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Flexitricity CSO Alastair Martin. Image: Flexitricity.
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Lockdown lessons: how the pandemic will change the energy industry long-term

Flexitricity CSO Alastair Martin. Image: Flexitricity.

The coronavirus pandemic changed everything, in many cases very quickly. The effect of lockdown on energy demand was so rapid that Britain’s electricity industry found itself executing a handbrake turn. In doing so, the power sector has learned a lot about its own capabilities. Falling demand for electricity has helped break new records for the use of renewables – and for not using coal. The lesson from power is simple: we can be greener than we thought, sooner than we thought.

This development is important for the UK as it works towards a target of net zero greenhouse gas (GHG) emissions by 2050. However, with National Grid ESO having to work harder to balance the system at record low demand, this has highlighted the challenges involved, and has raised questions over how best to address them. As National Grid’s annual Future Energy Scenarios sets out, the combination of low demand, high renewables and flexibility will feature strongly in achieving net zero.

During lockdown, the UK used no coal for power generation for just under 68 consecutive days. This was the country’s longest coal-free period since the industrial revolution, far exceeding the previous record of 18 days set in 2019.

The 20% drop in electricity demand coincided with the sunniest spring on record in the UK. This together with periods of strong wind helped renewable energy sources to dominate during lockdown. The trend towards renewables was already underway, though, with official government data showing that low-carbon generation accounted for 47% of electricity generation in the first quarter of 2020 – up from 35.9% year on year and beating a previous quarterly record of 39%.

Lockdown began in the final days of that first quarter, on the 23 March. Much of the prior increase came from new capacity additions coupled with favourable conditions for wind generation. With most renewables having near zero marginal cost – wind and solar farms have to pay back their construction costs but have no fuel bills to worry about – green energy dominated and energy prices fell.

However, while the trends seen this year are milestones on the path to a net zero future dominated by renewable electricity, they have caused challenges for system operator National Grid ESO. At the start of lockdown, National Grid ESO sought – and obtained – emergency powers to disconnect smaller renewable generators, warning of “significant operational risk” associated with periods of particularly low demand.

These powers haven’t been used. Nevertheless, in electricity balancing, tough times mean higher costs. National Grid ESO projected in June that the Balancing Services Use of System (BSUoS) charges between May and August 2020 would total £593-725m depending on the level of demand suppression, against a projection made in February of £384m.

The costs and limitations of the supply-side response to volatility in power demand highlight the need for demand-side flexibility. As the UK prepares to phase out coal power by October 2024, demand-side players believe that ever greater flexibility will be needed, and are working with the government and Ofgem to help accelerate its development.

At Flexitricity, we now have over 500MW of customer-side flexibility under management from our 24-hour control room in Edinburgh, generating income for our customers. We use this to help balance the system during both peaks and troughs, when demand is changing rapidly, or in response to the ebbs and flows of wind and solar power. The half-gigawatt milestone marks the coming of age of flexibility within the country’s electricity industry. We believe this is the largest, most diverse and most advanced demand-response portfolio in the UK; it’s this spread that allowed us to become the first aggregator to trade industrial and commercial demand in the GB Balancing Mechanism, first as a direct participant and now also as a Virtual Lead Party.

Virtual power stations like Flexitricity’s are now as effective as traditional plants in securing electricity supplies, while being much cheaper and greener. We expect further dramatic growth in the demand response industry as the UK works towards its net zero goal.

This goal is in the UK’s sights as much as before, with COVID-19 not only failing to derail progress, but perhaps accelerating it.

In June, National Grid’s CEO, John Pettigrew, said net zero should be central to the UK’s recovery from COVID-19. He called for continued investment in a broad range of initiatives across three key areas – a clean energy workforce, economy-boosting infrastructure projects and opportunities for communities and consumers – in support of the net zero goal. As National Grid ESO’s Future Energy Scenarios work has repeatedly shown, this combination underpins every credible energy future. We knew that before lockdown; it’s uncontestable now.

This approach requires innovation, and that’s where the demand-side industry excels. The energy industry has already been transformed by non-traditional players adapting quickly to new conditions. This is a big part of how that handbrake turn was executed. The pandemic has been a terrible trauma, and the recovery will be tough. But the energy industry at least is now pointing in the right direction.

Contributer

Dr Alastair Martin Founder and chief strategy officer at Flexitricity

Dr Alastair Martin is the founder and chief strategy officer of demand response company Flexitricity

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