EEFW/S5/19/EI/41 1 ECONOMY, ENERGY and FAIR WORK COMMITTEE ENERGY INQUIRY SUBMISSION from Drax Group Plc Drax Group Plc (Drax) O
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EEFW/S5/19/EI/41 ECONOMY, ENERGY AND FAIR WORK COMMITTEE ENERGY INQUIRY SUBMISSION FROM Drax Group plc Drax Group plc (Drax) owns and operates a portfolio of flexible, low carbon and renewable electricity generation assets providing enough power for the equivalent of more than 8.3 million homes across the UK. Drax‟s pumped storage, hydro and energy from waste assets in Scotland include Cruachan Power Station – a flexible pumped storage facility within the hollowed-out mountain Ben Cruachan. Drax is pioneering bio-energy with carbon capture and storage (BECCS) at Drax Power Station, the UK‟s largest power station, based at Selby, North Yorkshire. The successful deployment of BECCS is a key ingredient to meeting net zero commitments at Scottish and UK levels, as supported by the recommendations of the UK Committee on Climate Change (CCC). Drax also owns two retail businesses, Haven Power and Opus Energy, which together supply renewable electricity and gas to over 390,000 business premises across the UK. Our retail businesses offer renewable products and actively help Small and Medium Enterprises (SMEs) with their energy needs, as well as providing products to larger, industrial customers. In addition to working with our partners Eaton1 on battery storage options for our customers and with BeyondGrid to enable our customers to trade the power they produce2, Drax recently entered the non-domestic Electric Vehicle (EV) market providing an end-to- end EV proposition. This includes site assessment for suitability of EV infrastructure, installation of EV infrastructure and operating software, a leasing contract for the use of EVs, support for vehicle telematics, and the supply of renewable electricity at the charging points. We have begun to roll this out to a number of business customers enabling them to switch their fleets from traditional internal combustion engine vehicles to EVs. We welcome the opportunity to provide written evidence to the Committee‟s energy inquiry and agree with the Committee‟s assessment that „there are key linkages [between the issues identified by the inquiry] in relation to decarbonising energy systems and increasing the generation of renewable electricity, balancing transmission and distribution networks whilst powering increasing numbers of EVs and delivering innovative local energy systems‟. In anticipation of the Scottish Government‟s Climate Change Plan and Energy Statement, expected later in 2020, it would be useful if the Committee‟s inquiry was able to explore these issues upon which other policies such as the roll-out of EVs also rely. As such, we would like to offer some short introductory remarks. We welcome the focus on the climate emergency and review of policies to ensure they meet the ambition of the 2045 net zero target. In reviewing policies needed for net zero, it becomes clear that greater flexible generation and energy storage are needed, not least due to the greater role which electricity will be called to play in decarbonising different sectors of our economy such as 1 https://www.eaton.com/gb/en-gb/markets/success-stories/drax.html 2 https://gridbeyond.com/new-haven-power-gridbeyond-partnership/ 1 Drax Group plc EEFW/S5/19/EI/41 transport. Increased efforts will be required over the coming years to complete plans for how Scotland can generate the electricity needed to reach net-zero3. In line with our net zero ambitions, intermittent renewables will make up the majority of our electricity generation. Given Scotland‟s progress in renewable generation, the implications of decarbonisation for the electricity system as a whole are described in the Scottish Government‟s Network Vision 2030 document4. Due to the intermittent nature of renewable energy sources such as wind and solar, other more flexible sources of power need to be available to ensure that the grid functions in an optimal way. The electricity grid was developed when other sources of energy, such as coal, were prevalent. As a result, the mechanisms keeping the entire system stable – from the way frequency and voltage is managed to how to start up the country after a mass black out – relied on the same technology. Estimates underline that even if energy sources such as wind and solar made up 80-85% of our generation, there would still be a need for the remaining 20-15% to come from other low-carbon and flexible sources to maintain the system‟s stability5. This is acknowledged in the 2017 Energy Strategy. The table below provides an overview of ancillary services that can be provided by different power technologies6: 3 Completing plans for generating the renewable electricity needed to reach net-zero climate emissions was one of the 12 key recommendations by the Scottish Climate Emergency Response Group: https://www.energysavingtrust.org.uk/about-us/news/twelve-point-plan-tackle-scotlands-climate- emergency#targetText=On%20Monday%2026%20August%202019,around%20the%20world%20%5B2%5D. 