Trade groups and clean energy players have raised concerns over the UK government’s announcement to build more gas-fired power stations and plans for wider energy market reforms.
“While the government has chosen to emphasise the potential role of backup gas power in its announcement today, the renewables industry is doing all it can to deliver a carbon-free electricity system,” said director of policy and delivery at Solar Energy UK Gemma Grimes.
“New, grid-scale energy storage can make this a reality by storing power from renewables, enabling us to use clean, affordable power 24/7, 365 days a year.
“The storage sector is set to grow leaps and bounds in the coming years, to keep pace with the renewables revolution.”
James Alexander, CEO of UKSIF, said today’s announcement risks sending a negative signal to investors that the UK is prioritising fossil fuels over new investment into renewables.
He said: “The UK does need some base load energy provisions, but we should be focussing on attracting the billions in private investment which we know is waiting in the wings to deliver home-grown renewable energy.”
Andy Willis of Kona Energy, a clean energy development company, said the development underlines the “desperate need” for fundamental reform of how the grid connection process operates.
Kona said: “It is simply not fit for purpose, and without doubt the biggest obstacle on our path to net zero.
He said if a development can get online faster, delivering vital energy security, then that should be given priority.
UK energy programme lead at E3G Juliet Phillips said while the UK remains on track to be a clean power leader by 2030, having overseen continued exponential growth in renewables, due to policy failures over the last parliament, the government “has missed opportunities to build out the full offshore-wind pipeline, to make gains in energy efficiency, or address clunky network connection times – all factors that mean new gas plants have been announced today”.
Phillips added: “These must come with strict conditions that new plants can be retrofitted with green hydrogen or CCS in the future, to maintain the UK’s clean power leadership.
“In addition, more political attention is needed to often-over looked power solutions – like long-term storage and demand side flexibility – in order to get the UK off volatile fossil gas imports for good.”
The announcement about building more gas plants is part of a wider plans for electricity market reforms, including Capacity Market changes to incentivise new sources of zero-carbon flexibility and a new consultation on the Review of Electricity Market Arrangements
Reacting to the latter, a joint statement published by Solar Energy UK and RenewableUK has highlighted various industry concerns.
A “sensible reform package” arising from REMA is “essential to ensure we continue to accelerate private investment in clean electricity generation and build a cost-effective system but certain options could do more harm than good”, according to the renewable energy players.
One of the measures on the table is a move to zonal pricing, which would divide the wholesale electricity market into zones with different prices.
“In theory, this should incentivise generation to locate close to demand and alleviate constraints on the transmission grid. Although it is positive to see that this consultation now discards the earlier option of moving to a nodal pricing system (with the price set at hundreds of nodes across the transmission system), we remain sceptical about the claimed benefits of a zonal system,” said Solar Energy UK and RenewableUK.
“Zonal would introduce additional uncertainty into the market, raising the cost of capital for renewable energy at a time when we need to deploy around 10GW of renewable electricity generation capacity each year until 2035 to meet our targets and deliver a lowest cost clean energy system for billpayers.”
Ana Musat, Executive Director for Policy & Engagement at RenewableUK (pictured), added that consulting on the best arrangements to underpin the future electricity markets is essential given the levels of system transformation we have seen just in the last decade.
“We are glad to see the REMA consultation move away from the concept of nodal pricing, which would have been lengthy and expensive to implement and would have provided a disincentive to investment in renewable generation,” she said.
“The consultation is still inviting views on whether zonal pricing can be feasibly introduced while maintaining investor certainty. However, given stronger locational constraints faced by projects – such as planning hurdles, including a de-facto ban on onshore wind in England or grid connections, the influence of zonal pricing on location choices will likely be limited.”
Solar Energy UK and RenewableUK added they have fundamental concerns about the proposals.
The disruption caused by the implementation of zonal pricing could create uncertainty for investors in renewable energy, increasing the costs of financing projects. Ultimately, this could end up adding unnecessary costs onto renewable energy projects, they said.
It is also unlikely that such a system could be implemented in less than seven years, they added.
Furthermore, “a substantial amount of the theorised benefits of zonal pricing would arise from reducing constraint costs between 2025 and 2030, which would be unlikely to emerge if the reforms cannot be completed in a timely fashion”.
Good Energy chief executive Nigel Pocklington said “it makes no sense” to be pronouncing new gas generation when the country is still recovering from the shock of exposure to global gas prices, “let alone when the UK’s cheapest source of power, onshore wind, is effectually blocked”.
He added: “Meanwhile, the announcements on locational pricing have the potential to help make our energy system more fit for a lower carbon future.
“This is the real energy security measure announced today – more local, home grown clean renewable power brings down bills, carbon and our reliance on volatile gas markets.”