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The great energy race

Atkins | 15 Sep 2010 | Comments

Energy could be in short supply much sooner than many are willing to admit. Do we face a future of rolling brown-outs, escalating electricity and heating costs, and ongoing environmental concerns? Or can we make the changes needed in order to produce a better energy mix?

Energy has rarely been so central to public debate as it has in the last few years. Climate change, energy security and the need to find new energy sources have all served to focus the minds of policy-makers, energy experts and the general public.

The big question is how to find a “mix” of future sources that solves what Martin Grant, managing director of the Atkins energy business, says has come to be known as the “trilemma” of energy policy: how to square the demands for clean, secure and affordable power.

“We need to generate electricity with minimal climate impact, that is secure and affordable,” Grant says. “These three things all have to feed into the equation. Preventing climate change for an infinite price is not an option. Nor is producing energy without regard to the environmental consequences.”

As a result, energy policy needs to be judged first and foremost in light of its impact on carbon reduction commitments. While not formally adopted, the Copenhagen Accord still reflects a large degree of consensus on the need for deep cuts in CO2 emissions and therefore most developed countries have committed to stretching targets.

Second, energy sources have to be secure. For example, recurring disputes between Russia and its neighbours over oil and natural gas export tariffs have a knock-on effect on European supplies. Others point to instability in some parts of the Middle East, both for oil and natural gas imports. Ideally, energy should be home-produced, come from “reliable” countries or else be diversified across a range of sources and technologies.

In the UK and some other developed nations, we have another important factor to take into account: an ageing electricity generation fleet. According to the UK Government’s own estimate, up to 20 gigawatts (GW) of the current 75GW of capacity could be out of commission by 2020. E.ON, the German electricity producer, says it could be worse than that: up to 26GW might be lost by 2015.

Depending on the energy demand – which tends to rise and fall with the economy – the UK could start having shortages by 2016, according to the energy consultants Pöyry.

“First and foremost, more attention must be paid to counteract increases in energy demand,” argues Louise Kingham, CEO of the Energy Institute, the professional body for the energy industries worldwide, based in the UK. “Energy efficiency is increasingly seen as the most important action, in terms of what can be realistically achieved in the timescale required to reduce carbon emissions. It is the biggest way in which individuals and organisations can play an active role in tackling the energy challenges. And it can have an immediate effect both on CO2 emissions and the bottom line.”

A more positive light

As it happens, the UK’s “trilemma” may not be quite as intractable as it is in other countries. For one thing, it has several plausible sources of renewable energy – particularly offshore wind. For another, it has a level of expertise and experience in nuclear, which is likely to be a significant part of the UK’s future portfolio.

Much of the new energy planning currently revolves around renewables, particularly offshore wind. Such projects have been multiplying and expanding over the last decade. The third phase of schemes, approved by the last Government in January 2010, foresees nine new zones allocated for wind farm development around the coastline and an estimated capacity of 25GW. At the time, Gordon Brown forecast Round Three could cost up to £75bn and create as many as 70,000 jobs by 2020. (In all, Ofgem says the UK could have to spend £200bn transforming its energy supplies over the next 10 to 15 years.)

Round Three comes on top of the 1,000MW capacity of the offshore turbines already installed around the UK, the 1.2GW under construction and the 3.5GW in the planning process. If it all goes ahead, the UK will become by far the largest offshore wind producer in Europe. Worldwide, only China is likely to have a bigger offshore wind network by the end of the decade.

The advantage of wind energy is that it is clean, secure and infinite. Moreover, offshore wind does not tend to run into the same planning and regulatory obstacles as onshore wind or conventional power station developments.

Carmelo Scalone, executive director for business initiatives at Portugal’s EDP Renewables, says the UK in particular has done a good job addressing the energy challenge and attracting investment to its wind industry. EDP Renewables is currently leading a wind farm project off the coast of Scotland.

“The UK’s situation is similar to that in other countries in many respects,” he says. “Throughout Europe, the demand for energy is increasing while the portfolio of energy generating facilities is ageing, in general. There is a need for these facilities to be upgraded or replaced, or to rethink the whole energy mix. In addition, more or less every country supports the idea of renewables as part of that mix.

“However, I think the UK is leading Europe when it comes to the offshore wind industry. It has taken the right approach. For example, the UK Government, Crown Estate, Ofgem and National Grid have all helped make the wind industry credible, so that people who did not consider an investment in the UK before could see that there was a lot of upside.”

Grant also praises the way in which the Government has boosted offshore wind, by offering attractive fiscal enhancements (called the Renewable Obligation Certificate scheme), which supplements the price operators get for the energy they supply.

