While Brexit may feel like the only game in town, president and COO of Global Transmission for National Grid Ventures, Jon Butterworth, says its most pressing challenge is how to cost-effectively accelerate the transition to a more dynamic low-carbon energy system, while maintaining a robust security of supply
As someone who is responsible for a significant amount of investment in electricity interconnectors that directly link Great Britain with mainland Europe, it’s fair to say the last two-and-a-half years have been hard work.
No matter what industry you are in, the Brexit process has been complex and unpredictable. I have a team of experts who have devoted hundreds and hundreds of hours to Brexit, attentively following each new twist, working with government, the regulator, and our partners, and preparing contingency plans for a range of outcomes.
But although Brexit has consumed enormous amounts of time and emotional energy, it’s certainly not the biggest challenge we face in the energy industry today.
I’m not downplaying the need to manage Brexit well for consumers, but the reality is that even under a no deal scenario we expect electricity to continue to flow between Great Britain and EU Member States. Irrespective of where we end up in the coming weeks (or months?), it will always make more sense for us to combine our resources and work together with our European neighbours to utilise every spare electron for consumers from Birmingham to Bratislava.
No, the most pressing challenge we face today is how do we cost-effectively accelerate the transition to a more dynamic low carbon energy system, while maintaining a robust security of supply? The speed and scale of renewables growth means we now need more flexible technologies that can help to reliably manage a far more volatile supply of energy.
Interconnectors are in many respects the perfect technology, because they enable flexible access to cheaper, low-carbon electricity from neighbouring markets. We have calculated that by 2030, around 90 per cent of the energy imported into Great Britain will be from zero-carbon generation sources, such as wind, solar, hydro or nuclear. Interconnectors also strengthen security of supply by providing access to a much larger and more diverse mix of generation. This is strengthened even further through interconnector participation in the GB Capacity Market (CM).
Since its introduction in 2014, the GB CM has been an important tool, alongside a number of others, to ensure security of supply in Great Britain. The GB CM is currently in a ‘standstill period’, following a ruling by the European Court of Justice in November, but the UK government and the EU appear confident they can get the GB CM reinstated in reasonable time. With that in mind, BEIS last month published its Proposals for Further Amendments to the Capacity Market consultation. In particular, it includes changes to the de-rating methodology for interconnectors.
The de-rating factor is a metric that aims to reflect the availability of each type of generation or interconnector during a time of system stress. For an interconnector, the key question is whether or not it will be importing to Great Britain.
In a recent report titled “Securely Connected”, energy consultancy FTI analysed the contribution of electricity interconnectors to GB security of supply. The report concluded that the current de-rating methodology underestimates the contribution of interconnectors, which are highly likely to import when needed. Consumers pay more when interconnectors, which are among the lowest cost participants in the GB CM, are undervalued. FTI estimates that if 1GW of interconnector capacity was removed from the most recent four-year ahead auction, consumers would have paid an additional £80 million through a higher clearing price.
In last year’s well-documented ‘Beast from the East’ storm, we saw how an electricity interconnector reacted to market signals and played an important role in contributing to security of supply in both the UK and France.
On Thursday 1 March 2018, the UK Gas System Operator issued a Gas Deficit warning, which caused a number of gas-fired power stations to reduce their output, thereby increasing GB power prices. As a result, the IFA (Interconnexion France-Angleterre) Interconnector, which had been supporting French security of supply earlier in the week imported at near full capacity to GB for the remainder of the high demand period. IFA ended up delivering power to both the British and French markets when they most needed it, making the energy system more resilient than ever before.
In some respects, we are living in uncertain times. But they are also exciting times for the energy industry, because we’ve never had a bigger opportunity to make things better for consumers and the world in which they live and work.
That means making sure we have the right policies and regulatory frameworks in place, such as the GB CM, to deliver a clean and secure energy mix at the best possible price for the bill payers. And that means delivering a smarter and more flexible energy mix in which new and more traditional technologies sit side-by-side: including renewables, gas and nuclear generation, battery storage, demand-side response and interconnectors.
Jon Butterworth is President and COO of Global Transmission for National Grid Ventures. Part of National Grid plc and separate from the core UK regulated business, National Grid Ventures’ portfolio includes interconnectors in operation, construction and development.