Making the UK's energy systems fit for 2050-Generating the Future A report on UK energy systems...

News Release

18 March 2010

Making the UK's energy systems fit for 2050

http://www.raeng.org.uk/news/publications/list/reports/Generating_the_future_report.pdf">Generating the Future A report on UK energy systems fit for 2050

Fundamental restructuring of the UK's entire energy system is unavoidable if it is to meet future energy demand while reducing greenhouse gas emissions by 80 per cent by 2050, even assuming that energy demand in all sectors can be substantially reduced, according to a report published today by the Royal Academy of Engineering. If we are to achieve this, the scale of the undertaking will require the biggest peacetime programme of investment and social change the UK has ever seen, says the Academy.

Generating the Future: UK energy systems fit for 2050 considers four possible energy scenarios that could meet the 2050 emissions reduction target, each of which demonstrate that there is no single 'silver bullet' solution that will deliver the required 80 per cent emissions cut. Demand reductions through a combination of increased efficiencies and behavioural change will be essential. The scale of the engineering challenge is massive - the country will need to exploit its renewable energy resources to the maximum and supplement this with other low-carbon sources including nuclear power and coal- or gas-fired generation fitted with carbon capture and storage (CCS).

"There is no more time left for further consultations or detailed optimisation and no time to wait for new technical innovations. Infrastructure on this scale doesn't happen on political timescales," says Dame Sue Ion, chair of the Academy's energy scenarios working group. "It takes decades to prove and roll out large-scale major infrastructure so only those low-carbon technologies we already know of can help us to meet the 2050 targets."

The Academy created four possible scenarios for the UK's 2050 energy demand, all presented using energy flow diagrams - simplified versions of those used by DECC:

1. Level demand with fossil fuel prioritised for transport
   "Level demand" is still substantially lower than currently predicted for 2050 and is by no means business as usual. It would require over 80 new nuclear or CCS-equipped coal power plants before 2050, along with vast increases in all types of renewables, to meet a huge increase in electricity demand from about 42 GW to 127 GW, largely to replace fossil fuels used for low-grade heating. "Building new power stations on this scale is probably only achievable by monopolising most of the national wealth and resources," says the report.


2. Medium demand reduction with fossil fuel prioritised for low grade heat and electrification of transport


3. Medium demand reduction with fossil fuel prioritised for transport and electrification of low-grade heat
   Scenarios 2 and 3 both assume a demand reduction of around 28 per cent, mostly by reducing heat loss from buildings and hence the demand for space heating. Scenario 2 requires transport to be 80 per cent electrified while scenario 3 does the opposite, channelling all the available fossil fuel into transport and electrifying heating systems using heat pumps and resistive heating. There would still not be enough fossil fuel to meet demand and significant electrification of transport would still be needed. However, both these scenarios are more practical than scenario 1, needing around 40 new nuclear or CCS-equipped power plants to be built (these could be fuelled by coal, biomass or gas).


4. High demand reduction with fossil fuel prioritised for transport
   This scenario reduces overall demand by 46 per cent, again by improving buildings to reduce the need for low grade heating, which is almost completely electrified to conserve fossil fuels for transport. This would enable the electricity system to remain about the same size as it is today with about 20 new nuclear or CCS-equipped power stations being required. However, nearly 58 per cent of this scenario's electricity would be supplied by intermittent sources, well beyond the limits of what has been achieved before.

"The scale of the challenge is obvious when you look at DECC's UK energy flow chart for 2007," says Dr Ion. "Most of our energy is still supplied by fossil fuels. If we are to cut emissions by 80 per cent most of the fossil fuels will have to be replaced by nuclear power and renewables such as wind, solar, marine or biomass. We compared the 2007 chart with its equivalent for 1974 and it is almost identical - remarkably little has changed in the proportion of fossil fuels we use during 33 years. We are looking at a completely different paradigm over the next 40 years and beyond.

"Whatever happens in the future, we need to recognise that the changes required to the UK energy system required in order to meet the 2050 emissions reduction targets are so substantial that they will inevitably involve significant rises in energy cost to end users."

http://www.raeng.org.uk/news/publications/list/reports/Generating_the_future_report.pdf">View the report

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The experience of engineers shows that implementing fundamental changes
to a system as large and complex as the UK’s energy system to meet the 2050
greenhouse gas emissions targets will bring with it many challenges for
government, business and industry, engineering and the public alike. Turning
the theoretical emissions reduction targets into reality will require more than
political will: it will require nothing short of the biggest peacetime programme
of change ever seen in the UK.

