Power struggle: fears for UK energy generation as green projects delayed

20 02 2024 | 05:56Alex Lawson

Path to relying solely on green power appears long as series of problems collides with reality of keeping the lights on

By road, the 280-mile journey from Hadrian’s Wall to Peterhead takes in stunning Scottish countryside, quaint villages and busy suburbs. But the lengthy route is also to become a building site for vast power lines connecting offshore windfarms with urban centres.

The Scottish route, and other big lines including another following the M6 through Cumbria, is expected to be part of a “national transmission plan” being devised by National Grid, which could be published in time for March’s budget. The drive to net zero is expected to increase demand for electricity supplies, and Great Britain’s grid is being rewired and expanded to accommodate the many new green energy projects.

Policymakers face a tricky decade as the target of decarbonising the electricity system by 2035 collides with the day-to-day job of keeping the lights on and ensuring electric vehicles, heat pumps and industrial machinery are powered.

In worst-case scenarios, Britain’s power plants will struggle to meet the surging demand forecast in the early 2030s if a series of nascent technologies – from hydrogen power stations to carbon capture and storage (CCS) – struggle to take off. The scenarios vary wildly, but doomsday predictions leave Britain with 39 gigawatts less power than previous forecasts. This could mean 28 hours – just over a day – during the year 2035 when there will not be enough supply to meet demand. The shortfall is being called the electricity gap.

The issue threatens to present a further energy headache for the Labour party after it rowed back on its £28bn green spending plan, a reversal some fear could deter overseas investors from backing UK power generation projects.

Energy security shot up the agenda after Russia’s invasion of Ukraine in 2022 left countries scrambling to secure gas supplies, as concern grew about rolling blackouts.

The potential shortfall has resurfaced in recent weeks as market headwinds for low carbon projects have drawn sharper focus on the long-term future of Britain’s gas plants, which were the biggest source of electricity, at 35.7%, last month.

A further delay to Hinkley Point C has added fuel to the argument that building new nuclear plants is too slow and costly. The vast project in Somerset was originally expected to be completed by 2017 but has been repeatedly held up and is now not expected until 2031. It is also unclear whether and when a proposed sister plant at Sizewell in Suffolk will begin generating power.

After 2028, Sizewell B will be the only remaining plant generating in the British nuclear fleet, until its planned shutdown in 2035. However, sources said the lifetime of remaining plants at Hartlepool, Heysham and Torness may be further extended and a fleet of smaller reactors is planned.

Meanwhile, windfarm planning has been shaken by supply chain problems that forced the world’s biggest developer, Ørsted, to scale back, and for Sweden’s Vattenfall to pull out of a huge offshore project off the Norfolk coast after they said rising costs meant it was no longer profitable.

Tom Glover, the UK chair of the power generator RWE, says: “Post-Covid and the gas price increase every government has realised that renewables is the way to go and there’s a supply chain squeeze.”

A cluster of new technologies offer an uncertain salvation. Switching gas-fired plants to green hydrogen appears viable, but costly; CCS allows fossil fuel stations to continue but is unproven at scale; and large battery projects, which are designed to store renewable energy when there is little sun or wind, are facing a backlog to connect to the grid.

In a report into “resource adequacy”, National Grid’s electricity system operator (ESO), which is tasked with balancing supply and demand, says “a failure of some key low-carbon technologies to deliver, such as hydrogen, new nuclear or CCS, does not imperil security of supply. However if all these technologies fail to come to fruition, the GB system will struggle to meet security of supply using battery technologies alone.”

Glover plays down the concerns over a shortfall in electricity production, arguing the life of gas plants can be extended. “We do not see a big risk as long as the operational and environmental permits are still in place,” he says.

“Each station is inspected every five years to decide whether to refurbish them. It’s like Trigger’s broom, we can keep refurbishing power stations as long as they need to run. If the market is in place and working, they will work.”

Glover does bemoan difficulties connecting to the grid – RWE’s planned plant at Stallingborough in Lincolnshire could be ready by 2030, but has been allotted a connection in 2035.

Regulators’ efforts to tackle this, such as kicking “zombie” projects out of the queue to be connected to the grid, could offer a solution. As could changing consumption patterns.

Nigel Pocklington, the chief executive of the green household supplier Good Energy, says he would like to see a move from Labour on “unblocking access to the grid”, adding: “A lot of our planning centres on peak demand but we will make a big dent if consumers are more flexible with cars charging overnight and usage shifted from peak times.”

Britain’s future energy mix has become heavily politicised. Campaigners argue Rishi Sunak’s “plan to back drivers” will stifle green progress. Within Labour, there appear to be tensions over the party’s target to decarbonise power by 2030 and how practical a target to only use gas-fired stations as a backup really is.

Sources say much of Labour’s working assumptions on energy mix are based on Drax, a biomass power plant in North Yorkshire, continuing to produce a significant chunk of Britain’s electricity. This is despite the heavy criticism, including from Labour MPs, that the plant has received over its green credentials and receipt of huge subsidies.

There is also a question mark within the party on how much money to commit to decarbonising home heating (although lobbying efforts by gas firms to push for hydrogen have been dented). “We do not get anywhere near our climate goals without electrification of heat,” says Pocklington. “There is going to have to be a willingness to take on the vested interests who are very powerful – the unions and gas companies who have a lot to protect.”

Two deals offer an intriguing backdrop to conversations between government and energy executives. In July, National Grid is expected to complete the spinout of the ESO to create a nationalised systems operator. Bankers at Citi are understood to be forensically studying the ESO’s costs on behalf of National Grid and the final price is likely to draw scrutiny amid concerns that the taxpayer may overpay. Meanwhile, the infrastructure investor Macquarie’s acquisition of a further 20% of Britain’s gas transmission grid has been delayed as it is faces scrutiny under the National Security and Investment Act 2021.

An industry source says: “Everything relating to government decarbonisation targets has an asterisk with ‘subject to security of supply’ attached.”

The path to relying solely on green power appears as long as the journey to Peterhead.

Cover photo: In worst-case scenarios, Britain’s power plants will struggle to meet the surging demand forecast in the early 2030s if a series of nascent technologies struggle to take off. Photograph: Monty Rakusen/Getty Images