The message is clear – the UK’s energy infrastructure will not be able to support demand by 2025. It is obvious that the Government must take action but responsibility must also lie with energy users to mitigate the risk of blackouts. Businesses must act now to put measures in place that will ensure continuity in the event that power outages become a reality and the risk is a credible one.
The UK Government has announced plans to close all coal-fired power stations by 2025 alongside the intended retirement of the majority of the UK’s ageing nuclear fleet. Predictions with regard to the growth in energy use in the UK vary dependent upon the source with some analysts suggesting that consumption will reduce in the coming years.
Whilst opinion is divided on this subject, there is no escape from the fact that such closures will leave the UK facing an electricity supply gap and this is likely to be significant. According to a recent report from the Institution of Mechanical Engineers, the gap between supply and demand will be between 40-55%. The simple message is that phasing out coal and nuclear reactors without reliable and cost-effective alternatives will create a supply crisis within a decade which will lead to blackouts.
The Government aims to close all coal-fired power generation by 2025 amid the on-going plans for retirement of the UK’s aging nuclear reactors. If the UK is to replace this capacity with Combined Cycle Gas Turbine (CCGT) plants, as many as 30 new power stations are likely to be needed to make up the deficit. The UK has built just four CCGTs in the last 10 years and nine power stations have closed. There are around twenty nuclear sites that are listed for decommissioning.
According to the Institution of Mechanical Engineers, the country has neither the resources nor enough people with the right skills to build this many power stations in time and reforms to the electricity market brought in under the previous coalition government are not encouraging construction. Currently there are insufficient incentives for companies to invest in any sort of electricity infrastructure or innovation.
It is important to note that whilst the UK needs baseload capacity to replace coal and nuclear, it is not necessary that this is replaced by gas-fired generation. The UK already has a significant pipeline of capacity from offshore wind, additional interconnectors to other parts of Europe and new nuclear power stations. Despite widespread criticism of the scheme, the UK also has a capacity market designed to guarantee sufficient supplies.
The current challenge to alternative generation sources is that the government has cut subsidies for onshore wind and solar power and has withdrawn the £1billion ring-fenced capital budget for carbon capture and storage technology which could have given an extension to some coal-fired power plants. Building on the ambition of the recent Paris Agreement, much more of global energy will come from renewable and other lower-carbon sources. There must also be a greater focus on helping industry to reduce its demand for electricity.
Attempts to encourage energy efficiency, such as the Green Deal which was scrapped, have not been sufficient. The Government must encourage the development of new technologies to change how we store and use power with investment and a stable policy. If investment is to be forthcoming, there needs to be a clear long-term framework so companies can plan for projects that will last into the next decade including offshore and onshore wind and carbon capture and storage (CCS). The policy framework must look at the whole system and encourage innovation across different technologies, not focus on single streams, to deliver affordable low carbon electricity supplies.
In response to the report, the Government has reiterated that coal will only be phased out if it is confident that the transition can be achieved within the necessary timescales. Whether the warning from the Institute of Mechanical Engineers is over-exaggerated, it is true that there are major challenges ahead to build an energy infrastructure that can meet demand for the next decade and beyond. The way we power our economy must be transformed. We simply cannot rely on alternative generation sources if we are to avoid the supply gap.
The challenge requires action from all energy users – it cannot be left to the policy makers and the industry to ensure that the lights stay on. The solution is two-fold – reduction in usage and investment in alternative power sources to decrease reliance on grid supply either on a permanent basis to weather any power outages. It is vitally important that businesses, particularly energy intensive industries, undertake a strategic review of their business continuity plans now to ensure resilience in anticipation of power shortages and resultant blackouts in the not too distant future.