The scale of the offshore undertaking is staggering, however, and there are plenty of obstacles to overcome. For one thing, the latest turbines are gigantic, measuring up to 175m according to some designs (by comparison, London’s famous “Gherkin” building comes in at 180m). Simply erecting these towers is a major task. Moreover, there is currently a shortage of turbine producers and a lack of vessels capable of hauling the structures out to sea.

“The amount of hardware put in place will be of the same order as the oil and gas industry put in place in the North Sea over the last 30 years,” says Grant. “You are talking about doing a whole North Sea all over again. This is not something in the margins. It is absolutely game-changing.”

Grant estimates that the projects could eventually account for over 30 per cent of the UK’s electricity capacity. One reason he is confident it can be done is the experience the UK has in working in tough conditions at sea.

“We’re in an unbelievably fortunate position that we’ve got this natural resource around us, and that we’ve got a skill base that’s been developed in offshore oil and gas. It’s a great opportunity for the UK – and for Atkins – because we’ve got a lot of experience in that area. Our hope is that we can then export that expertise, again in much the same way as the UK oil & gas industry,” he says.

The nuclear elephant

Wind power’s great drawback, however, is its intermittency. It is available only when the weather permits. Grid managers have to hope that the wind blows when it is needed – ideally during peak periods. If not, there are currently few economically viable ways to store large amounts of wind-generated electricity (though some new technologies are now being developed).

David Parkin, renewables manager at Atkins, says there needs to be a focus on how inland infrastructure can be updated in order to accommodate all of the power generated offshore.

“I think there is still a lot of work to be done around planning for the supplementary infrastructure. We simply cannot use the anticipated level of intermittent electricity unless we fundamentally change our energy storage infrastructure. The thinking about that is nowhere near as advanced as for generation itself,” he says.

For this reason and others, many experts see a need for a “baseload” of more traditional generating capacity – chiefly, nuclear energy.

Nuclear has the advantage of being “cleaner” than fossil fuel-based generation and the raw materials required are available from relatively friendly countries. This has led to what has become known around the globe as the nuclear renaissance. A large number of countries have announced nuclear new build programmes. China has embarked on a six-fold increase in nuclear capacity to 50GW. India aims to add 20 to 30 new reactors. In the UK, companies such as EDF and others have committed to building up to 16GW of nuclear generating capacity.

“We’re never going to have 100 per cent renewable energy. You can’t cope with the intermittency issue. The most you could have is 70 or 80 per cent renewables and then have a baseload of something else,” says Parkin. “If you wanted to be completely self-sufficient, you could look to ‘clean coal’, but that still has some technology challenges. Your best bet is to rely on an external supply of nuclear fuel, which is a relatively reliable market.”

This raises the prospect of an energy mix dominated by renewables and nuclear, but this in itself would be problematic. Wind is intermittent and nuclear works best when delivering at a steady pace. Something else is needed to deal with short-term peaks in demand, such as a million kettles being switched on at half time in an important televised football fixture. At the moment gas fired power stations are the answer to this need. It seems clear that a diverse energy mix is the way forward.

Two other ways to partially mitigate the intermittency problem, and improve the flexibility of the energy system, would be to modernise the power grid and improve links between countries. The idea of a “smart grid” is to have a more transparent and responsive distribution system where both producers and consumers have access to detailed information about usage and pricing at different points and times. This would help everyone make better decisions about when to consume (householders could choose when to power their washing machines based on price) and when extra resources might be needed.

A smart grid might also involve using electric vehicles for large-scale energy storage. Potentially, large numbers of car batteries could offer an effective storage method for electricity produced from intermittent renewable sources.

Such an arrangement would require a level of on-high co-ordination, though: “Having electric cars in every driveway being charged overnight when the wind is blowing is a great idea. But to work, it still needs a major investment. I don’t see that happening at the moment,” says Parkin. He believes the idea of grid expansion – to pool resources between EU neighbours – is more realistic at the moment.

“A European-wide grid means that wherever the wind is blowing or the sun is shining, you can generate from that bit of Europe and transmit your power wherever else it is required. We’re starting to see interconnectors being built up, for instance between Ireland and the UK, and France and Belgium and the UK. But we need to be doing more,” he says.

More ambitiously, there is continued speculation about the feasibility of generating vast quantities of electricity from solar plants in equatorial countries and transmitting this to areas of high need such as northern Europe. Such a scheme would however require massive investment and co-operation between countries.

More power needed

Though the UK’s currently planned investments in offshore wind and nuclear are sizeable, and potentially transformative, they may not yet meet expected demands.

“In the climate-changed world, we will need more electricity, not less, because we will decarbonise some sectors by using electricity – transport, for example,” says Samuel Fankhauser, principal fellow at the Grantham Research Institute on Climate Change at the London School of Economics and a member of the Government’s Committee on Climate Change.

