forces us to send electricity to France when we need it most and pay a premium to buy it back from Norway, all while paying Scottish wind farms to switch off.
“With locational pricing, customers will save hundreds of pounds a year on bills and parts of the UK will see the lowest electricity prices in Europe, attracting new industry and reducing the need for new pylons”, the Octopus boss went on.
“It’s right that the government is progressing zonal pricing and the energy sector must now work together to get this up and running swiftly so we can attract new industries – from data centres to manufacturing – and customers can benefit from cheaper electricity fast.”
For solar developers, lobby group SolarEnergyUK said it remained sceptical.
“Zonal pricing would introduce additional uncertainty into the market, raising the cost of capital for renewable energy at a time when we need to deploy around 10 gigawatts of renewable capacity each year until 2035, and deliver a lowest cost clean energy system for billpayers”, said the trade body.
From heat pump installer Heatio, currently aiding E.on customers, CEO Simon Roberts was critical.
“Further investment in, and a reliance on fossil fuels contradicts the government’s commitment to Net Zero”, Roberts commented. More concerningly, it highlights its belief that this will deliver greater energy security.
“We have seen in recent times the impact of failed government policies to decarbonise industrial and residential buildings, which has led to the energy crisis we face today.
“We should be focusing investment on energy security and renewable generation here in the UK, not becoming more reliant on foreign gas”, the Heatio boss added.
“This announcement only highlights the lack of strategy and investment in clean energy generation, storage and a UK smart grid, which would enable the flexibility we need in both supply and demand to serve UK energy customers”.
The House of Lords’ science committee is expected tomorrow to criticize the government’s delays in sending clear signals to companies eager to invest in utility-scale electricity storage, including as back-up beyond two hours.
Today, its chair Baroness Brown of Cambridge was dismissive of Coutinho’s & Sunak’s intentions.
“it is disappointing that the government seems focused on fossil fuels as a stop gap and not long duration energy storage as a secure solution”, the peer commented.
“A strategic reserve of hydrogen as a means of low-carbon long-duration energy storage would insulate the UK against dependence on volatile gas prices whilst allowing it to continue decarbonising the electricity system.
“We should be building this now rather than designing in delay by expecting the market to deliver fossil-fuelled plants that hardly be used and will rapidly become stranded assets.”