While the market will be the vehicle for technological and business solutions,
the combined challenges of climate change, security of supply and affordability
call for a more directed approach from government. This transcends political
ideology: only government can facilitate and ensure delivery of the necessary
infrastructure, some of which, being natural monopolies, do not respond
classically to market forces. The market will not respond unless there is an
appropriate long-term national plan and a framework set out by government
to ensure the delivery of the necessary infrastructure in the wider context of
Europe.

Implementing such fundamental and widespread changes across the planning,
industrial, technological, economic, business and customer dimensions of the
UK’s energy system will only be achievable in the context of a national strategy
to coordinate and drive the process. Such a strategy needs to be informed by a
high degree of whole-systems thinking and be underpinned, from the outset,
by critical evaluation of the economic, engineering and business realties of
delivery across a system.

Despite positive steps, such as the creation of the Department of Energy and
Climate Change, current government structures, including market regulation,
are, as yet, simply not adequate for the task. This issue must also be addressed
as a priority by means of a reorganisation of government departments to
coordinate and drive action as well as to provide the clear and stable long-term
framework for business and the public that is not currently in evidence.

It also needs to be recognised that the significant changes required to the UK
energy system to meet the emissions reduction targets will inevitably, involve
significant rises in energy costs to end users.

Craig A. Severance, CPA is co-author of The Economics of Nuclear and Coal Power (Praeger 1976), and former Assistant to the Chairman and to Commerce Counsel, Iowa State Commerce Commission. His practice is in Grand Junction, CO.

Given this discrepancy, nuclear’s history of cost overruns, and the fact new generation designs have never been constructed any where, there is a major business risk nuclear power will be more costly than projected. Recent construction cost estimates imply capital costs/kWh (not counting operation or fuel costs) from 17-22 cents/kWh when the nuclear facilities come on-line. Another major business risk is nuclear’s history of construction delays. Delays would run costs higher, risking funding shortfalls. The strain on cash flow is expected to degrade credit ratings.

Generation costs/kWh for new nuclear (including fuel & O&M but not distribution to customers) are likely to be from 25 - 30 cents/kWh. This high cost may destroy the very demand the plant was built to serve. High electric rates may seriously impact utility customers and make nuclear utilities’ service areas noncompetitive with other regions of the U.S. which are developing lower-cost electricity.

Based on current industry practices, CBO expects that any new nuclear construction project
would be financed with 50 percent equity and 50 percent debt. The high equity participation
reflects the current practice of purchasing energy assets using high equity stakes, 100 percent
in some cases, used by companies likely to undertake a new nuclear construction project.
Thus, we assume that the government loan guarantee would cover half the construction cost
of a new plant, or $1.25 billion in 2011.
CBO considers the risk of default on such a loan guarantee to be very high—well above
50 percent. The key factor accounting for this risk is that we expect that the plant would be
uneconomic to operate because of its high construction costs, relative to other electricity
generation sources. In addition, this project would have significant technical risk because
it would be the first of a new generation of nuclear plants, as well as project delay and
interruption risk due to licensing and regulatory proceedings.

February 24, 2009, 4:30 pm

First Solar Claims $1-a-Watt ‘Industry Milestone’

By JAMES KANTER

The solar photovoltaic industry has plenty of supporters, but wider uptake of the technology has long been hampered by cost.

High costs have not just prevented consumers and companies plastering more homes and offices with solar cells. They also have bolstered the claim that large quantities of fossil fuels and nuclear power will be necessary in the future in part because solar panels do not provide value for money.

On Tuesday, First Solar, a global photovoltaic panel maker based in Tempe, Ariz., said it had reached an “industry milestone” by reducing its production costs to less than $1 a watt.

In a statement — seen by Green Inc. on Tuesday — First Solar, which has produced modules for solar installations in several countries in Europe, said it had brought costs down to $1 from $3 over the past four years through economies of scale by increasing its production capacity by 50 times, and by passing on those savings to consumers.

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Solar Energy Industry Electricity Prices

The solar electricity index below draws exclusively upon the global http://www.solarbuzz.com/Moduleprices.htm">Solar Module prices in our survey in the high power band exclusively (> 125 Watts). This price segment was down four cents in March 2010 (vs February 2010).

The March 2010 survey result saw reducing http://www.solarbuzz.com/Inverterprices.htm">Inverter prices, but unchanged http://www.solarbuzz.com/Regulatorprices.htm">Charge Controller and http://www.solarbuzz.com/Batteryprices.htm">Battery price indices.

The overall outcome is to drop the Solar III index to 19.37 cents per kWh in March 2010.

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Solar III: Industrial Index

This is a 500 kilowatt flat roof mounted Solar System, suitable on large buildings. It is connected to the electricity grid and excludes back up power. The Price Index includes full system integration and installation costs