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Deloitte on UK electricity to 2020

Posted by Chris Vernon on March 4, 2006 - 2:14pm in The Oil Drum: Europe

Deloitte's Energy, Infrastructure and Utilities division have recently published a report on the UK electricity environment. Its title: 2020 vision - Meeting UK power generation objectives in 2020.

The focus of the report is quite rightly on UK electricity supply recognising that 2006 should be "a watershed in UK energy policy." The executive summary includes this on the emerging energy gap:

By 2020, over 50GW of new or refurbished generation capacity will be required which represents circa two-thirds of current capacity - equivalent to either 55 new CCGT's, 30 new nuclear power stations, 95,000 on-shore - or 40,000 off-shore wind turbines.
These figures give an idea of the challange the UK faces over the next 14 years, more than 3.5GW per year starting now. It's clear 2006 isn't going to hit that target so the objective, if business as usual is to continue unchanged looks more like at least 4GW per year starting in a few years time.
The challenges facing the UK are identified by the report as:
  • Declining gas reserves
  • Reducing civil nuclear capacity
  • Renewables growth (rate slower than required)
  • Climate change (closure of uneconomical coal plant due to emission profile)
  • Rising and volatile gas prices
Remarkably this list is a perfect match to the presentation I gave at the PowerSwitch conference July 2005 (link 0.5MB .pdf). The Vital Trivia article UK Gas and Electricity Crisis Looming article also covers the material.

The report doesn't only highlight the problem but also looks at what can be done about it. It is clear that significant policy decisions must be made, to this end the need for consultation is identified and stakeholders are identified.

Four possible scenarios for 2020 are considered:

Business-as-usual with a low gas price, which increases the gas share to 70%, doesn't build any more nuclear as the fleet is decommissioned, significantly reduces coal burn and increases the renewable contribution to 15%. Investment: £22bn, cost of generation: £31/MWh.

Business-as-usual with a high gas price, similar to the first scenario but only 50% from gas (still considerably more than today!), the remaining 20% to come new integrated gasification combined cycle (IGCC) and carbon capture and storage (CCS) coal plant. Investment: £32bn, cost of generation: £40/MWh.

Diversified portfolio, here the current gas share is maintained at 30%, IGCC and CCS provide 20%, limited new nuclear build increases the contribution to 15%, renewables provide 20% and the remaining 15% is provided by CHP and fuel cells. Investment: £51bn, cost of generation: £41/MWh.

Low carbon, again the current gas share is maintained at 30%, IGCC and CCS provide 25% now, significant new nuclear build makes up 30% with renewables providing 15%. Investment: £50bn, cost of generation: £40/MWh.

These scenarios are very interesting. Firstly none assume a lower gas burn than we have today, I think this is reflects an unrealistically optimistic assessment of gas availability in 2020. Secondly all assume little or no demand reduction, the report is weak in this area.

My assessment: I suspect 2020 won't look exactly like any of these scenarios but rather be characterised by lower electricity consumption, provided by reduced gas burn (20%), reduced coal burn (20%), limited new nuclear build (10%) and increased renewables (10%) making 60% of current supply. Conservation and efficiency will enable that 60% of supply to deliver 80-90% of the utility electricity provides today leaving us 10-20% worse off than today in electricity terms.

My final quote from the report is this on gas prices:

Only four countries in Europe have greater than 35% gas penetration in their generation mix. The UK is set to join this super league within three years. With 200% volatility in month-ahead gas in 2005 (compared to circa 20% for the equities markets) and with gas price inflation running at 20% compared to 2.5% for the overall the economy, the UK may become an increasingly unattractive base for energy-intensive multinational industry.
To me this sums up the fundamental flaw in the current business-as-usual policy of not only importing gas to offset North Sea decline but also to replace decommissioned coal and nuclear plant. The road we are currently on looks like requiring 40% of gas to be imported by 2010, with construction expected to start on between 2,000 and 5,000 MW of CCGT within 18 months.

The challenge facing the UK is immense; though I believe with immediate and dramatic action the situation can still be saved. Deloitte are right to hope for 2006 to be a watershed. Hopefully this report will help to focus the debate since decisions made this year will determine whether the lights are still on in 2020.

Deloitte on UK electricity to 2020

PDF version

6 comments

goritsas on March 5, 2006 - 8:41am Permalink | Comments top
I have to say, great news there's a UK specific TOD.

I'd like to believe the notion that action now, 2006, would do much to mitigate the looming electricity deficit.  Sadly, I'm not sure this will be the case.

There are far too many pressures on TPTB today to make tomorrow a priority.  I think it's safe to assume the UK will be facing a very large electricty deficit by the time London 2012 rolls around.  In fact, I have a feeling that London 2012 will not be the games Seb fancies but will be hamstrung by ongoing electricity shortages up to and during the games themselves.

North Sea gas decline and the loss of most of our nuclear generation capacity before then makes me think we'll be lucky to get a 40 watt bulb over the dining table, let alone a splendid games, by 2012.

jimbo
;-)

Simstim on March 5, 2006 - 9:57am Permalink | Parent | Comments top
That assumes that consumption will remain constant or will increase.  There's a lot of low-hanging fruit regarding efficiency and lower consumption still to be plucked, however I suspect that the current PR push for nuclear suggests that TPTB are going for the increase in production rather than the decrease in consumption (presumably working on the electoral calculation that a few neighbourhoods pissed off at the nuclear power station in their locality are less damaging than telling everyone to install low-energy bulbs).
goritsas on March 6, 2006 - 7:49am Permalink | Parent | Comments top
Consumption, at least in the sort term, won't decline.  I think it's
safe to say there's enough latency in the system that in the absence
of prices at the meter being at least 3 times that now, demand will
increase steadily.  The rate might be price dampened, but not price
halted.

