The UK faces serious power shortages when coal stations close, the Institution of Mechanical Engineers has warned.
While government has pinned its hopes on gas and nuclear picking up the slack, the Institution predicts that the UK will only have half the power it needs in 2025. The proposed new nuclear plant at Hinckley Point, if constructed by then, will not be enough. Meanwhile, around 30 new large gas power stations will be required to plug the gap and the UK no longer has the people or knowhow to build that many in ten years, according to the IMechE. “The UK is facing a serious supply crisis,” warned its head of energy.
In a report published this morning it recommends government urgently reviews the incentives for businesses and households to reduce demand and become more energy efficient. Government must also create clear, deadline-driven energy policy so that as much new generation as possible can be brought online before it’s too late.
While the Department of Energy and Climate Change (Decc) has tried to ensure the UK has sufficient generating capacity, the policy it has implemented has failed to incentivise building of new gas power stations. Old thermal plant and small gas and diesel generators are instead winning contracts because they can undercut new-builders in the auctions. That is because they do not have to factor in construction costs and the operational uncertainty facing new developers in a market disrupted by intermittent wind and solar.
When the wind blows and the sun shines, the abundance of renewable power on the system forces down the wholesale power price. That makes it uneconomic for thermal generators to run. Because their revenues are therefore less predictable, it makes investment in new gas power stations riskier. More risk equals more cost, and investors are currently unwilling to risk losing money in the capacity market as it is currently designed. That means the government will have to intervene again in the market or find another way of incentivising new gas power stations – and the longer it takes, the higher the cost to UK bill payers.
But the IMechE thinks it may already be too late.
“The UK is facing an electricity supply crisis,” said Dr Jenifer Baxter, head of energy and environment at the Institution of Mechanical Engineers. “We cannot relay on [gas power stations] alone to plug the gap as we have neither the time, resources nor… the skills to build sufficient power plants.
“Currently there are insufficient incentives for companies to invest in any sort of electricity infrastructure or innovation and worryingly even the Government’s own energy calculator does not allow for the scenarios that new energy policy points towards. Under current policy, it is almost impossible for UK electricity demand to be met by 2025,” she added.
“Government needs to take urgent action to work with industry to create a clear pathway with timeframes and milestones for new electricity infrastructure to be built including fossil fuel plants, nuclear power, energy storage and combined heat and power. With Carbon Capture and Storage now out of the picture, new low carbon innovations must be supported over the course of the next 10 years.’
She urged the National Infrastructure Commission to “take urgent action to prioritise greater energy efficiency by industry and clarify financial incentives for research and development of renewables, energy storage and combined heat and power.”
Read the full report here.