Reaching for the stars – decarbonising the UK energy system

There’s a bit of maths coming up but bear with me because it’s central to all of this. The Government anticipates that if energy demand goes down by 30% by 2050 (a big if), we will need 910 Terra Watt Hours or 910 million MW hours of renewable energy to achieve a net zero carbon generation system. That’s assuming that within 28 years over 75% of all domestic, industrial and transportation energy need is powered by electricity produced from renewable sources and the only thing left burning fossil fuels would be some industrial processes, cement manufacture, planes and shipping.  Sounds idyllic and if we assume the sun shone and the wind blew 24 hours a day we would need 103,881 MW of installed capacity (910 million MWhrs/8760 hours) to reach this nirvana. We currently have around 53,500 MW of installed renewable capacity and of this 81% is wind or solar. So moving from 53,500 MW to 103,881 MW in 28 years doesn’t seem so hard.

However and here’s the rub, the weather Gods don’t cooperate 24 hours a day and the  actual generation output of that existing 53,500 MW of capacity is only 28% of the installed capacity and for solar it is as low as 10%. If we optimistically assume that capacity factors will go up to say 40% by 2028, we would need 259,703 MW of installed capacity rather than 103,881 MW, an increase of 206,205 MW on what we currently have. To put this into context, Hornsea 2 is the largest wind farm built in the UK to date and has a capacity of 1,386 MW so to add 206,205 MW by 2050 we need to build another 149 of those in 28 years or about one every 3 months give or take. To put it another way, to reach a net zero generation system by 2050, we  need to add 7,364 MW of renewable capacity to the system every year for 28 years.

 Last year we only added about 3,843 MW including one very big offshore wind farm (Triton Knoll at 900 MW) and the difference between these two numbers (7,364 MW needed and 3,843 MW actual) is the very essence of the challenge facing our industry and the Government.

It is of course the dependable refuge of every blogger to talk about China when it comes to big numbers but to put this into relative context, the Chinese are adding an astonishing 200,000 MW per annum of renewables to their grid every year which if we matched on a per capita basis would be about 9,490 MW per annum for the UK.  Even at the very height of the 2015 solar boom, we only added 5,000 MW of capacity and the rate of annual capacity additions has been in decline ever since.  

So what’s stopping putting 7,364 MW of new capacity on the grid every year. Four things and these four things will be the reason the UK probably won’t get to net zero by 2050 but the Chinese just might. Firstly the constant problem of grid capacity. Our grid is much older and more congested than the Chinese equivalent and this makes things a lot harder. The queue to add renewable energy projects to the grid is now the longest in Europe and there are over 200 GW of projects trying to connect to the system.  However  most of these projects will probably never happen because they haven’t got planning permission (see below) or they don’t have the rights to the land or they are not bankable. Submitting an application was for far too long, far too easy and the grid operators are now belatedly taking steps to try and sort the wheat from the chaff in order to identify the real projects that may actually get built by introducing a first ready first served system. However untangling the knot of the existing queue whilst simultaneously upgrading the grid, will take years and every year that passes puts us further behind target.  

The Grid have also realised that we probably need a parallel offshore transmission system and they are taking steps with the development of the snappily titled Offshore Coordination Project which aims to connect wind farms together with cables on the seabed rather than having them each connect with a separate spoke to the mainland. Sounds obvious but probably a lot more technically challenging than you or I imagine.

The second impediment is local democracy and planning. Pretty much every blog I write about the UK energy system has a paragraph or two where I moan about the planning system. The UK is a little island which is very crowded in the little bit in the south and mostly empty in the far north. That said only 1% of UK land is used for housing and almost an equivalent amount is used for golf courses so the emotive term ‘crowded’ is relative.  Beijing is a crowded place to live with unsurprisingly not many golf clubs, Surrey maybe less so.  However the people who live in the ‘crowded’ bit of this country are very articulate and vocal about any more development so the problem is the places where you can get planning tend not to be where the energy is needed. Most of the speculative grid connection applications  referred to above are stalled because of planning objections and in the existing first come first served system, these applications hold everybody else up.

The inexorable nature of biology plays a part here. The Government would prefer that renewable energy plants are not placed on high quality agricultural land and would much prefer developers build on brownfield sites. That sounds sensible but nature abhors a vacuum so if you leave a site derelict and untended for say a year or so quite quickly nature will cheerfully start to recolonise it with wild flowers, insects, nesting birds, bats, newts etc. Nature would love to do the same recolonisation with agricultural land which is why farmers relentlessly spray it with lots of chemicals. Ironically prioritising brownfield sites rather than existing cultivated land probably reduces bio diversity because you don’t get as much wildlife in the latter.

