Producers not Consumers Now Control the UK Electricity System
A recent press statement by the United Kingdom’s Transmission System Operator (TSO) shows that the consumer interest is no longer in the driving seat. The system is now run for the convenience and benefit of electricity producers.
On Friday afternoon last week National Grid issued a widely reported statement to the effect that at lunchtime on that day the instantaneous output from the United Kingdom’s nearly 12 GW of solar photovoltaic generation was 8.7 GW, which just over 24% of the load at that time and a new record.
National Grid developed its theme thus:
An increase in renewable generation poses an exciting challenge for National Grid, whose role as system operator is to balance the national transmission network, by ensuring supply and demand is matched second by second.
Duncan Burt, who’s responsible for control room operations said: “We now have significant volumes of renewable energy on the system and as this trend continues, our ability to forecast these patterns is becoming more and more important.
“We have an expert team of forecasters who monitor a range of data, to forecast just how much electricity will be needed over a set period.”
Duncan added: “We have planned for these changes to the energy landscape and have the tools available to ensure we can balance supply and demand. It really is the beginning of a new era, which we are prepared for and excited to play our part”.
Clearly written in haste so as not to miss the moment (“who’s responsible”), this incoherent statement reveals that National Grid is still coming to terms with a genuinely novel situation, one that they can hardly believe, so extraordinary and so favourable is it to their company’s future. It is certainly “exciting” for them, commercially exciting.
Hitherto, forecasters have indeed been concerned with predicting “just how much electricity will be needed”, but as the previous paragraphs show with the advent of a renewables dominated grid they are now engaged on forecasting what is about to be produced. The significance of this change cannot be overstated. The consumer has become a secondary consideration; and the producer interest is now the main focus of National Grid’s attention. Of course, though it has a regulated income and asset base, National Grid is itself part of that producer interest. The grid management “tools” to which Mr Burt refers, software, personnel, and hardware are expensively purchased with consumer funds, but without consumer consent. National Grid will balance the system brilliantly, of course, but very expensively.
If the United Kingdom is to flourish, this mistaken inversion of priorities must be addressed by the next government. The Conservative Party Manifesto remarked that:
A successful industrial strategy requires competitive and affordable energy costs. We want to make sure that the cost of energy in Britain is internationally competitive, both for businesses and households. (p. 22)
One can hardly imagine that sensible people in the other political parties hold any other views. This is motherhood and apple pie. However, as National Grid’s release shows, policies have in fact over the last decade or so, forced the consumer into a subordinate and powerless position, one where it is very unlikely that energy costs will be either competitive or affordable.
The implications for inward investment and the reindustrialisation that many now seem to desire are obvious. Where will an investor prefer to place capital in the hope of generating a return? An economy where electricity demand drives supply, or one where the System Operator forecasts supply and then adjusts demand accordingly? Even if there are rewards on offer for flexible consumers, the truth is that most businesses would prefer complete freedom of operation rather than a compromised liberty and the occasional lollipop.