ETI Response to House of Lords Science and Technology Committee Inquiry Into Resilience of Electricity Infrastructure

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1 ETI Response to House of Lords Science and Technology Committee Inquiry Into Resilience of Electricity Infrastructure Key Points 1. By 2030 the UK energy system should be sufficiently different from todays that lessons learnt from current operations will have limited value in understanding future requirements. Unless these lessons are combined with sufficient evidence from large scale implementations (early roll-out) and subject to thorough evidence-based analysis, the risk of wasted expenditure and strategic failure is high. Although change is uncomfortable, the risk to the UK economy of discovering in the 2020s that we are on a track to an unaffordable, insecure and unsustainable energy system should compel us to move forward despite the challenges. 2. The next six years is a critical period for laying the knowledge foundations for progress to 2030 and beyond, given the timescale for planning and delivering major infrastructure investments. 3. This current inquiry has rightly focused on electricity. However, by 2030 we will need to have made good progress in developing combined infrastructure strategies across the UK. In any area the balance between gas, district heating, electricity, building works and control in delivering a viable path forward for the major load of space and water heating will determine a combined investment plan across each of these three energy infrastructures. These plans will differ significantly from area to area. 4. These strategies combined with policies to incentivise investments by individual building owners will shape demand profiles, in the light of consumer experience of the operation of energy markets to that point. 5. The generation mix will be shaped by government policies and incentives in combination with the operation of markets. Market operation will partly be determined by government determined rules and partly by demand profiles. 6. The ETI continues to explore the design and operation of affordable, secure and sustainable UK energy systems on a whole systems basis, including the transition steps from 2020 to 2030, on viable trajectories out to more or less attractive systems in A significant proportion of the technologies required for the 2050 system are already ready for first of a kind demonstration but require integration into effective systems, including appropriate policy, regulatory and market capacity, supply chain development and attractive consumer propositions. Although the major challenges are around this system development and the evidence base to underpin strategy development and build market confidence, some further component technology developments are required, such as improved detailed engineering of Delivering the UK s Future Energy Technologies 1

2 offshore wind systems, the applied science of hydrogen vehicles or the development of new systems eg domestic energy management systems. 7. Our evidence identifies a number of options for increased system flexibility at affordable cost from 2025 onwards. It is likely that a robust system will adopt a suitable combination of these options. Many of them require market and physical infrastructure development to support them. ETI work on the most appropriate combination of these options is ongoing. Very detailed whole systems operation analysis and technology characteristics analysis are required. However, distributed heat storage, dramatic improvements in the cost and performance of distribution scale electricity storage, hybrid fuel/electricity systems and the use of CCS in both pre and post combustion modes in combination with geological storage of natural gas and hydrogen all appear to be viable contenders, with some carrying lower risk than others. 8. Although it seems likely that there will be advantages to more interconnection, there is no basis for forecasting the supply and demand balances across neighbouring European countries. Interconnection creates deeper markets for supply and demand at significant cost and the impact on energy security can be positive or negative, depending on choices by others. 9. Our modelling highlights new nuclear as a key component of a future low carbon energy system, providing a core low carbon power generation capability and increasing security of supply by increasing diversity of supply and establishing a base-load generation capability alongside fossil fuel plants with CCS. Without investment in a major new nuclear build programme, the cost and difficulty of meeting the UK climate change targets will rise very significantly. We consider that Small Modular Reactors (SMRs) may have a potential role in the UK future energy system in concurrent deployment alongside large base-load Generation III+ designs. SMRs would offer the additional potential to energise major heat networks through waste heat recovery, and provide electrical network balancing through provision of more agile and flexible electricity output than large nuclear plant. 10. The ETI continues to build the real world evidence base and analytical tools and capability to underpin targets for technology development, systems design and market confidence. Our Smart Systems and Heat Programme is developing tools for area energy strategy support, evidence on consumer drivers and segmentation, real-world experience of cost-effective buildings retrofit and component technologies such as intensive heat storage and Home Energy Management Systems. Integrating this with the detailed outputs from our other technology programmes and market, policy and regulatory analysis is building a whole systems evidence base and capability. 11. Our technology investments also support product development by UK companies, provide the evidence base that DECC, Devolved Administrations and Local Authorities require for their strategy development and support the design of sufficient scale demonstrations to provide the evidence base required for real market confidence for supply side and demand side investments. Delivering the UK s Future Energy Technologies 2

