Increasing volatility driven by greater penetration of renewable power will require a major increase in system flexibility, according to Ørsted CEO, Henrik Poulsen.
Posting half-year results, the company demonstrated resilience to the impacts of Covid-19, with operating profit up 11 per cent to DKK 8.2bn (£991m), though second quarter earnings were negative.
The UK business was most impacted in terms of demand for power, said Poulsen and he expects “similar, maybe slightly smaller impacts” in the second half of the year. In some cases, energy suppliers and their business customers may need to resolve “important” discussions around contractual arrangements, he said.
The UK electricity system operator has had to work harder to keep the system stable due to exceptionally low demand as a result of Covid, with a significant increase in balancing costs.
With the ESO planning to run the system entirely on renewables when possible within five years, this summer has provided a glimpse of the future.
“As demand goes down the share of renewables in the mix goes up, driving additional volatility,” said Poulsen. “Ultimately volatility needs to be matched by increased flexibility either in production, dialling up or dialling down. Or to add storage mechanisms to production and consumption to smooth out peaks, or to [add] more flexibility from industrial consumers.” Either way, he said, “There is no doubt there is a big need for building more and more flexibility into the end-to-end energy system to create better alignment.”
Ørsted is “investing in the ability to have our offshore wind farms respond as quickly as possible to any imbalances in the system; increasing the responsiveness of offshore wind production is high on our agenda,” added Poulsen.
The company is also building battery storage alongside some of its generation projects, but Poulsen said hydrogen production via offshore wind power could also play a balancing role.
The company last week received government funding for the Westküste 100 hydrogen project in Germany. The initial plan is for a 30MW electrolyser, though “the ultimate ambition is to create a 700MW capacity electrolyser”, said Poulsen.
Meanwhile Ørsted is building a sustainable fuels hub at Copenhagen Airport along with companies such as Maersk and airline SAS. It could be producing transport fuels as soon as 2023, said Poulsen. “The vision is to become what could be one of the world’s largest electrolysers for hydrogen production,” he added.
The earnings press conference may have been Poulsen’s last before stepping down as CEO. The search for his successor is ongoing.
Full results here.
ESO may be planning that all electric supplies will be delivered from renewables “if possible within 5 years” but this ignores the fact that the total UK energy demand must be supplied from zero carbon energy by 2050. The latest BEIS data shows that the UK’s total energy demand in 2018 was 2,226 TWh and rising, while renewables that year were only 84.6 TWh or just 3.8% of the total. It is arguable that our total energy demand must be supplied by zero carbon electricity by 2050 with some derived from heat pumps. Renewables energy production could be increased by many times over the next 30 years, but the amount of available land and sea will be a limiting factor. The only other source of zero carbon energy is nuclear power; while the UK Government has committed to build 8 new power stations similar to Hinkley Point C, at a 60% power factor each one will only generate 16.8 TWh or 134.4 TWh for all 8 when they are running. Instead of building expensive new nuclear power stations the UK should start retrofitting the gas fired power stations with small modular nuclear reactors (SMRs) that can be mass produced and taken to site with heavy transport, saving the cost of the steam generation, turbine and electrical distribution equipment already in place.