Tag: energy prices

Coal comeback pushes up UK’s carbon emissions

17 September 2018

Opinion

10-year high gas prices¹ have prompted a resurgence in coal-fired power across Britain – and with it a 15% increase in carbon emissions from electricity generation.

If coal-fired electricity remains cheaper than gas-fired (as analysts predict), we could see the first year-on-year rise in carbon emissions from Britain’s power sector in six years. This highlights the importance of retaining a strong carbon price if we are to ensure the successful decarbonisation of the power system is not reversed.

After dropping to a historic low of just 0.2 GW during June and July, Britain’s coal power generation doubled in August, and has shot up to 2 GW during the first week of September. The last time coal output was this high was during the Beast from the East, when temperatures plummeted in March.

With these coal power stations running instead of more efficient gas plants, Britain is producing an extra 1,000 tonnes of carbon dioxide (CO₂) every hour.² Carbon emissions from electricity generation are up 15% as a result. These coal plants are not running solely because they are needed to meet peak demand, but because gas prices have risen sharply and carbon prices have not kept up, making coal power stations more economic to run than gas-fired ones.

It became cheaper to generate power from coal than from gas (see thick lines, chart below) in late August. Even though carbon prices now double the cost of generating electricity from coal,³ coal plants are consistently “in the money” at the moment, meaning they can generate power profitably all day and night.

Estimated cost of generating electricity from coal and gas in Quarter 3 (thick lines), and the output from coal power stations in Britain (thin line)

The cost of emitting CO₂ has increased sharply, up 45% so far this year due to the ongoing rally in European Emissions Trading Scheme (EU ETS) prices. Rising carbon prices should make gas more economical to burn as it emits less than half the CO₂ of coal.

However, wholesale gas prices have also risen 40% since the start of the year, as supplies and storage are squeezed in the run up to winter. Gas prices are at a ten-year high, currently 14% above their previous quarterly-average peak back in 2013 (see chart below). These rising costs are feeding through into wholesale power prices, which have risen by a third over the past year to hit £60/MWh.

The cost of generating electricity and carbon cost

The estimated cost of generating electricity from fossil fuels over the last 20 years, along with the cost of emitting CO₂.

Britain’s carbon price strengthened dramatically through 2014–15 due to the government implementing a Carbon Price Support scheme. This caused gas to become competitive against coal for power generation, leading to carbon emissions from the power sector halving. Unless Britain’s carbon price can once again make up the gap between coal and gas prices, we risk rolling back some of the world-leading gains made on cleaning up our electricity system.

The Committee on Climate Change has made it clear that power is the only sector that is pulling its weight when it comes to decarbonising the UK. Clean electricity could power low-carbon vehicles and heating, but this opportunity will be wasted if the electricity comes from high-carbon coal.

So what can be done? The sharp rise in gas prices hints at a lack of flexibility in the energy system. Britain came uncomfortably close to gas shortages in March, in part due to the closure of the country’s largest gas storage site. With nearly half of the electricity generated in Britain coming from gas, plus five-sixths of household heat, diversifying into other – cleaner – energy sources would help insulate consumers and businesses from price spikes.

No one country has the power to determine international fuel prices. Several factors have come together to push up gas prices, including a lack of transmission capacity, depleted stores of gas after the long hot summer and a lack of wind power increased output from gas-fired stations. Suppliers which don’t wish to be caught short after the Beast from the East, are also stocking up on gas.

Any knee-jerk reaction to try and lower the cost of electricity (for example, slashing the cost of carbon emissions) may only have a short-term impact, and could easily lead to longer-term damage (such as the resurgence of coal) which would require further interventions in the future.

Britain does have control over its carbon price. Its power stations and industry currently pay the Emissions Trading System price (determined on the Europe-wide market) which has fluctuated wildly over the past week between €25 (£22) and €19 (£17) per tonne, plus £18 per tonne in Carbon Price Support which goes to the Treasury. This needs to be maintained or strengthened further to save the power system from backsliding, and to show strong climate leadership on the international stage.

Explore this data live on the Electric Insights website

View Drax Power CEO Andy Koss’ comment

Commissioned by Drax, Electric Insights is produced independently by a team of academics from Imperial College London, led by Dr Iain Staffell and facilitated by the College’s consultancy company – Imperial Consultants.

