EEFW/S5/19/EI/41

ECONOMY, AND FAIR WORK COMMITTEE

ENERGY INQUIRY

SUBMISSION FROM plc

Drax Group plc (Drax) owns and operates a portfolio of flexible, low carbon and renewable 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 include Cruachan – a flexible pumped storage facility within the hollowed-out mountain . Drax is pioneering bio-energy with carbon capture and storage (BECCS) at , 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 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 . 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 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 , 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/

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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 , 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.

Electric Vehicles

1. The impact of increasing numbers of EVs on electricity generation, transmission and distribution? There are now well over 200,000 EVs on Britain‟s roads, and this number is growing by 30% per year. 1 in 40 cars sold in Britain is now electric, around one third of which are pure battery models, and two thirds are plug-in hybrid. This radical shift is just beginning though. Britain‟s electric vehicle fleet is expected to expand ten-fold over the next five to ten years. In more optimistic scenarios, half of all vehicles on the road could be electric just fifteen years from now12.

Increased pressure on the electricity grid needs to be considered in the context of EV roll- out. The grid will require considerable investment to prepare it for the predicted increase in consumption that a switch to EVs will create. In the National Grid‟s Future Energy Scenarios, the two that reach net zero by 2050, “Community Renewables” (pink) and “Steady Progression” (yellow) will require an estimated 16GW – 24GW additional electricity generation at peak times to support the increased demand for power.

11 Energising Britain, 2018: https://www.drax.com/wp-content/uploads/2018/12/Energising-Britain-Drax- Imperial-E4Tech-Full-Report-Nov-2018.pdf 12 https://www.drax.com/energy-policy/how-clean-is-my-electric-car/

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Grid expansion is necessary to transport electricity between the locations of generation and consumption. Generator locations are changing due to the shift from fossil to low-carbon generators, but this also changes the generation pattern away from a more constant use of transmission lines towards more intermittent utilisation.

Grid congestion already occurs in Scotland, especially as plants are typically located in the more rural areas, some of which were already troubled by weak grid connections.

To ensure a grid that is fit for purpose will require investment in grid upgrades as well as investment in flexible generation and energy storage, which as mentioned above, can ensure a resilient grid necessary for a successful transition to net zero.

2. The role of EVs in balancing electricity transmission and distribution networks. Are new battery and grid technologies being adequately supported and rolled out to enable this? The generally accepted solution to manage grid constraints is the implementation of smart charging. National Grid has suggested that the implementation of smart charging could limit the increase on the grid at to between 11GW – 12GW by 2050. This is as a result of rebalancing the grid as users are incentivised to charge at times of low demand. In addition, vehicle-to-grid (V2G) services have the potential to keep the grid balanced by allowing customers to transfer their stored energy back to the grid for financial benefit. V2G services will offer further support the grid and limit the additional impact at peak demand to between 2GW – 3GW by 205013. The smart metering system offers a viable solution for the smart charging of EVs and smart charging regulations should provide adequate space for future V2G innovation as this technology is still in its early stages and is likely to develop significantly over the coming years. However, it is important that we explore this option amongst other viable solutions to assess if there are any other, more suitable, long-term options. The full impacts of utilising the smart meter system for EV smart charging are yet to be realised, for example, what would the impact be on a consumer who continues to operate a “dumb” meter in their home or the logistics for consumers without access to off-street parking. As such, and particularly in the event of an unsuccessful uptake of V2G services, the Scottish Government should support

13 National Grid. (2019). Future Energy Scenarios 2019.

5 Drax Group plc EEFW/S5/19/EI/41 alternative mechanisms to manage grid constraints, such as the deployment of additional pumped storage hydro.

It is important to review this given the suggested delay of the smart meter roll out to 2024, which was announced by the Department for Business, Energy and Industrial Strategy.

3. Are enough and the right type of EV charging points delivering accessible charging, and keeping up with consumer demand? EV battery life has improved significantly over the past few years, in high-end models, lithium ion batteries can now match conventional petrol ranges of 300 miles, however the charging time of EVs remains an issue and considerable investments are being made to bring charge times down14.

Scotland‟s progress with respect to EV infrastructure is significant, for example it has the second highest number of charging points in the UK after London15. However, according to 2018 data, Scotland has a low ratio of EVs per available charging point, linked to having a higher proportion of EV chargers and/or a smaller (absolute) number of EVs16. This means Scotland‟s infrastructure is ready for greater EV uptake.

Looking ahead, two key issues that will support EV deployment are smart charging and device interoperability. The UK government has stated that they want full device interoperability to avoid users being “locked-in”, ensuring a competitive electricity market. For this to occur, it will be necessary for the UK government to implement further requirements of chargepoint operators beyond the device itself. However, the UK government has also been clear that it does not want to stifle innovation, and the introduction of full device interoperability too early risks chargepoint operators standardising technology too early. The Renewable Energy Association (REA) has suggested that the UK government supports cross-collaboration between market participants, rather than direct intervention17. The UK government proposes that a long-term solution is put in place for 2025 and remains confident that their current lead option of regulating via the smart meter system and amended BSI standards will ensure device interoperability and cyber security.

It must also be noted that there is a case for bearing in mind progress at the international level as diverging from international standards can have negative implications for the UK EV market; namely minimising the level of imports/exports to and from the UK.

A further point worth noting is the need to provide a comprehensive network of public, domestic and non-domestic charging infrastructure. It is important to ensure that workplaces have the infrastructure available to offer charging facilities to their employees, particularly in

14 Catapault Energy Systems. (2018). Preparing UK Electricity Networks for Electric Vehicles Report. 15 https://www.zap-map.com 16 Energising Britain, 2018: https://www.drax.com/wp-content/uploads/2018/12/Energising-Britain-Drax- Imperial-E4Tech-Full-Report-Nov-2018.pdf 17 REA. (2019). REA Position Paper: The interoperability of public EV charging networks in the UK.

6 Drax Group plc EEFW/S5/19/EI/41 light of the vast array of research that suggests charging will take place mainly at home or in the workplace18.

Funding is currently available to support organisations to install EV charging infrastructure on their premises making it possible for them to host either charge points that are available 24/7 for use by the general public or for sole use by the organisation‟s fleet, staff and visitors. This could be further supported through various policy measures, including planning. We note that the current Scottish Government review of permitted development rights is looking to address electric vehicle charging infrastructure19. This is a welcome step which could help accelerate the deployment of charging infrastructure.

Other possible ways through which the Scottish Government could further support the development of a robust changing network is through building regulations. In the context of a recent UK Government consultation on English building regulations, Drax supported proposals for every new non-residential building and those undergoing major renovation with more than ten car parking spaces to have a minimum of one chargepoint and cabling routes for one in five spaces. We would encourage the Scottish Government to consult on similar proposals as soon as possible.

4. Given the declaration of a climate emergency, what more needs to be done to promote a change in culture where EVs are the preferred alternative to fossil fuelled vehicles? While this is not an area of expertise for our company, we believe that improving the roll-out of EVs in the non-domestic market can offer a number of advantages, not least by potentially helping to dispel consumer concerns regarding owning an EV as revealed by different polls20.

18 The basics of Electric Vehicle charging infrastructure: https://www.mckinsey.com/industries/automotive-and- assembly/our-insights/charging-ahead-electric-vehicle-infrastructure-demand 19 https://www.gov.scot/publications/scottish-governments-proposed-work-programme-reviewing-extending- permitted-development-rights-pdr-scotland/ 20 https://www.thenational.scot/news/18037662.half-scots-plan-buy-electric-cars-charging-worry/

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