3 Short Term to The ETI is not best placed to comment on specific short-term measures to manage supply and demand out to 2020 as this will be based on ongoing assets, asset retirements and some new assets already well within the project pipeline. We have therefore limited our response to the following issues. 13. The evolution of supply and demand to 2020 is hard to predict as it is driven by factors such as Government policy changes (eg the sudden implementation of a PV FIT), consumer technology changes (such as the uptake of LED lighting), investment decisions (for example replacing electric resistive heating with gas boilers or electric heat pumps) and the general affordability of electricity in relation to disposable incomes and global competition of energy intensive industries. 14. We see no reason why current structures, if skilfully implemented, will not ensure sufficient system capacity and flexibility out to However, there could be significant excess or insufficient capacity provision given the challenges in accurately forecasting the balance. 15. The most likely significant differences from the situation in 2014 are more areas of distribution systems stress from local concentrations of PV installation and oversupply of electricity when demand is low, a higher proportion of wind generation and less reliable operation of the remaining nuclear fleet. All of these will create more and unpredictable demands for system services to be provided as a bolt-on to the system rather than as part of the design of the mix. 16. Domestic Smart Meters will have some impact on demand and peak smoothing, which will depend on tariff structures. 17. Industrial and commercial demand management (or more likely supply of system services) has greater potential. An understanding of the energy using system and its business integration and implementation of business responsive controls is key to this area of demand management. Retail refrigeration and small scale industrial processes are areas of further opportunity, beyond individual large energy intensive processes (such as chlorine production). 18. Since both underused and mothballed capacity and demand management opportunities are finite resources, the pricing of the services is likely to be set by competition with temporary generation and commercial strategies rather than derived from inherent costs. 19. During the period to 2020 it is critical to gather the evidence to support the decisions taken beyond Evidence from existing operations is currently tightly held within commercial activities, the System Operator and regulators. This should be provided to DECC and systematically analysed by a key team of technical and market experts to provide a coherent strategic evidence base. 21. Taxpayers and consumers support large scale demonstrations and trials through a variety of mechanisms at significant total cost. It is not clear that DECC has been given the levers to ensure that the design of these trials will provide the evidence they require and that they have sufficient access to the outcomes. Delivering the UK s Future Energy Technologies 3

4 22. Given the pace of change in electricity markets between now and 2020, the scale of investments in demonstrators and evidence collection and the increasing interaction between electricity and other energy vectors beyond 2020, it is critical to ensure that this evidence collection and analysis is coherent and sufficiently resourced. The additional costs to energy users and taxpayers of decisions taken on weak evidence would be of a scale out of all proportion to the costs of providing robust evidence. Medium term to We anticipate that the demand side will have shown limited change, apart from the impact of efficiency measures, more sophisticated energy management systems and response to changing market structures by Although various policy mechanisms are likely to create large scale experiments in new demand technologies, they will need to be scaled up as electricity supply is decarbonised, especially as our modelling shows there are lower cost options than electric vehicles and heat pumps to deliver carbon budgets to Nevertheless, a demonstration fleet of up to a million hybrid electric vehicles or heat-pumps (around 3% of the population of vehicles or buildings) would have a measurable effect on national demand profiles. Natural clustering will almost certainly lead to dramatic loads on some local distribution systems, even at this level of national penetration. 25. Current industry thinking is to identify areas where clustering will occur and reinforce these selectively. It is not clear that we have the planning and delivery capacity to do this effectively and especially speedily. There is therefore a risk of widespread reinforcements on a precautionary basis, combined with local overloads which take significant time to resolve. 26. Vehicle charging is a manageable problem, since the overnight load can be fitted into the available system capacity. However simplistic charging management solutions will create unfortunate effects, such as cliffs of coordinated switch-on and switch-off. There are other issues that need to be addressed in designing an effective charging system. Unmanaged systems will contribute significantly to peak load, since people naturally plug in at the point of arrival home and then charge through the evening peak. 27. It is therefore critical that carefully designed vehicle charging management systems and standards at the national level are developed and incorporated into any large scale demonstrations and early roll-outs. These systems need to address both the capacity of the national system and also the local distribution system. 28. Although vehicle charging is potentially manageable, the local distribution loads need to be considered as part of the local area strategy for heat and the role of the electricity distribution system in any location. 29. Electric heating is not an inherently manageable problem, since it is inevitable that everyone in an area will require heat on cold days and there is a real risk of distribution systems overload. Air source heat pumps have their lowest performance when it is cold and it is not economic to size them to cope with infrequent peak loads and they therefore usually include additional power through resistive heating, further reducing performance at peak demand. Depending on the detail of the local built environment, pumping heat out of the air around buildings and reducing building heat loss rates could further reduce heat pump efficiency. Delivering the UK s Future Energy Technologies 4