^{[1] The three-month average cost of generating electricity from gas exceeded £60/MWh for the first time since 2009. Short-term price spikes have been higher than this, such as the first week of March during the Beast from the East.↩}

^{[2] Extra generation from coal reduces the output from gas plants, which are their main competitors, as nuclear, wind and solar already run as much as possible. Calculation based on 1934 MW of coal generation (the average during the first week of September) emitting 937 gCO2 per kWh (1812 tonnes per hour) instead of gas generation which would have emitted 394 gCO2 per kWh (762 tonnes per hour).↩}

^{[3] The coal that must be burnt to produce 1 MWh of electricity now costs around £31, and the CO2 pollution costs an extra £31 on top. For comparison, producing 1 MWh of electricity from gas costs £50 for the fuel and £15 for the CO2.↩}

Joined at the volts: what role will interconnectors play in Great Britain’s electricity future?

14 June 2018

Power generation

For more than 50 years Great Britain has been electrically connected to Europe. The first under-sea interconnector between British shores and the continent was installed in 1961 and could transmit 160 megawatts (MW) of power. Today there is 4 gigawatts (GW) in interconnector capacity between Great Britain, France, Ireland and the Netherlands – and there’s more on the way.

By the mid-2020s some estimates suggest interconnector capacity will reach 18 GW thanks to new connections with Germany, Denmark and Norway. The government expects imports to account for 22% of electricity supply by 2025, up from 6% in 2017.

This increased connectivity is often held up as a means of securing electricity supply and while this is largely true, it doesn’t tell the full story.

In fact, this plan could risk creating a dependency on imported electricity at a time when flexibility and diversity of power sources are key to meeting demand in an increasingly decentralised, decarbonising system.

Great Britain needs to be connected and have a close relationship with its European neighbours, but this should not come at the expense of its power supply, power price or ongoing decarbonisation efforts. Yet these are all at risk with too great a reliance on interconnection.

To secure a long term, stable power system tomorrow, these issues need to be addressed today.

Unfair advantage

At their simplest, interconnectors are good for the power system. They connect the relatively small British Isles to a significant network of electricity generators and consumers. This is good for both helping secure supply and for broadening the market for domestic power, but the system in which interconnectors operate isn’t working.

Since 2015 interconnectors have had the right to bid against domestic generators in the government’s capacity market auctions.

The government uses these auctions to award contracts to generators that can provide electricity to the grid through existing or proposed facilities. The original intention was also to allow foreign generators to participate. As an interim step, the transmission equipment used to supply foreign generators’ power into the GB market – interconnectors – have been allowed to take part. In practice, interconnectors end up with an economic advantage over other electricity producers.

Firstly, interconnectors are not required to pay to use the national transmission system like domestic generators are. This charge is paid to National Grid to cover the cost of installation and maintenance of the substations, pylons, poles and cables that make up the transmission network. Plus the cost of system support services keeping the grid stable. Interconnectors are exempt from paying these despite the fact imported electricity must be transported and balanced within England, Scotland and Wales in the same way as domestic electricity.

Secondly, interconnectors don’t pay carbon tax in the GB energy market. The Carbon Price Floor is one of the cornerstones of Great Britain’s decarbonisation efforts and has enabled the country’s electricity system to become the seventh least carbon-intense of the world’s most power intensive systems in 2016, up from 20^th in 2012.

Interconnectors themselves do not emit carbon dioxide (CO₂) in Great Britain, but this does not mean they are emission-free. France’s baseload electricity comes largely from its low-carbon nuclear fleet, but the Netherlands and Ireland are still largely dependent on fossil fuels for power. Because the European grid is so interconnected even countries which don’t yet have a direct link to Great Britain, such as Germany with its high carbon lignite power stations, also contribute to the European grid’s supply. The Neuconnect link is planned to connect Germany and GB in the late 2020s.

Not being subject to the UK’s carbon tax – only to the European Union’s Emissions Trading System (EU ETS) which puts a much lower price on CO₂– imported power can be offered cheaper than domestic, lower-carbon power. This not only puts Great Britain at risk of importing higher carbon electricity in some cases, but also exporting carbon emissions to our neighbours when their power price is higher to that in the GB market..

This prevents domestic generators from winning contracts to add capacity or develop new projects that would secure a longer-term, stable future for Great Britain. In fact, introducing more interconnectivity could in some cases end up leading to supply shortages, be they natural or market induced.

Under peak pressure

The contracts awarded to interconnectors in the capacity market auctions treat purchased electricity as guaranteed. But, any power station can break down – any intermittent renewable can stop generating at short notice. Supply from neighbouring countries is just the same.

