Energy Needs Informed Decision Making

The UK's energy industry is fragmented and a "˜system architect' is needed to inform technical decisions and take a holistic view of the energy system in order to secure the country's future energy supply, experts are warning.

Now academics at Newcastle University are calling on the Government to create an independent, expert body to inform energy policy.

The recommendation is included in a briefing note on energy policy to relevant MPs and other organisations, outlining a number of concerns about the fundamental problems facing the UK's energy market. These include: energy storage and distribution; energy pricing models; lack of competition; and water use in electricity generation.

Professor Phil Taylor, Director of the Newcastle University Institute for Sustainability, said, "Energy is a hot topic at the moment and the Government has made some positive steps to open up competition in the market, but much more work is required - and quickly.

There's an urgent need to reduce carbon emissions while protecting the UK's future energy security. It's vital that politicians move beyond short-term political soundbites and instead support those initiatives that could make a real and sustainable difference.

"The University is calling on the Government to establish a group of experts that can take a long-term view about what is required and inform technical decisions and energy policy in a more effective manner than the current situation. For instance, debate among policymakers focuses almost exclusively on issues of affordability and emissions reductions, ignoring the vital issue of the energy sector's use of water. This thinking risks locking the UK into a future in which water availability could put energy security at risk, and power stations could be forced to reduce production or even shut down if there isn't sufficient water available to keep them safely operational.

"But it's about more than just creating a body of experts and then continuing as before. The Government needs to work with the energy industry to fundamentally change the way energy is priced. Although we must make sure people can afford to heat their homes, for the majority of us energy is actually too cheap "“ this is why we leave lights on, keep appliances running and use machines at peak times when energy costs more.

"The current pricing model does not accurately reflect the high economic and environmental cost of generating, storing and distributing energy. In fact, because of the way energy is sold today it becomes cheaper the more we use. This is unsustainable. Instead, energy providers should be rewarded for providing tools and techniques that help customers use energy efficiently and cost-effectively. They also need to diversify the energy mix available to customers, so people can switch from gas to electric power and back again depending on what's cheapest at any given time.

"Policymakers and energy providers also need to do more to understand how and why customers use and generate energy so they can find ways to reduce demand on the network, especially at peak times. This means funding must be given to projects such as energy storage test beds and inducement trials, and the results used to inform policy decisions.

"There are a range of serious challenges facing the energy market, and policymakers need to think seriously about the wide ranging and long lasting effects their decisions will have. Only by addressing some of these inconvenient truths and engaging with the academic and business communities to ensure decisions are based on evidence and not just rhetoric will the Government be able to provide a secure and sustainable energy future for the UK." 

Energy policy briefing note

The Energy Act received Royal Assent on 18 December 2013. The Act is designed to establish a legislative framework for the delivery of secure, affordable and low carbon energy, and includes measures to enable the Secretary of State to set a decarbonisation target range for 2030. The financial goal is to attract £100bn of investment into the electricity sector. The act ensures consumer protection by limiting the number of energy tariffs companies can offer.

The group of academics are concerned that the Act does not take into account some of the more fundamental problems facing the energy market, putting the sustainability of the UK's energy systems at risk. We believe there are five areas that need further consideration.

1. Energy storage and distribution

2. Energy pricing models

3. Competition

4. Water use in electricity generation

5. The need for a system architect

Energy storage/ distribution

The national electricity network, put end to end, currently stretches twice the distance from the earth to the moon and cannot feasibly be replaced. It will struggle to cope with the substantial additional demands likely to be placed on it over the coming decades, such as decarbonisation and additional electrification of transport and heat demand.

Policymakers and energy providers need to do more to understand how and why customers use and generate energy, so they can look at ways to enable behaviour change and reduce demand on the network in peak times.

We need to find ways to store energy efficiently and effectively when plentiful and low carbon so it can be released during periods of high demand, high carbon or to keep the lights on after major storms have damaged network assets.

The £2m Science Central grid scale energy storage test bed being developed in Newcastle will allow us to develop and trial new technologies for energy storage and release in a real world 11kV electrical network operated by Northern Powergrid.

It is vital that projects such as Science Central are given the funding and support they need, and that the results are used to inform future policy decisions.

Energy pricing models

Most people in the UK think energy is too expensive and for some in society this is true, but it could be argued that for the majority it is actually too cheap. We leave lights on, keep appliances running and use machines at peak times when energy is more expensive because the current pricing model does not accurately reflect the high economic and environmental cost of generating, storing and distributing energy.

In fact, due to the way energy is sold today, energy becomes cheaper the more we use.

The Government needs to work with the energy industry to fundamentally change the way energy is priced, to enable us to move from a system where generation follows demand to one where demand is based on the cost of generation, storage and distribution at any given time.

Currently, energy companies make very small margins on each unit of energy produced, so they need to sell volume in order to make a profit. This leads to a bad deal for consumers, as there is no incentive for companies to help customers reduce their energy use.

Energy providers should be rewarded for providing tools and techniques that help customers use energy efficiently and cost-effectively. Energy providers also need to diversify the energy mix available to customers, so they can switch from gas to electric power and back again, choosing the cheapest source at any given time.

Competition

The UK's energy market is dominated by just six companies. The Government must do more to open up this market to new entrants, through regulation and infrastructure that allows smaller players to effectively challenge the existing suppliers and providers.

The way energy provision is managed needs to be transformed. Currently, companies that develop and build energy generators, whether wind farms, solar panels or tidal turbines, have to sell the energy they produce on the wholesale market. This puts them at a serious disadvantage to the big six energy suppliers, who can generate energy and then sell it back to themselves at preferential rates, before selling it on to customers at a profit.

Only when energy generation is rewarded at the same rate as energy provision and there is genuine competition in the market will consumers get the best deals.

Water use in electricity generation

Debate on the UK's energy future focus almost exclusively on issues of affordability and emissions reductions, ignoring the vital issue of the sector's use of water. This thinking risks locking the UK into a future in which water availability could put energy security at risk.

Research shows that energy pathways with high carbon capture and storage (CCS) or high nuclear capacity will lead to increases of between 30%-399% in water abstraction and consumption by 2050.

However, pathways with high levels of renewables have potential decreases of 20%-60% when coupled with increased energy efficiency.

Depending on the location of generation facilities, the UK could face localised water shortages and a decline in marine and estuarine environments. In addition, power stations could be forced to reduce production or even shut down if there isn't sufficient water available to keep them safely operational in the future.

It is vital that the levels of water use across potential energy pathways is given serious consideration and only those options that reduce carbon emissions while maintaining the UK's water security and protecting our marine and estuarine environments are taken forward.

The need for system architect

The UK has an unbundled, or some would say fragmented, energy industry. However energy systems contain many interacting and interdependent elements. The energy challenges we face today are so complex and long term that the Government should establish an independent, expert body who can act as an overall system architect for our energy system.

This group would be able to take a holistic, long term view about what is required and inform technical decisions and energy policy in a more effective manner than is currently being achieved.

Conclusion

There are a number of problems facing the energy market, and policymakers need to think seriously about the wide ranging and long lasting effect their decisions will have. The Government needs to ensure that the price of energy reflects the cost of storing and distributing it, as well as generating it, and that those firms that provide energy to the wholesale market are rewarded fairly with respect to those who sell it direct to consumers.

In addition, the impact of energy generation on water availability and the lower requirements for renewable energy sources must be considered to avoid a future in which the UK faces power shortages and even blackouts.

Finally, the Government should make better use of independent experts when considering energy policy.

©2014 Permission required. Angel Business Communications Ltd.