5 30. The domestic RHI has been designed to manage these risks through controlling the pace of adoption by level of support and requiring certain energy efficiency measures to be undertaken. Not only do efficiency measures reduce the total energy requirement, more importantly they enable the thermal mass of the building to be used more effectively to spread the heat load out over a day and reduce peak demand. 31. In order for peak management to occur: the electricity tariff must reflect time of day costs of distribution sufficiently to incentivise the consumer; the building must have a relatively high thermal mass within the insulation and the control system must be capable of managing the heat source during the day against the thermal mass and comfort requirements in different parts of the building and hot water requirements, taking advantage of the tariff. 32. The ETI considers a hybrid system, which combines a gas boiler with heat pump as an important transition technology to Burning gas in buildings will need to be almost completely eliminated if we are to meet our climate change targets. Although gas boilers might play a role in meeting infrequent cold weather peaks, it seems problematic to take up valuable living space with a rarely used system and to maintain a gas distribution system for rare events. However, hybrid systems could contribute to climate change targets while reducing peak loads on the electricity system and providing homeowners with superior economics at least out to 2035 and many could still potentially be in service in Heat storage devices could also play an important role in managing peak heat load but hot water tanks are now present in only 58% of houses in the UK, having been replaced by high power combi-boilers. Not only do these provide instant hot water which is always available, they free up valuable living space, which can also increase property values in some areas. 34. We consider two typical house examples below: o Conversion from a combi-gas boiler (without heat storage) to an Air Source Heat Pump (ASHP) ASHP power is low compared to a gas boiler, so long pre-heating is required. In low efficiency buildings, which leads to high losses while pre-heating and very poor responsiveness for householders. Fabric efficiency needs to be lifted to a reasonable standard, but this is likely to be expensive in older solid walled homes. High capacity heat storage is a route to improving responsiveness, but the technologies are currently immature. Given the above, this example is for a relatively modern home with cavity wall insulation, loft insulation, double glazing, etc sufficient to avoid excessive losses during long pre-heating of the house. Heat storage in this example is only for water heating, where a heat output of at least 25kW is required and the 14kW heat output of the ASHP is nowhere near sufficient. Space heating will be significantly less responsive than the old combi-gas boiler. The least cost (by far) route to heat storage from an ASHP is a hot water tank. Typically, this occupies a volume of litres; space that will need to be found within the home. This will be sufficient for a typical family, but when the tank is empty it will take an hour or so to refill (assuming no space heating is also consuming output from the ASHP). High temperature ASHPs are available to interface directly to the existing wet radiator system in the home with minimal changes. A typical unit is comprised of two boxes; an Delivering the UK s Future Energy Technologies 5

6 outside heat exchanger and an inside compressor unit both around half a cubic metre in size (an alternative configuration is a single external unit including both parts). The combination and including the storage tank costs around 7,000 plus installation. Significantly more space will be needed for the combination and storage than the combi-gas boiler occupied. Across an area of typical housing we would expect the average costs of efficiency measures for all dwellings to reach the level of a post 1970s new build to be in the range 5,000-10,000 per dwelling, possibly more in some areas. This assumes significant development of new tools and systems approaches by the supply chain. The diversified load across the houses in periods of cold weather is likely to be in the range 6-8kW, requiring major upgrades to the electricity distribution system, which would cost a few thousand pounds per dwelling (depending very much on the characteristics of the area) but only if executed as a part of a coordinated area strategy rather than a series of incremental upgrades. The cost of delivering sufficient building efficiency improvements to avoid these upgrades would be factorially higher and much harder to organise. o Conversion from a combi-gas boiler (without heat storage) to a hybrid boiler/ashp The gas boiler in hybrid combination yields similar responsiveness for both space heating and hot water. A hot water tank is therefore not essential and sufficient fabric efficiency is not a prerequisite. However, a very significant proportion of energy consumption is associated with the rapid heating of spaces and hot water use. The proportion of heat supplied by the ASHP is hence directly related to fabric efficiency and hot water tank availability. Given the above, this example is for an older home with solid walls and no external or internal wall insulation. Heat storage is not incorporated in this example, to avoid the requirement for finding additional space in the home. Hybrid gas boiler and ASHP systems are available as an integrated package comprised of two separate boxes; an outside heat exchanger and an inside gas boiler combined with compressor unit both around half a cubic metre in size (alternative configurations are available). The combination costs ~ 2,500 plus installation. More space will be required, but not as much as above. This is reasonably cost competitive compared to a combi-gas boiler replacement. The diversified load across houses in this example is lower, perhaps 4-6kW in periods of cold weather. 35. By spending 1,000-3,000 extra per dwelling, optimising the design of the gas boiler and heat pump, integrating a different style of heat storage to shift electricity top-up and installing advanced controls it might be possible in many areas to reduce peak electricity demand to the level where smart network investments could avoid major upgrades. This would marginally increase the proportion of energy supplied by gas. 36. We have concluded that hybrid systems with appropriate smart controls and intelligent market design can contribute to both economic decarbonisation and peak/trough electricity demand management. Delivering the UK s Future Energy Technologies 6