Research by Aurora found that historically, interconnectors have often delivered less power than the system operator assumed they would and on occasion exported power at times of peak demand. This happened recently during the Beast of the East, when low temperatures across the continent drove electricity demand soaring.

This European-wide cold spell meant Ireland and France (which has a largely electrified heating system) experienced huge electricity demand spikes, driving power prices up.

As a result, for much of the time between 27 and 28 February Great Britain exported electricity to France to capitalise on its high prices. This not only led to more fossil fuels being burned domestically, but it meant less power was available domestically at a time when our own demand was exceptionally high. Even when the interconnectors do flow in our direction they cannot provide crucial grid services like inertia so our large thermal power stations are often still needed.

It is difficult to say for certain how interconnectors will function during times of high demand in the future due to a lack of long-term data, but that which we do know and have seen suggests they don’t always play to the country’s best interests.

There is still an important role for interconnectors on the Great Britain grid, but to deliver genuine value the system needs to be fairer so they don’t skew the market.

Where interconnectors fit into the future

Interconnectors bring multiple benefits to our power system. They can help with security of supply by bringing in more power at times of systems stress, with the right system in place they can help reduce the need to rely on domestic fossil fuels and enable more renewable installation, and if electricity is being generated cheaper abroad, they can also create opportunities to reduce costs for consumers.

However, the correct framework must be put in place for interconnectors to bring such benefits while allowing for domestic projects that can help secure the country’s electricity supply.

As a start, interconnectors should be reclassified – known as de-rating – to compete with technologies on an equal footing.

Drax’s proposed OCGT plants, which can very quickly start up and provide the grid with the power and balancing services it needs, before switching off again, could offer a more reliable route to grid stability than such overwhelming dependence on interconnectors will. In addition, the coal-to-gas and battery plans at Drax Power Station, would prove to be a highly flexible national asset.

New gas and interconnectors should be able to compete fairly with one another. Policymakers should facilitate a system that allows competing technologies to exist in a cost beneficial way. Both interconnectors and domestic thermal power generators can play their part in creating stability, transitioning towards a decarbonised economy and fitting within the UK’s industrial strategy.

In 1961, when the first interconnector was switched on it marked a new age of continental co-operation. Five decades on we should not forget this goal. In an ever more complex grid, what we need is different technologies, systems and countries working together to achieve a flexible, stable and cleaner power system for everyone.

How much does it cost to charge my iPhone?

4 April 2017

Electrification

It’s difficult to imagine life without electricity. Its ubiquity means it’s easy to forget the incredible feats of science, engineering, and infrastructure that allow us to undertake a task as simple as plugging in our smartphones.

In fact, so expansive are the nationwide infrastructure networks that lie beyond the wall socket, keeping a top-of-the-range mobile phone charged for a year can cost as much as… 67p.

To work out how much electricity an appliance uses there’s a relatively straightforward equation we can follow of power (kilowatt, kW) x time (hours used) = energy transferred (kilowatt-hour, kWh). To then work out how much that costs in real terms we need to take the wattage of the appliance (worked out in kilowatts as this is the metric electricity tariffs are measured in), multiply that by the number of hours it is being used for, then multiply that figure (kWh) by your energy tariff (£).

In the case of an iPhone, it works out like this: a typical iPhone charger is 5W (0.005 kW) and a full charge from empty takes a maximum of three hours (a conservative estimate). The average electricity tariff in the UK is 15p per kWh, which leads to an equation that looks like this:

0.005 x 3 x 0.15 = £0.00225 a day

And if we assume that an iPhone owner might fully charge their phone roughly 300 times a year, the total annual sum amounts to a princely 67.5p.

There’s no other way of looking at this – it’s a very low number. But it’s important to think about this number in scale. Extrapolate it across the number of devices in the country and it grows significantly.

A 2016 study on UK smartphone owners suggests three quarters of all adults have smartphones, which would put the country total somewhere in the region of 40 million. Per day, that’s 600 MWh of electricity needed to power their smartphones. That’s the equivalent of 200 MW of power generation, or enough to power 565,000 households, for one hour.

How much electricity do my other appliances use?

Unfortunately, not all appliances are as modern, efficient and cost effective as your average smartphone. In fact, when it comes to household appliances, charging your Apple iPhone, Samsung, Sony or Windows Phone device is one of the least power-hungry activities you can undertake.