The absurd complexity of the UK plannings system is nicely illustrated by the development for the Lower Thames Crossing, a relatively short stretch of road and tunnel under the river Thames in Kent. Now given that the Thames already has 214 bridges and 20 tunnels you would think that adding one more crossing would be straightforward but no. To date the National Highways Agency have toiled for 6 years, written a 66,000 page submission and spent an astonishing  £266.7M trying to get planning consent for basically another tunnel under a river which already has a lot of existing bridges and tunnels.

The Government is painfully aware that the myriad complexity of the planning system is holding up both road and renewable energy projects and a couple of initiatives may help the latter. For a start we could make a shift to nodal pricing of wholesale electricity whereby the price paid by consumers and industry will vary across the country according to the local cost of supply. This could be revolutionary as people and industry will see the economic benefit of locally produced renewable energy and hence the local community may just may be less likely to object.

Another initiative that works is the huge focus on offshore wind as the primary source of new renewable energy in the UK. It is in part driven by an imperative to avoid planning objections. Hornsea 2 is 55 miles off the coast of Yorkshire and an even longer way away from the ‘crowded’ bit so even your most fervent NIMBY would struggle to say it impairs the view from their kitchen window. Fortunately the fact that we are an island means we have surrounded by windy seas and the UK has the best potential for wind generation in Europe and one of the highest in the world.

The majority of the new 206,500 MW of installed capacity is likely to come from offshore because it has much higher capacity factors and is lot easier to get planning.

The third impediment that may prevent is reaching the 2050 target is the rising cost of steel and other components. A MW of wind power requires up 180 tons of steel and steel prices reached record highs in 2022 (though they have since fallen to be more in line with long term averages).  You will have read that Vattenfall recently cancelled the 1,400 MW Norfolk Boreas wind farm because of the mismatch between rising costs and electricity prices and other investors are now sucking a thoughtful tooth and rerunning their economics on current steel and electricity prices. Long term we expect the market will readjust so that the two reach equilibrium but as John Maynard Keynes said and Vattenfall seem to have ruefully realised, “markets can stay irrational for a lot longer than you can remain solvent”. 

The final impediment is money. Although costs have fallen dramatically, a MW of renewable costs about £2.5m supplied and installed so if we generously assume prices will come down to £2m in real terms, that 206,205 MW will cost the UK about £412 billion to build. Now that feels like a scary number but there are an awful lot of funds and banks who want to invest in renewable energy so the money is probably out there somewhere. However, the UK is just a little rainy country off the coast of Europe and pretty much every other country in the world is trying to transit to a low carbon generation system so there are lots of competing projects in the world.

The UK has taken steps by setting up the UK Infrastructure Bank and this has been given £22 billion which sounds a lot but it is less than 5% of what is needed so the other 95% has got to come from the private sector. In addition the obscure Solvency 2 regulations are designed to try and make it easier for London insurance companies to invest in renewable energy. This could open up £100 billion of available funds and in parallel, the regulators are succeeding in making it easier to list green bonds on the London stock market with now over 300 listed bonds. However a lot of other Governments are also trying to attract capital for their national projects and value of bonds issued on the London exchange in 2022 was only £13 billion compared to £45 billion in Germany and £57 billion  in China.  

In conclusion, the UK needs another at least another 200,000 MW of installed renewable generation capacity of it is to achieve  net zero target by 2050. This will cost over £412 billion or £18 billion a year or £40m a day. Every day for 28 years. To achieve this we will need four metaphorical stars to align and stay aligned for a long time; grid capacity, planning, steel prices and money.

Doubling the rate of installed renewable capacity per year whilst simultaneously fixing the grid and keeping the voters on board is an enormous challenge and it is probably delusional to think that we will have all that new capacity installed by 2050. We are going to struggle to build the equivalent of 4  Hornsea projects a year for the next 28 years because the grid, the planning system and the markets probably won’t play ball. That said  we live in hope and persevere because in life trying is better than not trying. It reminds me of that old joke at the end of the film Annie Hall. “A chap walks into a psychiatrist’s office and says, hey doc, my brother’s crazy! He thinks he’s a chicken. Then the doc says, why don’t you turn him in? Then the guy says, I would but I need the eggs”

That’s how everyone in the UK industry feels about renewables. We know it’s next to impossible to fully decarbonise the UK generation system within one lifetime but by breaking it down into lots of achievable projects we may just may get somewhere near it. We keep going because we believe in a carbon free future, the alternative is too bleak to contemplate and we owe it to the next generation to at least try.  We keep going because we need the eggs.