7 37. Heating with Air Source Heat Pumps alone appears to be close to the point where major electricity distribution upgrades will be required, even with all of the mitigations described in para 31. If vehicle charging is required in the same dwellings as those containing heat-pumps, then not only will the local sub-system be very likely to be overloaded, but the individual connection to the building may need to be replaced. Typical shared distribution capacity in the UK is in the range 1 to 3 kw/building and a typical connection rating for an individual building is 19kW. In buildings designed for electric heating, such as blocks of flats, the shared capacity is typically 8kW/building. The exact ratings vary. 38. The evidence of consumer willingness to modify their demands to suit the drivers of the System Operator is limited. Requiring consumers to reduce their washing and drying activities during periods of several days of very cold weather is not an obviously attractive strategy. Although some consumers may be constrained to do this by costs, we anticipate from our original consumer study work that many consumers will be willing to pay the additional costs of sufficient capacity, especially as this is relatively affordable. Without harder data on likely demand elasticity in a future world, planning capacity and the shape of the mix (from base load to rare peakers) will be guesswork. 39. We are aware of a number of electricity distribution studies which assume much lower electricity demands per building when ASHPs are installed. Some of these have published their efficiency assumptions, which typically assume mass retrofits to deliver very high building efficiencies. The likely costs for these are an order of magnitude greater than uprating the distribution system, which makes this strategy very unappealing. Other studies have not published the detail of their assumptions about building efficiency and thermal capacity, heat pump sizing relative to cold day requirements, whether the heat pump economics have been optimised by including resistance heating and how the system is to be controlled within the building. Given the importance of these factors to the conclusions about electricity distribution strategies, we encourage the authors of such studies to publish these assumptions, not just a conveniently low assumed peak electricity demand. 40. District heating with combined heat and power in dense urban areas offers some of the lowest potential costs of carbon saved in the period 2020 to In many areas district heating may well be the long-term solution, but with an increasing switch to lower carbon heat sources beyond The strategic flexibility of transitioning the energy supply without repeated interventions in millions of individually owned buildings has considerable attraction. 41. The design of energy centres for district heating in operation out to 2030 will depend very much on government policy and market design. Economic efficiency for consumers would argue for a larger CHP element, smaller gas boilers and larger heat stores. The operation of these distributed generators could then contribute significantly to meeting peak electricity demands. By 2030 the national district heat network embedded generation capacity could range from less than 1GW to several GW, depending on government policy. It is possible that some of this could enter the capacity market, on the view that there will be a good demand for heat and that operators can choose between scheduling gas boilers, storage and gas-engines in response to customer demand and national market forecasts. Delivering the UK s Future Energy Technologies 7

8 Background on the ETI 42. The Energy Technologies Institute (ETI) is a public-private partnership between global energy and engineering firms and the UK Government. ETI carries out three primary activities: 43. modelling and strategic analysis of the UK energy system (power, heat, transport, infrastructure) to identify the key challenges and potential solutions to meeting the UK s 2020 and 2050 energy and climate change targets at the lowest cost, 44. investing in major engineering and technology demonstration projects through targeted procurement to address these challenges with the aim of de-risking solutions both in technology and in supply-chain development for subsequent commercial investors 45. providing support to enable the effective third party commercialisation of project outcomes. 46. Recognising the need to focus and target investments to ensure value for money and leverage from public sector support, the ETI s techno-economic modelling and strategic analysis of the UK energy system is a critical tool for supporting effective system planning and innovation delivery. The ETI approach is termed ESME and is now used by DECC and the Committee on Climate Change to aid with policy development, planning and effective investment targeting. 47. Insights from ESME analysis have been reviewed with the European Commission and the JRC. With their support ETI have now developed a prototype tool for use in assessing energy system design for the European Union area using the same approach used for the UK. A local (urban area) energy system planning tool EnergyPath is in development as part of the ETI Smart Systems and Heat programme. 48. The UK energy system development and decarbonisation priorities identified by ETI are: Efficiency introducing systems and technologies to reduce cost and improve buildings and transport efficiency. Nuclear establishing a new build programme based on new supply chain capacity and increased investor confidence. Bioenergy informing the science, technology and business cases for decisions on how to optimise the use of sustainable bioenergy resources as solid, liquid and gaseous fuels. Carbon Capture and Storage providing system demonstration and strategic insights for capture, transport and storage building investor confidence. Gas enabling long-term use of a critical fuel for power, heat, storage and potentially transport ( gas = natural gas, synthetic combustion gases, biogas and hydrogen). Offshore renewables reducing cost and building investor confidence. Response submitted by Energy Technologies Institute LLP, Loughborough, UK Enquiries to Nigel Richardson, Public Affairs Manager nigel.richardson@eti.co.uk Delivering the UK s Future Energy Technologies 8