A bigger offender is your fridge-freezer, but not because they need a lot of electricity to run. Instead, it comes down to the fact it is plugged in and drawing power for a significant amount of time. A fridge freezer is plugged in for 24 hours a day, seven days a week, and even though modern fridge freezers have good energy efficiency mechanisms to limit their usage, they can very easily use 427 kWh a year, leading to an annual cost of over £50.

To put that into perspective, here’s how much your other household items cost per hour according to the same equation used earlier.

What’s new?

As our homes, workplaces and industries have become more energy efficient, the country as a whole is using less power. Nowhere is this more evident than in our lighting – today, the common LED lightbulb uses just 17% of the power needed for an incandescent lightbulb of equivalent brightness.

The news has been full of stories about how much more power 4K TVs use compared to high definition TVs. But because most of us buy a TV once every decade or so, replacing your 2007 1080p full HD TV with the UK’s best-selling 4K model and watching it for an hour will actually use around 70% less power.

This continued trend towards efficiency has had a marked effect on the country’s use of power. In March 2017, the government published its latest electricity demand data for the UK, showing the country’s power needs falling all the way through to 2020.

But then something interesting happens. From 2026 the forecast shows us beginning to use increasingly more power than we are due to in 2017. To the point where by 2035, we’re using more power than we are today – 19% more. Why is this?

One possibility is electric cars. In 2015, electric vehicles (EVs) consumed 0.25 TWh of power, but that’s set to grow significantly. In its Future Energy Scenarios report published in 2016, National Grid projected EVs will consume 19 TWh in 2035, but it has already said it believes its projections might be understated. In short, the EV revolution could drive demand far higher, which leads to the question, ‘Where is all of this extra power going to come from?’.

Understanding the smart home

Our future energy needs are not just going to be met by more electricity generation capacity, they will also be assisted by something closer to home. With the introduction of smart meters, pinpointing the devices and appliances in our homes that use the most electricity will become more widespread. More than this we’ll be able to identify what time of day they’re using the most energy and when we might be able to turn them off. With this information we can optimise our usage and save money.

And while cutting down your yearly phone charging budget from 67p to 50p might not sound like much, if three quarters of the country are joining you, those pennies can quickly add up.

This is how smart meters will change how you use power

5 January 2017

Electrification

Homes in the UK rely on energy almost 24 hours a day. Whether powering your computer, boiling your kettle or heating your home, electricity and heating fuels are absolutely integral parts of modern life. The same is the case with businesses and transport.

But how the gas and electricity we use to power our lives is tracked, recorded and fed back to utility companies is changing. It could mean lower bills and a more stable energy network and it’s all thanks to a small, inconspicuous box called a smart meter.

What is a smart meter?

Between now and 2020, every household and business in the UK will be offered smart meters for both electricity and, where they are on the network, gas too. A smart meter is a device that tracks your energy use in real-time and then automatically feeds this information back to your energy provider.

Better yet, in the UK they’ll be coupled with an in-home display showing what you’re using and how much it’s costing. It’s a simple piece of technology that can have a serious impact on how you use energy and how much you pay for it.

Will smart meters help reduce my energy bills?

The crucial difference a smart meter will make to household bills is seeing off estimated bills. In the past, utility companies would either ask you to take a reading from your meter, or send a representative to your home or office to get one. When they’ve not been able to do this, utility companies estimate your usage within a certain time frame and create a bill based on that.

With smart meters, the automatically-delivered details will mean utility companies have up-to-the-minute accuracy on customers’ energy usage. No more estimated bills. No more searching for your awkwardly-placed meter. No more unannounced meter readers arriving at your door.

Will smart meters change how I use electricity?

More than just improving accuracy and saving time, smart meters can help you use energy in a … smarter way.

They can pinpoint power-heavy home appliances as well as the times of day when you are using the most energy. With this information, you can optimise your usage to find where there are cost saving opportunities.

The data collected by your smart meter might show that you use most electricity in the evening when power demand is at its highest. Based on this you can change your habits to make the most of off-peak times and potentially lower tariffs, for example charging your battery-based appliances overnight.

Are smart meters good for the UK?

More accurate information is not only a benefit to home and business owners – the country as a whole could end up in a better place, too.

Armed with accurate numbers on how and when the country uses power, the National Grid, which manages the gas and high voltage electricity network, and Elexon, which manages the balancing market for electricity, will be able to better predict energy supply. If they track that electricity is being used at a certain time of day they can ensure generation by UK power stations like Drax, the UK’s biggest, is planned to match it. The aim is a more stable and efficient grid.

