The Energy Institute’s first Energy Policy Debate of the year, chaired by Paul Spence, Former EDF Energy Director of Strategy and Corporate Affairs, considered the ambitious UK plan for a ‘Clean Power’ energy system by 2030. That Clean Power 2030 target consists of two principal goals: first, that clean sources (renewables and nuclear power) will produce at least as much power as Great Britain consumes in total; second, clean sources will produce at least 95% of generation, with the remaining 5% from unabated gas.

All three speakers agreed this goal is possible, but a ‘stretch’. Much of the discussion covered problematic areas.

Presenting the point of view of a leading power generator was RWE Head of Corporate Affairs Alice Barrs. She said: ‘Over the last five years, we added around 20 TWh of renewable generation to the system. That needs to move to 200 TWh added to the system in the next five years [a tenfold increase]. It's incredibly challenging.’

She pointed out that the contract for difference (CfD) auction later this year, AR7, will be the first real test of Clean Power 2030. To stay on track, and assuming all capacity is delivered by the CfD, it will need to procure at least 6 GW offshore wind, 3 GW onshore wind and 6 GW solar. Across AR7 and AR8, a minimum of around 12 GW of new offshore wind capacity with grid connections will be required by 2030.

Barrs mentioned a number of ‘headwinds’ slowing action. First is cost. ‘Commodity price inflation, rising interest rates and scarcity in the supply chain are pushing our development costs higher. So as a developer of offshore wind in particular, we’re observing total investment cost for offshore wind around 40% higher versus pre-Ukraine,’ she said. Other issues mentioned were financial, namely high inflation, rising interest rates and geopolitical tensions.

Finally, a big headwind is ‘uncertainty’ – particularly around whether the government will switch from national to zonal pricing – where the cost of electricity varies depending on local conditions of supply and demand and grid constraints. Barrs is opposed: ‘We, along with other many other developers and investors, think that moving to zonal pricing now will significantly increase the cost of meeting the clean power target, potentially making it unachievable.’

Octopus, however, is a huge proponent of zonal pricing. Fellow panellist and Octopus Energy Director of Regulation and Economics Rachel Fletcher said: ‘We have seen no research to show how alternatives to zonal pricing would address the wasted wind problem, how it would help us run our energy system more efficiently. Research which FTI [Consulting] have carried out and extensive modelling for us shows that consumers could save £3–5bn simply on improved system operation costs, with more savings coming through in terms of reduced transmission bills.’

However, both energy providers agreed that prompt government action on pricing would do much to alleviate the problem, whichever system it chooses.

For Fletcher, the biggest difficulty, ‘which is almost certainly not getting enough attention in industry’, is about people. ‘Losing consumer affordability and consumer support for the transition to clean power is the single biggest risk to achieving 2030.’

She later added: ‘Those of us fortunate enough to have professional jobs might not feel it, but there are huge swathes of the population in Britain today still paying off the debt that they incurred two years ago, and including energy that, by the way, were much publicised by Ofgem. This is still very fresh in people’s minds. So, in that context where I can’t afford anything, my energy bill looks too high, and it’s certainly a lot higher than it was three years ago, you need to be taking big chunks out of the bill. £5 here; £10 there ain’t going to be enough, frankly speaking, to vote Labour back in. That is, quite crudely, where we are right now.’

Fletcher also argued that the UK isn’t using its network flexibly enough, and questioned how achievable is the 12 GW target for flexibility. She estimated that the UK currently has only about 2 GW of flexibility from residential, business and industrial users, but that has taken 15 years to create.

She pointed to the results of research commissioned by Octopus and the Centre for Net Zero about consumer flex from heating and electric vehicles (EVs). She reported that proper use of flex could save £5bn/y in electricity system running costs. She explained: ‘That ‘s [about] using EV batteries and the ability to shift when you heat your home with electric heating, in order to suck up excess wind [energy], to reduce constraints and level-off peaks. Therefore, requiring less investment in the networks.’

‘Losing consumer affordability and consumer support for the transition to a clean power is the single biggest risk to achieving 2030.’ – Rachel Fletcher, Octopus Energy Director of Regulation and Economics

Distributing the load
The job of managing loads falls to distribution network operators (DNOs) and distribution system operators (DSOs). Director of National Grid’s DSO for the South West, South Wales and Midlands, covering 8 million meter points, is Ben Godfrey. He said that the network has about 6.5 GW of renewables and 4–4.5 GW of fossil connected in the network. ‘We are expecting now to double the amount of renewables that we connect over the next five years.’