4 The document states that: “The ability to operate the electricity system as a whole is becoming more challenging. The closures of large, thermal power stations across Britain, including those in Scotland, means that while discussions about infrastructure often focus on the capacity of networks to move power, a stable electricity system needs other services such as the ability to support voltage, detect faults, and remain resilient to unexpected events”. “We think, based upon our own analysis, informed by the work of the Scottish Energy Advisory Board, that there needs to be a greater strategic focus on regional security of supply. This means considering not only the networks, but also the location and characteristics of resources connected to them”. https://www.gov.scot/publications/vision-scotlands-electricity-gas-networks-2030/ 5 http://www.energy-transitions.org/sites/default/files/ETC_MissionPossible_FullReport.pdf 6 More information on ancillary services can be found here: https://www.drax.com/energy-policy/maintaining- electricity-grid-stability-during-rapid-decarbonisation/ 2 Drax Group plc EEFW/S5/19/EI/41 As has been highlighted elsewhere, it is important that the transition to net zero takes place in a just way which brings all members of society along. Ensuring that the transition happens in an affordable and secure manner is therefore important and investing in flexible energy generation can help achieve that. It is anticipated that investing in flexibility will be of considerable value to the consumer in the long-term. Research underpinning the joint UK Government and Ofgem plan for the delivery of a smart and flexible GB energy system estimated that the potential reductions in cost that could be delivered by effective competitive markets for flexibility were between £17-40 billion by 2050 and around £8 billion per year up to 20307. In its net zero report, the CCC also noted the potential value of system flexibility in achieving that target at the lowest cost to consumers8. The potential risks of a „slow start‟ scenario were also explored. In this scenario, the anticipated cumulative cost to consumers of constrained deployment of flexibility in 2020-2025 was estimated at around £9bn by 2050. However, according to the Energy Transition Readiness Index9, Britain was ranked eighth out of the nine countries, as regulatory uncertainty, lack of visibility on returns, and technical challenges connecting to the network are delaying investment in flexibility and could hamper renewables deployment in the 2020s. Looking at storage in particular, a recent report suggests that ten times more energy storage is needed for Britain to reach net zero climate target10. Britain risks failing to meet its net zero targets unless energy storage from technologies like pumped hydro and batteries 7 Imperial College and NERA. Value of flexibility in a decarbonised grid and system externalities of low-carbon generation technologies. 8 “Improvements in system flexibility have the potential to bring electricity system costs down by £3-8 billion/year by 2030 … and £16 billion/year by 2050 … by making better use of low-carbon generation.” https://www.theccc.org.uk/wp-content/uploads/2019/05/Net-Zero-Technical-Annex-Integrating-variable- renewables.pdf 9 The Energy Transition Readiness Index was published in November 2019 by Renewable Energy and Clean Technology (REA) and commissioned by Eaton and Drax: https://www.drax.com/press_release/britain-ranks- second-to-last-for-power-system-flexibility-in-review-of-nine-leading-european-countries/ 10 https://electricinsights.co.uk/#/reports/report-2019-q3/detail/what-next?&_k=bpo44m 3 Drax Group plc EEFW/S5/19/EI/41 increases tenfold to support more renewables on the electricity system. Getting to over 80% wind and solar power, as is suggested for reaching net-zero, might require an expansion from 3 GW of storage today to over 30 GW in the coming decades. In this context, it must be noted that pumped hydro storage dominates the UK‟s storage stock. According to Drax‟s 2018 report „Energising Britain‟, in total 3.7 GW of storage is active in the GB power system, of which 2.9 GW is pumped hydro, 0.8 GW is batteries (primarily lithium-ion), 0.4 GW is mechanical (flywheels) and the rest is thermal storage (liquid air and hot water storage)11. Given that Scotland‟s geography can support pumped hydro, there are distinct advantages to maximising opportunities for the deployment of this technology. Cruachan Power Station in Argyll is as an example of a power station that supports flexible and low carbon generation and storage while also enhancing the natural environment. The role of demand side response through reduced consumption at peak times should not be understated. The Electricity System Operator in their Future Energy Scenarios highlighted that the majority of EV‟s by 2050 will be smart charging, a significant proportion will be utilising Vehicle-to-grid services, smart appliance use will be at around 85%, and over 13GW of demand side response will be provided by large business consumers.