PowerSwitch

The neoliberal energy liberalisation gig continues to malfunction! --
and OFGEM's caving in...

Looks like we're seeing the rise of the "zombie power station" -- dead, but not yet out of action because it still might turn some valuable profit in a crisis!

Why build new power stations when you can ransom the capacity of the old ones when people are averse to freezing in the dark?

P.

https://www.ofgem.gov.uk/press-releases ... ter-201415

New tools available for National Grid to manage tight Electricity Supplies from Winter 2014/15

Thursday 19th December 2013


Ofgem has today approved additional measures that will be available for National Grid to use to manage tighter electricity supplies from next winter.

In Ofgem’s 2013 electricity Capacity Assessment published this June, our analysis showed that electricity margins could tighten in 2015-2016 to between around 2 and 5 per cent, depending on the outlook for demand.

Therefore, Ofgem considers it prudent to provide National Grid with the option of extra tools to help it balance the system against tighter electricity supplies from winter 2014/15.

Ofgem Chief Executive, Andrew Wright, said: “Our latest assessment on security of electricity supplies published this summer showed that electricity margins are set to tighten more quickly than previously expected in the middle of the decade. This is mainly because older coal power stations will close sooner.

“Britain has one of the most reliable power systems in the world, but with margins tightening there can be no room for industry complacency on security of supply. Therefore we have approved these new tools to act as an extra insurance policy that is available for National Grid to protect consumers’ power supplies.”

Ofgem’s decision gives National Grid the ability to agree contracts with power stations to provide extra reserve power to balance the system in peak demand periods. Mothballed gas-fired plant and other generators would compete for these contracts.*

National Grid will also be allowed to develop a new demand side product. It will be able to offer businesses a new opportunity to reduce their electricity use during times of high demand (between 4 and 8 pm on weekday evenings in the winter) in return for a payment. The amount they would receive would be determined through a tender run by National Grid next year.

Ofgem’s decision today means that National Grid can make preparations to be able to begin tendering for the services from Spring 2014, so that they could be delivered from winter 2014-2015 onwards.

{snip}

I don't see the problem of keeping generators available for the times when the demand exceeds what those wonderful wind turbines fail to deliver, because the wind has stopped blowing. Why indeed build new power stations? You probably have a valid point, but I am missing it. Can you clarify?

woodburner wrote:I don't see the problem of keeping generators available for the times when the demand exceeds what those wonderful wind turbines fail to deliver, because the wind has stopped blowing. Why indeed build new power stations? You probably have a valid point, but I am missing it. Can you clarify?

Perhaps I didn't explain this well enough. The issue isn't that we're keeping open old plant; we've done that for a decades. It's that OFGEM are now offering contracts to keep plant open -- locking in the higher costs of keeping mothballed plant at an operable standard.

In the longer term it would cost less per unit of power to: a) reduce power consumption by paying for those things with a lower marginal costs (e.g. insulation); b) building new generation capacity.

This is a short-term panic because OFGEM can't/won't take on the power generators and force them to do what's required -- and now they're in the mire because plants are closing and there are no policy measures to reduce demand/ensure new capacity gets built on time.

And for the industry, why would they want to build on time?; they can make far more profit from their existing generating assets by being late in the delivery of new capacity -- which again brings us back to the issue that OFGEM allowed the re-integration of generators and suppliers, creating the opportunity for companies to cream-off more profit.

Personally I didn't think that should involve building more in any case -- we should be funding projects to reduce demand in the long-term (even though recent changes to these schemes have made them useless in that respect). Its interesting that some of the payments the Government is removing from power bills are aimed at reducing consumption, which of course the power companies are not philosophically very keen on!

OFGEM could tell the generators to build a new plant, but they won't. Better still we could tell the generators to build a new plant or hand back their licence, and the Government could then offer a competitive design/build contract and get the job done. Given that new rules for the market being written by DECC effectively commit the Government to underwrite future costs, it makes very little difference to public finances in the end.

My problem is that OFGEM are enshrining past problems as a matter of policy rather than driving change, purely because the power/energy industry interests have bought-out politics, and thus no one will force them to do what's necessary.

Electricity demand can only be forecasted approximatly, no one can know exactly what the near future demand will be, let alone furthur ahead.
Likewise the exact available generating capacity can not be forecast accuratly, no one knows what will break or how long repairs will take.

Therefore to ensure a reliable supply of electricity there simply has to be some generating plant plant that is seldom or virtually never used.

This is nothing to do with arguments regarding the merits of public or private ownership.

Since electricity can not be economicly stored it has to be produced as needed.
One must therefore have available sufficient plant to meet the largest reasonably forseeable load, and to cover for the largest reasonably forseeable series of breakdowns.

If demand is only average, and no unexpected breakdowns occur, then such plant will lie unused at substantial expense.