Utility companies could also use this data to create peak and off-peak times with different tariffs, opening the door for further cost savings and the smarter use of electricity nationwide. Coupled with the new market in battery technology such as the PowerVault and Tesla’s PowerWall 2, households and businesses will also be able to take even greater advantage of off-peak tariffs.

How can I get a smart meter?

Your electricity or heat supplier may install it for you, depending on the deal or package you are on. Contact them to find out what options are available.

Drax’s own electricity supplier, Haven Power, is currently investing in technology to allow it to use the new national smart metering infrastructure. It will begin rolling out smart meters to its customers during 2017 and will offer them to all of the businesses that purchase electricity from Haven Power by 2020.

Billington Bioenergy, Drax’s supplier of compressed wood pellets for heat, has installed smart meters – known as fuel level measurement systems – across various industries such as Care Home sector and Schools and projects that a third of its bulk-blown pellet customers will have them installed by 2020.

Some like it hot: how temperature affects electricity prices

30 November 2016

Electrification

In 2012, Europe faced an extreme cold wave. Temperatures in France dropped to minus four degrees Celsius, far below its average of five above.

As people huddled indoors, electric heaters were dialled up and lights were switched on. Electricity demand soared. It topped at 102 GW, surpassing the country’s previous peak by more than 20 GW. France had to import power from neighbouring countries.

The low temperatures drove demand so high the country couldn’t manage on its own. It’s something we see across the world – temperature peaks drive how and when we use electricity, increasing demand in the colder Northern European countries as the temperature falls, and acting inversely in hotter Southern countries.

But more than just driving up how much electricity we need, the temperature can affect how much we pay for it, too.

Putting a price on electricity

In the UK electricity is bought and sold by power generators, energy suppliers and the National Grid by the megawatt hour (MWh). One MWh is roughly enough power to boil 400 kettles and although prices fluctuate significantly, on average one MWh costs roughly £50 in the UK. In winter, when UK electricity demand peaks it’s estimated that for every degree the temperature drops below 15 Celsius, demand rises by 820 MW.

Electric Insights, an independent report produced by researchers at Imperial College London and commissioned by Drax via Imperial Consultants, looks at the UK’s publicly available electricity data and clearly shows the trend.

As the temperature drops, demand rises.

This raised demand affects the price of electricity in one obvious way: consumers’ bills rise because they’re using more of it. A less obvious impact is its effect on the production and supply cost of electricity from generator to the high voltage electricity transmission grid.

How temperature affects supply

In cold weather power plants work better. Cooling towers are more efficient, power cables are more conductive, and less energy is needed to help keep generating equipment from overheating. This all adds to small cost savings, which in turn can make electricity cheaper.

However, during colder weather the amount of gas used in the UK goes up – largely due to the rise in heating – which raises its price and this has a knock effect on electricity. For every 1p increase in the cost of gas, the cost of generating 1 MWh by a CCGT (combined cycle gas turbine) power station increases by around 70p. As CCGTs generate a large percentage of Britain’s electricity, the overall price of electricity also goes up.

But a bigger cost-determining factor is the increasing variety in today’s energy make up. Renewables like wind and solar are intermittent energy sources. Solar can’t function at night or when it’s overcast; wind turbines don’t rotate when it’s still, so when it is especially cold, dark or without much wind, the Grid needs to bring in additional flexible power generated by sources like biomass, gas and coal. These technologies can either deliver power to the Grid all the time – known as baseload – or just when demand rises, when they can be dialled up quickly.

But in the event of extreme weather, the demand for power can surge and the Grid needs to bring in additional generation capacity. In Britain, there are smaller power stations fuelled by diesel, oil or gas that lie dormant for much of the year but can start up at short notice to provide this boost of generation to meet demand.

Activating and running these plants quickly for short amounts of time can be expensive, and this can subsequently affect electricity price and lead to spikes in the winter.

The effect on the bottom line

This leads to the following trend: for every degree Celsius the temperature falls below 10, there is a corresponding rise of £1.10 MWh. It is also possible for increases in temperature to cause increased prices, but this is usually in countries where air conditioners and electrically-powered cooling units are hooked up to their own national or regional electricity grid. For better or worse, this is not a problem that affects the UK, but it’s important to understand that maintaining grid stability will always have its costs, whatever the weather.

Tag: energy prices

Coal comeback pushes up UK’s carbon emissions