Last week, Secretary of State for Business, Energy and Industrial Strategy to the UK, Rt Hon Greg Clark delivered a speech on the future of the energy market. Encouraged by the growing portion of renewable generation in the UK’s energy mix, he closed his address by calling for celebration, announcing that the Energy Trilemma is “well and truly over”.
In this response, Founder & Chief Technology Officer Matthew Williams and Chief Economist & Head of Government Affairs Richard Dowling together challenge the idea that the Energy Trilemma is “over” and examine how greater amounts of renewables will affect energy security and energy equity, should there be no change to the current grid.
Faraday Grid welcomes the government’s forward-looking strategy and commitment to a sustainable energy future. The UK has made great strides in its decarbonisation efforts and we should applaud this progress.
But it would be wrong to say the Energy Trilemma is over.
Customers looking at their rising bills would not agree that the Trilemma is over.
System operators grappling with increasing threats to system stability would not agree that the Trilemma is over.
So whilst we’re going in the right direction, we’re not even halfway to meeting our carbon reduction commitments.
Decarbonisation of energy is a critical global objective and higher portions of renewables can indeed be integral to a sustainable solution. But simply investing in renewable generation will not be enough to solve the Energy Trilemma in itself. Green energy does not necessarily mean cheap energy.
The Energy Trilemma is a relatively recent concept. Before we started worrying about carbon emissions, we had an energy dilemma: how to supply reliable and affordable energy? Large-scale thermal generation provided an excellent solution to this, supplying low-cost power and the inertia the system needed for a secure operation.
As we introduce more renewable generation, such as wind and solar, the system’s inertia proportionally reduces, making it increasingly harder to maintain reliable power using traditional grid technology. The way these sources destabilise the system is already apparent in some countries, like Australia, where power outages are becoming more severe and frequent.
Methods to compensate, ancillary services and backup power are available, but they are expensive. And whilst it is true that the costs of renewable electricity generation are plummeting, the physical challenges of integrating these renewables are putting a significant cost pressure on network infrastructure, not to mention ongoing subsidies.
As a result, we are able to achieve any two aspects of the Trilemma in the current system, but not all three at once. We can have low carbon generation that is cheap to produce, but the cost of stable delivery is very high because of all the additional technology and services.
What does this mean in terms of numbers? According to Aurora Research, the rapid growth of renewables could reduce wholesale prices by £40 per MWh by 2050 but these gains could be entirely offset by increases in non-wholesale costs and leave consumers no better off. The latest quarterly report from Drax found that the cost of balancing the British energy system has already reached a 10-year high, costing consumers £3.8m per day.
It is therefore incorrect to simply equate cheap renewable generation with falling energy prices for the end user. Despite more renewables, the British energy system remains expensive and boasts the highest costs in Europe for large industrial users. The country’s Energy Equity index, as measured by the World Energy Council, has been getting worse over the past years.
And this situation is not unique to the UK – other jurisdictions, such as Germany, Australia, California, and New York have seen the non-wholesale portion of electricity bills rise to up to 90%.
We and others are convinced that harnessing the power of low-cost renewables is our best bet to achieve decarbonisation. But adding renewables into an outdated grid that cannot effectively deal with the inherent variability of renewables will degrade the reliability and affordability of energy.
A recent peer review undertaken by Heard and colleagues on the feasibility of 100% renewable energy concluded: “Our sobering results show that a 100% renewable electricity supply would, at the very least, demand a reinvention of the entire electricity supply-and-demand system to enable renewable supplies to approach the reliability of current systems.”
In other words, the Energy Trilemma cannot be solved as long as the grid that provides the indispensable transport system for electricity remains static and fragile.
Greg Clark noted “The whole economy builds on the foundations of secure, low cost energy – that is just what talking about ‘infrastructure’ means”.
The message is clear – our economy could not exist without the availability of secure and affordable electricity. Only when we have an electricity system that can ensure this even at high levels of renewables will we be able to declare victory over the Energy Trilemma.