Tuesday, 28 June 2016

With Brexit UK may not need any more power stations as electricity demand falls still further

One largely unintended consequence of 'Brexit' is that the economic uncertainty and reduced economic growth are likely to produce a further fall in electricity demand which may mean we do not need any more big power stations other than those already being built.
Lost behind the usual blizzard of insistence that blackouts will result if we don't build more gas and nuclear power plant is the fact that electricity demand has fallen over the last decade. According to Government figures (see DECC energy statistics) electricity demand fell from 406 TWh in 2005 to 359 TWh in 2015. Even since the economy began to grow again after the crash consumption fell from 384 TWh in 2010.

The reasons for the decline are threefold. First electricity prices have remained high. A lot of this is because we are having to import increasing quantities of natural gas from abroad,  and that gas is more expensive than what we have enjoyed coming from the now depleting North Sea fields. Grid costs have increased and green levies such as the carbon floor price have put prices up. Second, energy efficiency policies (including energy efficiency standards introduced by the EU) have repressed demand, and thirdly economic growth these days is much less energy intensive than it used to be (even in the 1980s) because of a switch from industrial production to services.

But now Brexit seems likely to reduce economic growth to at best a few points of a per cent in the near and perhaps more prolonged future. Consensus Economics, for example, has predicted UK economic growth to be down to 0.4 per cent in 2017. Any rate of economic growth below 2 per cent per annum seems likely to see falling electricity demand on the basis of recent experience.  In addition, as Cornwall Energy Associates have pointed out, electricity prices are going to keep on rising. Ok, perhaps by not as much as an increase in the longer term as if we had Hinkley C (which seems now even more likely to be cancelled), but they will still rise.

If you put all of the factors together electricity demand seems likely to fall, perhaps quite substantially. Aurora energy have already been projecting (before Brexit) that our new power station requirements for the medium term would be modest.

The Government has yet to make good use of its levers to make the electricity system more flexible. The National Grid has been criticised by the House of Commons Energy and Climate Change Select Committee for alleged conflicts of interests which deter it from making optimum use of demand side response and other demand reduction techniques. There is only a snails pace response by the Government to encourage the more widespread adoption of electricity storage techniques. In addition to that the National Grid already has, through the 'Supplementary Balancing Reserve' the means to take-up supply from power stations that might otherwise be closed down.

In the 2030s we are likely to see an increasing demand for electricity to power electric cars. Yet such demand has great potential to fit into an electricity regime increasingly dominated by fluctuating renewable energy sources. ''Grid to vehicle' and 'vehicle to grid' electricity systems will act as a crucial means of matching demand to supply.

I do also disagree with arguments suggesting that the alternative to Hinkley C is gas fired power plant in the quest for decarbonisation of our electricity supply. It is not. It is renewable energy, and the Government is ignoring vast resources of cheap onshore wind and solar power, in addition to the resources of offshore wind. All of these options are going to be a lot cleaner, cheaper and certainly much more deliverable than new nuclear power.

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