Although the energy crisis is affecting the whole world, the UK has been hit particularly hard. The record high wholesale cost of gas has led to soaring electricity bills which is fueling a cost-of-living crisis in the UK. The crisis is set to get worse come April when the energy price gap will rise by 54% and customers will see an increase of £693 per year on their energy bills. The Chancellor of the Exchequer, Rishi Sunak’s targeted support scheme will do little to lessen the worse effects of this huge price jump.
Why are UK Energy Bills so High?
While there is no doubt that these high prices are in part due to the wholesale cost of gas, there’s evidence that some electricity generators are charging much higher prices to increase generation on days when flows of electricity from wind and solar plants fall.
To ensure a steady supply of electricity engineers at National Grid ESO, which manages the grid, have to work continuously with generators to manage supply.
On the days or hours when there is very little wind, National Grid takes bids from suppliers to fill in the gap via something called the “balancing market”. In recent months balancing market costs have risen exponentially.
Darren Jones MP, chair of the business, energy and industrial strategy committee told Sky News:
“The pricing seems very high compared to normal. What we need to understand is how much of that is related to the price of gas given the international gas crisis, and how much of that is due to potential bad behaviour of generators who are quite frankly taking the mick in order to make excessive profits.”
November 2021 saw the most expensive month on record with balancing costs reaching £541 which is nearly four times the monthly average.
This unprecedented peak led to the energy regulator Ofgem writing to energy companies about the issue. National Grid ESO has since launched a review of the market. The review will examine the timing and the cost of the “bids” made by power generators offering to take part in the balancing market.
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Fintan Slye, Director of National Grid ESO told Sky News:
“We wanted to ensure the rules and mechanisms of that market were delivering competitive outcomes for consumers.”
The severity of the UK’s energy crisis is in part due to the mishandling of its ambitious green agenda.
The UK is in a transition stage on its journey to reaching net zero. While we build our low-carbon energy systems we need to ensure we have “dispatchable power” which are sources of energy that allow supply to be ramped up or down to meet demand. In older electricity systems this was simply a case of burning more hydrocarbons when necessary. Wind and solar energy, which in 2020 made up 29% of the UK’s energy supply, are intermittent as they depend on the weather.
In order to balance out the shortfall when the wind doesn’t blow, and the sun doesn’t shine it’s essential to retain some dispatchable power which means being able to switch to some other source of power at short notice. With coal almost entirely phased out the only option is gas which is currently hugely expensive.
Unfortunately, the UK’s geography doesn’t help as the best option for dispatchable power which is also low carbon is hydroelectricity. Furthermore, batteries, green hydrogen, and carbon capture are not yet developed enough to be used on a scale large enough to cover days or weeks of shortfall.
There is nothing like soaring energy bills to focus the mind on the age-old problem of how we can better store power.
The closure of the Rough gas storage facility in the North Sea in 2017 left the UK with only enough storage to meet the demand of four to five winter days. While gas is being phased out and we are relying more on renewables such as offshore wind and solar we are stuck with solving the problem of intermittency, the periods of time when the wind doesn’t blow, and the sun doesn’t shine.
The key to securing enough affordable, low-carbon energy is more storage to make the most of the renewable energy available. Within the next five years the International Energy Agency (IEA) expects global power storage capacity to expand by 56% to reach more than 270 GW by 2026. This is being driven by a growing need to create flexible electricity systems which rely more on renewable sources.
According to a report by Bloomberg New Energy Finance, well established lithium-ion batteries are expected to dominate but their capacity is measured in hours rather than days. As the winter energy crisis has progressed new energy technologies have found renewed favour within the power industry.
It is time to concentrate on developing energy storage options which could help keep the lights on in the future. Currently, there are four long-range options being developed.
Hydropower has acted as a form of energy storage in the UK for decades, but the new breed of pumped storage could play an even bigger role than the giant hydropower plants of the past. The way hydropower works is quite simple. Electricity is used to pump water upwards into a reservoir when the market has ample power available. When electricity supplies become tight the water can be released at short notice to flow over a generating turbine to create electricity for the grid to use. In future projects could generate the same amount of electricity from slopes which are less than half as high by using a mineral rich fluid which has more than two and a half times the density of water.
The demand for hydrogen made from water and renewable energy is expected to boom in the decades ahead as governments plan to replace the fossil fuels used in power plants, factories and heavy transport with the clean burning, green alternative. What may not be realised is that green hydrogen can be used as a form of energy storage.
Dr Graham Cooley, the chief executive of ITM Power which makes the electrolysers used to produce green hydrogen, says:
“When the wind is blowing but the grid is oversupplied with renewable energy you can store energy in a battery for about an hour. But if you want to store energy for days or even months you need something new.”
In the past, the UK’s electricity system operator has had no choice but to pay renewable energy developers to switch off their wind turbines or solar farms to avoid overloading the grid with green electricity when power supplies outstrip demand. Using sunny weekends and windy nights to run electrolysers and create green hydrogen could help countries make better use of their wind and solar farms.
Concentrated Solar Power Storage:
New technology is already being pioneered which allows energy generated by renewables to be stored as heat. To give an example, the Crescent Dunes project uses the heat of a vast solar farm, concentrated using mirrors, to heat molten salt to temperatures of up to 560C. The salt can maintain this temperature until electricity is needed. Then, the heat is used to run a conventional steam turbine which generates enough electricity to power 75,000 homes long after the sun has set.
According to the IEA, concentrated solar power is typically stored for between five to 15 hours, more than three times the duration of traditional lithium-ion batteries. Unlike batteries, which have a finite number of charge/discharge cycles, the molten salt, or molten silicon, can be used indefinitely and can be recycled when the units reach the end of their 20-year service life.
Within the next year one of the world’s biggest liquid air, or “cryogenic”, batteries will begin operating near Manchester in the UK after its developers promised it could help store renewable energy for weeks rather than hours.
The project being developed by Highview Power plans to use renewable electricity to chill air to -196C, transforming it into a liquid that could be stored in large metal tanks for weeks. When needed, the liquid can be turned back into gas, and used to turn a turbine and generate enough electricity to power up to 200,000 homes for five hours. The full-scale “cryobattery” will have a capacity of 50MW or 250MWh over a five-hour release time.
Payment from UK Renewables
The UK’s wind and solar farms could help to reduce household’s energy bills by paying back almost £800m to consumers by the end of the winter. According to official figures, households earned a £157m windfall from renewable energy generators for the first time in the final quarter of last year following record high market prices.
The body responsible for managing renewable energy payments, the Low Carbon Contracts Company (LCCC) has forecast paybacks from the industry could increase to a total of £770m by the end of winter, shaving an average of £27 from the annual home energy bill.
However, according to the industry, customers might have been in line for multibillion pound paybacks worth about £140 for a typical annual energy bill if the UK’s renewable energy rollout had taken place sooner.
The system that typically sees renewable energy projects receive payments from household energy bills to top up the earnings from the energy market to an agreed level, is supposed to protect households from surging market prices. Renewable energy projects in return, are expected to pay cash back to consumers when market prices outstrip the set subsidy level.
Based on official figures form the last quarter and according to analysis by SSE, the UK’s pipeline of renewable energy projects, which are expected to be under construction until 2023, could have saved households £3.9bn if they were operating this winter.
It is widely agreed within the industry that in order to avoid an energy crisis caused by soaring gas prices, investment in low-cost renewables needs to be encouraged so that the UK can decrease its reliance on very expensive fossil fuels. The UK needs to build more of its own clean energy infrastructure and invest in the network infrastructure to connect it all if we are to be protected from the next energy crisis.