Utility Week

12 | 11TH - 17TH OCTOBER 2019 | UTILITY WEEK Policy & Regulation Market view N ational Grid came under fire in the summer aer more than a million homes were le without electricity. The incident was somewhat unique in nature but does spark further thinking about the future of grid stability as we transition the nature of our energy production. One important aspect of ensuring stable supply is of course the National Grid's bal- ancing mechanism, so it was good to hear at an energy conference in September that the company is working to make it easier for other providers to enter this market. The full cost of power Sadly however, the priorities being examined in opening the balancing mechanism (BM) market appear short term and narrow. As confirmed by the conference speaker, when balancing mechanism units are chosen, the decision is based purely on a cash-cost-of- provision basis – cheapest wins. I'm all for getting value from your deci- sions, and National Grid has a duty to ensure value for money for consumers and industry alike, but if that is the case then at all points in the analysis we must ensure that the full and true costs of each power unit bought are taken into account. Climate change is rarely out of the head- lines and the potential costs are ever more accurately assessed. When considering power provision we should always broaden our approach to ensure knock-on effects like pollution and environmental damage are accounted for. The impressive rise in renewables clearly demonstrates that we can do that in bulk power decisions, why not in the BM? The good news is that there's a simple method we can use to take the long view on the impacts – the social cost of carbon (SCC). The long term view Figures for the carbon emissions per MW of power from different generating sources are available from many sources, such as those from the World Nuclear Association (2011) shown in the table above. These represent averaged values and are useful as a gen- eral indicator, but for each BM applicant it would be a useful requirement (and a sim- ple achievable specification) that they quote the measured emissions characteristics for their generation source. In some cases this is already done. Various sources have identified values for SCC, which can be defined as the "marginal cost of damage caused by an additional ton of carbon dioxide emissions". Disparate values There is a wide disparity in SCC across the literature, with numbers as high as $1,000 / tCO2 down to as low as $12/tCO2. However, values in the $40-100/tCO2 range are widely quoted. A globally consistent value would be useful to have (research donations grate- fully accepted), but in its absence, $60/tCO2 would be a good estimate. So, without much mathematical prow- ess it's pretty simple to multiply these two numbers (volume of CO2 per MW x cost of carbon) and add that to the basic quoted cost from a generating source to establish a long term view of the true cost of provision of that BM unit. Granted, this is a cost num- ber calculated to take a view over a much longer period than normally associated with the balancing mechanism, but surely it represents a more complete, rational and sustainable view of cost than the immediate self-gratification of an (incomplete) cheap- est-past-the-post wins decision? Steer away from flawed judgements If the governments targets of net zero emis- sions of CO2 by 2050 are to be met, some very difficult and technologically challeng- ing developments need to happen. Basic sci- ence will need to be investigated, engineers will be intellectually stretched and many billions of pounds of investment will need to be made. But let's also look for some simple, effec- tive and immediate methods that can be adopted. "Cash today" cost of energy is of course extremely important, and without fail we must have sufficient scale of provision in reserve to call on. Some of that provision will by commercial necessity be older systems that have higher emissions than we might prefer. But for the medium term we will have to accept that as a necessary evil. However, including an SCC measure in our thinking would allow us to preferen- tially select lower pollution sources where they exist for BMU provision, calling on pro- gressively more polluting technologies only when we need to. This is especially sensible when our BM energy system has a widening set of genera- tion options and the market is being actively opened to new entrants. Including SCC in our energy choices across most provision activities and for certain within BM provi- sion, seems intellectually and operationally trivial to accomplish – why wouldn't we fac- tor that into our thinking? Phil Hart, professor and director of energy and power, Cranfield University Net zero: don't ignore the low-hanging fruit It's difficult to modify National Grid's balancing mechanism to take into account the environmental costs of different generation technologies, but Phil Hart says there are some simple solutions. EMISSIONS FROM ELECTRICITY GENERATION Source Emissions (tCO2/MW) Lignite 1.054 Coal 0.888 Coal + CCS 0.200 Natural gas 0.499 Natural gas + CCS 0.165 Oil 0.733 Solar PV 0.085 Biomass 0.045 Nuclear 0.029 Hydro 0.026 Wind 0.026 Source: World Nuclear Association

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