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Renewables on course to be the dominant force in Britains power mix


Renewables on course to be the dominant force in Britains power mix


"The rise of renewables and wind in particular is driving changes in activity in the GB market."
Paul Verrill, EnAppSys



Renewables are on course to overtake fossil fuels as the primary source of power in Britain during 2020.

A new report by energy market analyst EnAppSys predicts that renewables will generate 121.3TWh of electricity over the calendar year of 2020 compared with 105.6TWh from coal and gas-fired plants based upon current trends.

This assumes that the current trend of declining fossil fuel generation versus the rise in generation from renewable sources continues at the same annual rate.

Although the EnAppSys report shows that coal and gas-fired power stations produced a combined 130.9TWh last year against 95.9TWh from renewable sources, the latter figure was an increase of 12.7TWh (or 15.2%) on the previous year while the volume of fossil-fueled output fell from 140.3TWh in 2017 – a decline of 6.7%.

These figures highlight the continuation of a longer-term trend that has seen Britain generate more of its power from low-carbon fuels. In 2018, the increase in renewables generation was driven largely by a rise in the number of large offshore wind farms that were commissioned or entered full operation during the year.

As levels of renewable generation have climbed, gas-fired output has remained relatively static while levels of coal-fired generation have slumped 89% since 2012.

Paul Verrill, director of EnAppSys, said: “Last year, levels of wind generation displaced conventional power stations and whilst this leaves room for baseload generation it does squeeze levels of output from other generators in the market.

“In the short term at least, wind will continue to be the primary source of renewable generation having produced a record high share of the renewables mix (55.4%) in 2018. With the moratorium on onshore wind and reductions in capital cost of offshore wind farms, it is likely that more of these offshore projects will come on stream in future years, which will drive even higher levels of renewable output.

“New electrical transmissions infrastructure that came on line in 2018 will increase further the contribution of renewable energy to the UK fuel mix but constraints still persist despite the investments.”

The rise of renewables – and wind in particular – is driving changes in activity in the GB market. Conventional power generators are having to adapt to lower levels of activity and find ways to offset any lost income as a result.

This situation has been exacerbated by the suspension of the Capacity Mechanism (CM), which pays generators to invest in new capacity or keep existing plants open in the event of higher-than-expected demand. The effect of this is to create an oversupply of thermal generation in the market to ensure that the system copes with days of low renewable generation. EnAppSys said the suspension of CM payments to these generators, but the obligation for them to still be available, has contributed to financial pressure which will need to be resolved soon in 2019 if this excess capacity is to remain in the system.

Paul Verrill continued: “With conventional power stations still required to meet peak demand requirements, the suspension of the Capacity Mechanism payments that paid them to be available is a concern in terms of ensuring plants are incentivised to remain in the market. Against this backdrop, the margins for thermal power generation fell to 2014 price levels as the impact of reduced demand, increased levels of wind generation and very competitive market dynamics placed downward pressure on profits. This occurred despite overall market prices being 30% higher than in 2017, driven by higher gas prices and a recovery in the EU ETS carbon market.

“This dynamic should settle down over time, but with rising competition in the market driven by the growth of renewables it will become necessary to reinstate the Capacity Mechanism payments or some other alternative to fill the gap created by the lost income. If this is not the case, it’s likely that plant closures will be necessary to remove oversupply from the system and this will lead to decreased security of supply.”

Gas was once again the dominant fuel source in the GB market last year, providing 37.6% of the total amount of electricity, while renewables accounted for 31.2%. Almost one fifth (19.9%) came from nuclear plants, 6.3% from imports and just 5.0% from coal stations.

 

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