Investing in new generating plant that probably wont be used, and at most will run for only a few dozen hours a year is most unlikely to be viable.
It is usually more sensible to keep old generating plant as a reserve since the capital was sunk decades ago. The only costs are maintenance, insurance and minimal staffing. Efficiency/fuel costs are of little consequence for seldom used reserve plant, what matters is low or preferably zero capital cost.

Reducing demand by insulation etc. does not help with the question of reserve generating plant.
If overall demand was reduced by say 20%, then some present generating plant would be scrapped (or not replaced at the end of its economic life) and the problem would still arise "what do we do when demand is slightly greater than expected"

adam2 wrote:
This is nothing to do with arguments regarding the merits of public or private ownership.

Hmm... is there not at least a tangential connection? Back in the day, the GEGB had an obligation to deliver a power-cut free supply. It invested public money such that the obligation was fulfilled. Some argued that this was not the cheapest method to manage the system and so privatisation was invented.

Now the individual generation companies do not have an obligation, or even an incentive, to ensure there are no power-cuts. Their primary obligation is maximising shareholder value.

So we have to have Ofgen to fix the market failures with instruments such as we now see.

Of course if they had listened to advice on PowerSwitch several years ago ...

For once I take issue with Mobbsey: power station operators should be paid some kind of "retainer" for having the capacity-to-generate available, for a variety of reasons but WTs variable output is of course a good one. The power stations should be chosen, for things like reliability, Carbon, cost etc. We may as well use power stations that are already there, unless newly-built types have some massive, game-changing advantage.

A range of type of payment should be available. I think that there is one called STOR for 100-ish hours per year at very short notice: people with UPS and the like can take part in it, and they're paid to have their generators available. What's needed in addition is a payment (lower per kWh than STOR) for 1000-ish hours per year too, to cover about 100 winter tea-times plus the odd nuke fallover.

All this is completely separate from the need to reduce use, as adam2 points out. Unless, of course, your use-reduction takes place only during those 100 winter tea-times.

OK here we are...

http://www2.nationalgrid.com/uk/service ... g-reserve/

STOR is needed because at certain times of the day National Grid needs reserve power in the form of either generation or demand reduction to be able to deal with actual demand being greater than forecast demand and/or plant unavailability. Where it is economic to do so, National Grid will procure part of this requirement ahead of time through STOR.

The latest round has a tender d/l on 1st April (no this is not a windup )

mobbsey wrote:Perhaps I didn't explain this well enough. The issue isn't that we're keeping open old plant; we've done that for a decades. It's that OFGEM are now offering contracts to keep plant open -- locking in the higher costs of keeping mothballed plant at an operable standard.

In the longer term it would cost less per unit of power to: a) reduce power consumption by paying for those things with a lower marginal costs (e.g. insulation); b) building new generation capacity.

This is a short-term panic because OFGEM can't/won't take on the power generators and force them to do what's required -- and now they're in the mire because plants are closing and there are no policy measures to reduce demand/ensure new capacity gets built on time.

And for the industry, why would they want to build on time?; they can make far more profit from their existing generating assets by being late in the delivery of new capacity -- which again brings us back to the issue that OFGEM allowed the re-integration of generators and suppliers, creating the opportunity for companies to cream-off more profit.

Personally I didn't think that should involve building more in any case -- we should be funding projects to reduce demand in the long-term (even though recent changes to these schemes have made them useless in that respect). Its interesting that some of the payments the Government is removing from power bills are aimed at reducing consumption, which of course the power companies are not philosophically very keen on!

OFGEM could tell the generators to build a new plant, but they won't. Better still we could tell the generators to build a new plant or hand back their licence, and the Government could then offer a competitive design/build contract and get the job done. Given that new rules for the market being written by DECC effectively commit the Government to underwrite future costs, it makes very little difference to public finances in the end.

My problem is that OFGEM are enshrining past problems as a matter of policy rather than driving change, purely because the power/energy industry interests have bought-out politics, and thus no one will force them to do what's necessary.

I completely agree about the need to focus primarily on demand (I'm sure this is going to sink in with the powers that be in the coming years but my goodness it's taking a long time!). But insulation is only going to have a modest effect on electricity demand.

Space heating accounts for about 20% of UK electricity demand but the vast majority of that is off peak storage heating. Storage heated homes, which account for around 8% of UK households, do see some peak space heat demand through topping up or secondary heating because many storage heaters perform so badly, but it's still a relatively small amount compared to their off peak demand.

In my view it's better to focus on hammering down appliance and lighting demands (which are found in all homes), in particular ones that are used at peak times. For each 100W you shave off the average home's peak demand you reduce UK peak demand by 2.5GW or 4%. You can achieve that by replacing a handful of halogens with LEDs.