House of Commons Energy and Climate Change Committee A European Supergrid Seventh Report of Session 2010–12 Volume I Volume I: Report, together with formal minutes, oral and written evidence Additional written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/ecc Ordered by the House of Commons to be printed 7 September 2011 HC 1040 Published on 22 September 2011 by authority of the House of Commons London: The Stationery Office Limited £15.50 The Energy and Climate Change Committee The Energy and Climate Change Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department of Energy and Climate Change and associated public bodies. Current membership Mr Tim Yeo MP (Conservative, South Suffolk) (Chair) Dan Byles MP (Conservative, North Warwickshire) Barry Gardiner MP (Labour, Brent North) Ian Lavery MP (Labour, Wansbeck) Dr Phillip Lee MP (Conservative, Bracknell) Albert Owen MP (Labour, Ynys Môn) Christopher Pincher MP (Conservative, Tamworth) John Robertson MP (Labour, Glasgow North West) Laura Sandys MP (Conservative, South Thanet) Sir Robert Smith MP (Liberal Democrat, West Aberdeenshire and Kincardine) Dr Alan Whitehead MP (Labour, Southampton Test) The following members were also members of the committee during the parliament: Gemma Doyle MP (Labour/Co-operative, West Dunbartonshire) Tom Greatrex MP (Labour, Rutherglen and Hamilton West) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/parliament.uk/ecc. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Report of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are Nerys Welfoot (Clerk), Richard Benwell (Second Clerk), Dr Michael H. O’Brien (Committee Specialist), Jenny Bird (Committee Specialist), Francene Graham (Senior Committee Assistant), Jonathan Olivier Wright (Committee Assistant) and Nick Davies (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Energy and Climate Change Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 2569; the Committee’s email address is [email protected] A European Supergrid 1 Contents Report Page Summary 3 1 Introduction 5 2 Background 7 What is a supergrid? 7 3 The benefits of an integrated solution 10 Helping the UK meet its renewables targets 10 Offshore wind ambition 10 The advantages of an integrated approach 11 Renewing the onshore grid 12 Landscape and transmission assets 13 4 The benefits of increased interconnection 15 Balancing intermittency 17 Reducing the need for backup generation: reserve sharing 18 Economic opportunities 19 UK comparative advantage 20 5 Barriers to the development of a supergrid 22 Technological barriers 22 Interoperability 23 Supply chain constraints 26 Costs 26 Construction costs 27 Anticipatory investment 27 Cost sharing 29 Price arbitrage 31 Regulatory challenges 32 Political commitment and timeline 35 Conclusion 37 Conclusions and Recommendations 39 Barriers to the development of a supergrid 40 Annex I: Terms of Reference 43 Annex II: Different supergrid proposals and work streams in 2011 44 The North Seas Countries’ Offshore Grid Initiative 44 The All-Island Approach 44 The UK-Baltic Cooperation 44 The Irish-Scottish Links on Energy (ISLES) study 44 DESERTEC 45 Greenpeace proposals 45 2 A European Supergrid Formal Minutes 46 Witnesses 47 List of printed written evidence 47 List of additional written evidence 47 List of Reports from the Committee during the current Parliament 48 A European Supergrid 3 Summary In July 2011, contrary to the advice of the Committee on Climate Change, the Government increased its ambition for the deployment of offshore wind generation by 2020 from 13 GW to 18 GW. This is part of a plan to meet the UK’s commitment to generating 15% of energy from renewables by 2020. This strategy is a big gamble. On the one hand, the encouragement of offshore wind makes sense. Renewable energy is vital for climate change mitigation and the UK has a potentially huge resource that could amount to the equivalent of a billion barrels of oil each year. However, offshore wind is also a notoriously expensive and intermittent source of electricity, which could end up reducing the reliability of our electricity supply and imposing an unacceptable cost on consumers. The Government is banking on reductions in the cost of offshore wind and improvements in efficiency to make the numbers add up. This report shows that to make the gamble pay off, it would help if an ambitious transmission system was developed to match the ambitious plans for offshore renewables. This system could deliver electricity efficiently onto the grid, help to balance out intermittency and provide a route to export when supply is abundant. Only this way will our electricity system be able to cope with increasing penetration of intermittent renewables, situated far from where the electricity is needed. At the moment, the UK is virtually an electricity island. While the rest of Europe is increasingly interdependent, sharing electricity resources across borders, in the UK we continue to rely on our own power plants to produce our energy and our own transmission system to deliver electricity to where it is needed. The Government has only just begun to consider the options for interconnection and creating an offshore grid. It must agree to meet European targets for interconnection and set out further plans for the period up to 2050. We demonstrate that immediate action will be necessary if the kind of offshore grid required to connect up new renewables and interconnect with other electricity systems is to be developed. While we applaud the Government’s involvement in negotiations such as the North Seas Countries’ Offshore Grid Initiative, these make no concrete commitments to new infrastructure. The Government must pursue the development of an integrated grid in home waters and begin bilateral negotiations to create new shared infrastructure with our European neighbours. The development of a methodology for sharing costs is particularly urgent. At the moment, we use point-to-point connections from a single offshore wind farm to the land, but this approach will reach its limits in the near future. It is costly, inefficient and requires a huge amount of infrastructure, particularly where electricity cables come ashore. By sharing transmission assets, we can save money and reduce the environmental impact of network reinforcements. The Government must undertake to calculate the environmental and social savings that could be made through offshore grid reinforcements and set this against the costs of construction. By integrating these lines with interconnectors, we can sell electricity when supply is abundant and import it when 4 A European Supergrid demand is high. Such a network brings its own risks. We believe that the cost of creating a European supergrid will be very high indeed. The Government should analyse carefully if the benefits are sufficient to justify the costs before proceeding down this route. We also recognise that reaching international agreement about the necessary regulatory and market frameworks will be extremely difficult. If we do not build as much offshore wind as we expect, new transmission systems built in anticipation of this generation could be left stranded at considerable cost to the consumer. This means that investment is unlikely to be forthcoming for the early stages of an integrated offshore grid. The Government must give certainty to investors about the long- term support on offer for offshore wind. It must also consider how to encourage early investment in offshore grid infrastructure, either through regulation or improving access to public finance for pioneer projects. To ensure that early investments do not become redundant, the Government must analyse how offshore networks can be combined with future “smart grid” and electricity storage technologies and how early assets can be made “supergrid ready”. In 1933, the “national gridiron” began operating as a series of regional grids with interconnections for emergency use. By 1938, these separate systems were linked up to form a truly national system. The national grid was, in its time, a model for the world. In the 21st Century, however, the UK is moving toward a system where major intermittent sources of supply are concentrated offshore, in the north of the UK and abroad. We can no longer afford to be an electricity island. A “supergrid” is an international network of electricity cables, which integrates offshore renewables generation into the transmission system, as well as allowing electricity to be traded across borders. It is extremely unlikely that a full-scale European supergrid could be developed by 2020 and very uncertain whether such a system could be economically justified. However, we believe that there is a strong case for working quickly to achieve much more interconnection and integration of offshore networks, the building blocks of a supergrid. This kind of network will not develop by itself and the current approach has left the UK electricity system one of the least interconnected in Europe. The Government must end its laissez-faire approach to offshore transmission and set out a plan for developing an interconnected, integrated offshore network in time to make the most of our renewable resources. A European Supergrid 5 1 Introduction 1.