Fankhauser says that initiatives to improve energy efficiency are likely to bring down demand between 2010 and 2020 – but that the appetite for electricity will pick up after that. “After 2020-25, the electrification of the transport fleet is likely to overwhelm the savings we have made in the next decade,” he says.

Parkin says the extra need could be fairly dramatic: “At the moment, our energy use is split roughly one-third electricity, one-third transport, one-third heat. If you turn all our transportation electric, you double the amount of electricity you need. And if you make a wholesale switch to ground source heat pumps for household heating, then you’re effectively tripling the electricity needed in the UK.”

After wind power, nuclear energy and improving the grid, there are several other more distant possibilities for the future energy mix. One is carbon capture and storage (CCS) where large quantities of CO2, from fossil fuel-based plants, are captured and sequestered underground.

Fankhauser says CCS has potential, but notes the technology is still in its infancy. More to the point, it may not be ready when we need it.

“Nobody knows if it’s going to work or not. The question is whether we will get the pilots on the ground in time. We are being very slow about it, but we can probably still make it work. If you work back from when the investment decisions will need to have been made, we will probably need to know if CCS is working by 2020, or ideally a couple of years earlier. This means you need pilot results five or six years from now. We don’t have any time to lose,” he says.

“The UK Government appears to support the development of CCS technology, which some see as vital to the move towards a low carbon economy,” adds Kingham. “The role of Government is to put in place the incentives and stimulus for take up of low carbon technologies, so that the demand for low carbon skills grows as well as being financially supported. Coming out of a tough economic climate may make this more of a challenge, but also offers big opportunities going forward. The Committee on Climate Change recommended an energy market review, which is taking place currently, where changes to stimulate low carbon investment will be desirable.”

Tidal and wave power are other possibilities. The Government, for example, continues to explore the idea for a “barrage” across various parts of the Severn Estuary. By some estimates, depending on the scheme, this could generate up to five per cent of the UK’s electricity needs. One great advantage of the barrage is that it would be a predictable source of power and relatively long-lasting – up to 120 years, compared to the normal lifecycle of a nuclear plant of 30 to 40 years.

It would, however, be a fantastic engineering feat – and therefore expensive. It would also face vigorous opposition from local groups fearing the effect on wildlife and scenery. (Atkins’ work on the barrage includes a feasibility study for an alternative “tidal reef” design, on behalf of the Royal Society for the Protection of Birds.)

If it does ever come to fruition (the idea was first discussed in the mid-19th century), the barrage is not likely to be ready in time for when the current stock of generating capacity runs its course.

In fact, experts agree that the diciest phase for the UK’s energy planners is likely to occur in the next decade – when a range of power plants are due to be shut down and new resources, including nuclear and offshore, have not yet been put into action.

Grant and Fankhauser say there could, therefore, be a need for gas-fired power stations, which are quicker to build than nuclear, as a stop-gap measure.

“The tricky period will be towards the end of the decade, when some power stations will have been decommissioned, and some of the big new chunks will not have come on-line,” says Fankhauser. “But there is always the gas back-stop. People think they can replace a lot of extra capacity at fairly short notice by building gas power stations. The issue is then whether you can make that compatible with decarbonisation. Gas is twice as clean as coal, but you will probably need to introduce CCS for gas as well.”

Otherwise, operators will have to learn how to keep existing stations open for longer than they were designed for.

“I think we’re going to want to have old facilities going for longer than we expected. That will mean life extension safety cases for nuclear stations and finding a way around legislation such as the Large Combustion Plant Directive for thermal stations. At the end of the day, though, if there’s a supply problem, it’s going to be very difficult to start shutting facilities down. There’s going to be a huge effort to keep things running a bit longer until the new equipment is in,” says Grant.

Either way, the experts are optimistic that the UK can eventually transform its system.

“I think it will happen, maybe in a British sort of way, by the skin of our teeth,” says Fankhauser. “The good news is that policy-makers and the whole of industry is very well aware of what’s happening, and we are 10 to 12 years ahead of the crunch time. We don’t have all that much time to waste as a new power station takes six or seven years to build. But we can probably still get there.”

“Industry believes that the technologies and solutions to move to a low carbon future are already known,” adds Kingham. “The sticking point is political will and consumer understanding, combined with the economies of scale to develop the technologies at an affordable price for all.

“For example, it is believed that by 2020, 70 per cent of primary energy in the UK will still come from oil and gas, with 20 per cent coming from renewables. Therefore, the priority for many is to manage carbon emissions through the development and implementation of CCS technology. This will enable the continued use of fossil fuel as a source of energy alongside the development of alternative, low carbon sources of energy, in order to reduce emissions in the longer term.”

“This is an energy system in transition,” she concludes. “By its very nature, it is evolving to meet new challenges and demands under exacting market conditions. There are undoubtedly many transitional and distributional effects that we have not yet worked through but we will find our way.”

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