He added that one of the biggest changes to grid connections over the past 15 years is the average size of project, from 10 MW then to about 40–60 MW today.

Godfrey went on to explain how the grid connection queues are being reformed – moving from a first-come, first-served approach to a first-ready, first-needed, first-connected approach. ‘This particular process will really help us align the top-down vision of system operation that we’ve got from NESO [National Energy System Operator] and from government to the bottom-up vision that’s been delivered by the market,’ he said.

He added: ‘We can certainly see that we’ve got some projects that are very ready, very needed right at the back of the queue, and they need to be coming forward… Equally, we’ve got some ‘zombies’ [projects with little real chance of being built] in the queue who are taking up spaces, and they just need to be managed out.’

He blamed the time it has taken to develop grid reform on the level of industry consultation to agree the right criteria to judge projects. But he reckons that ‘we have quite a good clear line of sight now’.

Godfrey expects the projects to be shuffled over the summer period, with outcomes due around September to October.

Nevertheless, this was a schedule which Barrs at RWE took issue with. ‘Can I just emphasise the importance of making sure those grid offers come in before the CFD auction? Because if we’re bidding into that auction, we don’t know when a CfD offer is, so September is perilously late.’

The next CfD auction opens in July.

Policy innovation needed
That theme was then picked up by Fletcher, who said: ‘I think the thing that policymakers are forgetting is that developers like us, if we’re given better information about what capacity is available on the grid, we can go off and do deals and come up with solutions that might make better use of that grid capacity than a top-down centralised plan would. Co-locating batteries for example with solar will create much less of a strain on the local grid than if those two projects are looked at as separate standalone entities.’

At that, Barrs chimed in to emphasise the benefits of innovation in the regulatory framework. She offered a hypothetical example: ‘Allowing developers to maybe share their grid connection. On the Humber, if you’ve got a gas station, you’re not really going to be operating when it’s windy. So, you might be able to take out your grid connection with a wind farm that’s connecting on the coast there.’

A similar issue has marred the government’s programme to roll out smart meters, according to Fletcher. ‘I completely understand why people don’t want a smart meter if all it’s going to do is give them access to an in-home display device that tells them what they already know, which is that their children are using too much electricity when they have the PlayStation on.’

‘The problem that we’ve got is that we’ve put the cart before the horse and we see this as an infrastructure for which the target is to get as many households in the country as possible, rather than the objective being let’s create a set of market arrangements and a regulatory approach to the retail market that encourages retailers and aggregators to come forward with products that help people save money and, therefore, as a byproduct of that want a smart meter.’ Fletcher added that this programme comes to an end this year, and the government is reviewing it.

Concerns were also raised about the short-termism of the 2030 plan, and that there wasn’t enough planned for what comes later.

Barrs pointed out that the Clean Power Action Plan also contained targets for 2035, which were interim and came from older ‘future energy’ scenarios. ‘We’re developing projects well out into the 2030s, so if your 2035 targets are used to re-order the grid connection queue and they’re not accurate and don’t reflect the realities of the project pipeline, that’s really problematic.’

RWE is asking for the 2035 targets to be revised as soon as possible, in order for the grid reordering system process to be able to factor in more ambition.

In other comments, Octopus Energy’s Fletcher looked even more long-term at another major shortage – the lack of data, digital and tech skills.

‘I think as an industry, and I’m including myself in this, we don’t have enough digital and tech skills. It’s one of the things that’s standing in the way of us being able to run an increasingly renewable electricity system efficiently. And there’s been huge publicity around skip rates for batteries [because, for various reasons, the grid doesn’t always send excess generated power to battery storage sites], which is really to do with the fact that we don’t have an automated balancing mechanism. There’s a lot still of manual intervention.’ Fletcher cited the presence of fax machines in system operator control rooms, and stated that these organisations need to develop.

On a final very positive note, she said: ‘Britain is in a fantastic place to lead the world on this; we’ve got one of the world’s leading tech sectors, I think second only to China or America. We’re way ahead on the renewables game of many other OECD countries. We really should be bringing these things together and showing the world how you use data and digitalisation.’

• Further reading: ‘Hot energy policy debate considers the role of citizen engagement in achieving net zero’. In April 2024, an Energy Institute hosted Energy Policy Debate saw four leading industry and academic speakers discussing the topic 'The energy sector can’t reach net zero without citizen engagement'.
• Simon Skillings, Senior Associate at climate change think tank E3G, looks at how the UK government, along with the National Energy System Operator, will oversee development of the electricity grid necessary to support progress towards net zero. He proposes a ‘Power System Delivery Office’ to take on the task.