Only after a period of blackouts and brownouts, not necessarily
nationwide, but throughout the country reported over a time frame of
several months, will the pressure begin to build for conservation
measures.  As well as a demand for increased efficiency. (Although how
long will it take to turnover the entire UK stock of, say whitegoods,
replacing them with new and more efficient models is anyone's guess.)

Personally, I think this will come too late.  At such time as the need
for these measures becomes obvious, I think the situation will have
passed beyond the "low-hanging fruit" stage.  I believe this to be
true for three reasons.  First, UK electricity generation capacity is
set to drop by virtue of nuclear plant decommissioning.  Second, the
lead time between a transfer from gas to coal will prevent such fuel
changes from taking place until well after the "grace period" has
expired.  And, third, in Duncan's latest "Olduvai Theory"
(http://www.thesocialcontract.com/pdf/sixteen-two/xvi-2-93.pdf), he
points out the grid itself is in dire straights.

    3) Permanent Blackouts Are Coming

    The third catch, according to the Olduvai Theory, is that sooner
    or later the power grids will go down and never come back up.4 The
    reasons are many.  The International Energy Agency (lEA, 2004)
    estimates that the cumulative worldwide energy investment funds
    required from 2003 to 2030 would be about $15.32 trillion (T, US
    2000 $) allocated as follows:

    1. Coal: $0.29T (1.9% of the total),
    2. Oil: $2.69T (17.6%),
    3. Gas: $2.69T (17.6%),
    4. Electricity: $9.66T (63.1%).

    Thus the lEA projects that the worldwide investment funds
    essential for electricity will be 3.7 times the amount needed for
    oil alone, and much greater than all of that required for oil,
    gas, and coal combined.

Now, I'm not truly bothered by the loss of generating capacity.  It
was bound to happen at some point.  But I don't think it will become
an issue with any sense of urgency until after unpleasant things
happen.  At that point we'll have a massive round of blame and
recrimination, and the poor and the fixed income elderly will be
freezing in darkness because the cost for electricity will have become
prohibitive; not to mention quite possibly rationing will have begun
taking place and "priority" users (read government, military,
multinational corporations) will be given the lions share in the name
of "national security."

jimbo
;-)

MUDLOGGER on March 7, 2006 - 4:49pm Permalink | Parent | Comments top
The first step to ration cards and social control is a universal and compulsory ID Card system
goritsas on March 7, 2006 - 6:34pm Permalink | Parent | Comments top
For most of us our "National Insurance Number" will do just fine.
Sure, at some later date an enhanced version of the NIN will become
the National ID Card (papers! make sure you use a totalitarian voice)
but in the beginning a rationing effort won't require such.

After all, if the Inland Revenue can find you, and they can, then you
might as well accept one of two outcomes: submission or rebellion.
Frankly, those are the only two options.  To pretend your vote counts
is to share the same delusional lifestyle as any heroin addict.  So,
what's it going to be, I ask myself?  Do I bite the bullet and say to
HM Government (whoever the hell "they" are) "fuck off," you're not my
feudal lord, or do I meekly accept the oppression and vow to fight the
system from "within?"

Why is it that as little as a century ago I could ramble about the
Earth and never be asked for my "papers?"  Sure, there were a few
places some uniformed official might do that, but by and large, I
could move from place to place with little or no obstruction.  Can you
imagine if our ancestors had been required to "papers!" as they made
their way from Africa to Europe to North America?

Moving on, sadly, the road ahead is clear, come to terms with at least
Peak Oil, Climate Change, and Overshoot and die off, or die off.  If
one can at least grab these by the horns, make the adjustments
necessary to ensure one's genes make it into the "new" gene pool, then
one's life will be a success.  For those who "can't see won't see,"
genes like those don't serve the species in any case.

jimbo
;-)

MUDLOGGER on March 8, 2006 - 7:21am Permalink | Parent | Comments top
Yes, this brings up several 'brain teasers':

  1. ID Cards  NI numbers are theoretically all thats required, but it is believed that in excess of 1 million numbers above that actually required are sloshing around in the system.
  2. ID Cards with picture and bio-data and info can be easily read by a portable card reader.
Handy for apprehending those caught out after curfew...
3)UK Population Overshoot: Over the last 30 years, the phantom carrying capacity of Britain created by hydrocarbon wealth has probably enabled the UK to ramp up population to 65 million plus. Just as Saudi wealth has enabled Saudi Carrying Capacity to ramp up (but not for the
same reasons). So what will UK carrying capacity be be between 2020 -2050? If we get lucky, then the carrying capacity shall be nearer to 1900 levels. And that assumes that the prior source of energy (coal) can be matched.
4) Like many looking into a post peak future, I have teenage kids. So what do we suggest is a way through the bottle neck? What way of life, ways to earn a living be appropriate in the next decade, and note well: They see peers following the path of the last 30 years of conventional wisdom....

Deloitte on UK electricity to 2020

PDF version

6 comments