How Will Growth in Renewables Change the UK’s Approach to Energy Security?

The International Energy Agency defines energy security as ‘the uninterrupted availability of energy sources at an affordable price’. Climate events all over the world in recent years added ‘resiliency’ and ‘the ability of an energy system to ‘bounce back’ from unexpected but more frequent climate events’ to the definition of energy security. Entering 2022, system resiliency in the face of climate events was a bigger worry than the possibility that our energy supply would be interrupted. The Russia–Ukraine war was a harsh reminder that our energy supply can and will be interrupted by wars and geopolitics.

The response to the energy crisis we are experiencing has included a mix of doubling down on exponential solar and wind expansion, protecting segments of the population against irrationally high energy prices, and increasing and diversifying short-term fossil fuel supply.

By 2030, the share of electricity in the UK energy mix will be more than 70%, up from around 20% today, and the UK’s Net Zero and Energy Security Strategy includes the target that by 2030, 95% of this electricity will be low-carbon, with more than 60% variable renewables (offshore wind, onshore wind and solar), compared to about 35% at the end of 2022. In parallel, there will also be a significant change on the demand side. By 2030, there could be more than 10 million electric vehicles (EVs) and over 1.1 million heat pumps installed. So, in the next eight years, we will move from a system where electricity is dispatched to meet demand, and where transport and heating largely use other fuels (including gasoline, diesel and natural gas), to a system where electricity is used and networked to most of our consumption, with much of that electricity variable (wind and solar), distributed and multi-directional in flow.

There are three main ways in which a high proportion of wind and solar will change how we think about energy security.

‘Supply Risk from Inputs’ Takes on a Totally Different Meaning

Currently, for most markets, we buy natural gas (or coal) for our power plants, and the electricity price reflects this input cost because without these inputs, we cannot generate electricity. Today, the supply risk of these inputs is met through long-term contracts and storage.

We don’t need to buy wind or solar energy, and to some extent, we can forecast when it will be available. For example, Deepmind has created a machine learning tool that can predict wind output 36 hours in advance, and to-date, machine-learning has boosted the value of wind energy by roughly 20%. There is a proliferation of advanced analytics tools coming to market that are enabling better production forecasting.

However, the sheer variability – within a week, between weeks, and seasonally – remains a key challenge. The below chart shows generation variability during a week in January (23/01 to 30/01).

Equally, the graphs below show the seasonal variability for wind and solar. Fortunately, the seasonal profiles of wind and solar are complementary, with solar increasing when wind is decreasing.

To manage the supply risk of wind and solar, there are a few levers:

• Overbuilding the capacity to ensure supply always has the ability to outstrip projected demand.
• Back-up generation and storage to help manage the within-week, week-to-week and seasonal variability.
• Pooling and optimising variable resources by building out domestic grid infrastructure and increasing interconnection with Europe. National Grid has laid out a plan for a £54 billion upgrade to the UK’s electricity network, the biggest investment since the 1960s in real terms. Interconnector capacity between Great Britain and the rest of Europe might increase to 23 GW by 2040.
• Demand response and managed EV charging. For example, National Grid launched the Demand Flexibility Scheme aimed at incentivising customers to reduce their electricity use during peak winter days. At the industrial and commercial level, Google intends to run on 24/7 carbon-free energy by 2030. This will mean matching operational electricity use with nearby carbon-free energy sources.

‘Supply Risk from the Supply Chain’ Will Increase Over the Coming Decade

In the next eight years, the UK is targeting more than 100 GW of renewables capacity. The exact mix is yet to be determined, but it is roughly equivalent to 50 GW offshore (around 2,500 offshore turbines), 25 GW onshore (around 5,000 onshore turbines), and 25 GW solar (about 62,500 solar panels). Europe, the US and many other markets also have similar wind and solar development targets. Like other industries that have experienced high growth, the massive expansion of wind and solar expected in the next decade is putting pressure on the supply chain. This will be the case for the next decade of growth of solar, wind, batteries, grids and networks. In particular, a lot of attention is being paid to critical minerals (such as nickel, copper, cobalt and rare earths). The IMF pointed out in January this year that ‘under a net zero scenario… current copper, lithium and platinum supplies are inadequate to satisfy future needs, with a 30 to 40% gap versus demand’.

We are seeing new trading relationships emerging, increased investment to develop domestic resources, and investment in technologies such as mechanical storage, material substitution and recycling to reduce the demand for critical minerals. For example, copper demand is projected to grow from 25 million metric tons (MMt) today to about 50 MMt by 2035. Chile provides about one-fourth of the world’s copper supply (which is used in EVs, wind turbines, solar panels and transmission infrastructure). Latin America is seeing a big jump in the demand for critical minerals. Chile, Peru and Mexico account for nearly 40% of estimated global copper production this year, and more than 25% of the world’s estimated lithium production is located in Chile and Argentina, while Peru and Mexico and Bolivia account for an estimated 19% of zinc production. GM and Lithium Americas have announced that they will develop US-sourced lithium production through a $650 million equity investment and supply agreement (which can support production of up to 1 million EVs per year). Tesla is planning to refine lithium in the US. Companies are also looking at circularity to reduce risk, such as Trafigura’s Nyrstar becoming the first company to recycle alkaline batteries for commodities export in Australia.

Energy Security Risk Will Increase in the Short Term – but the Long Term Will be More Secure

We are still understanding the impact of different challenges on the system, such as weather events and extremely cold and dark days with no wind, so we don’t yet have tried and tested solutions. We are changing the electricity and energy markets to incentivise the back-up and reserve capacity that we need, and we might even have to consider ‘circuit breakers’ like those that exist in the financial markets. We are creating a Future System Operator (FSO) to take a whole-system view of our infrastructure.

A highly digital and distributed energy system provides the opportunity to move away from central points of failure. For example, local resilience can be increased through battery back-up, micro-grids and self-generation (or even locally pooled and shared self-generation infrastructure), as well as consumer actions. In the last few months, we have seen the impact that consumer awareness of consumption can have on how much energy we use. This winter, demand response (through the Demand Flexibility Scheme) delivered a reduction of almost 800 megawatt hours up to 30 January (demand that would probably have been met with a combined cycle gas turbine). Another key area will be how we use the batteries in our vehicles. The average family-size EV will have a 50–100 KWh battery (5–10 times the 10 KWh battery in homes today that could provide 4–8 hours of back-up during a power outage).

Additionally, the UK is transforming its energy markets to better integrate and incentivise variable generation in order to meet demand and ensure security of supply. For example, the UK has launched a consultation to reform Great Britain’s Capacity Market as part of the government’s Electricity Market Reform package. The Capacity Market will support more active demand management in the electricity market, and the Department for Business, Energy and Industrial Strategy announced the final parameters for the upcoming Capacity Market auctions in February 2023.

One of the most important changes to support the energy security of the UK’s future wind- and solar-dominated system is the creation of the FSO. In addition to acting as a strategic advisor to policymakers on net zero, the FSO will have responsibility for the integrated planning of electricity, gas, and eventually hydrogen and carbon capture and storage (CCS) infrastructures.

‘The Future System Operator enables whole system thinking and coordinated action. There is a requirement to optimise and integrate the planning of our energy systems to ensure that we are delivering the best outcome for society and the economy. For example, how do you best integrate the large increases in offshore wind (GB has a target of 50 GW by 2030) with the emerging hydrogen technologies and the reinforcement needs of the networks. The ability to identify, evaluate and then deliver options at pace, in the context of net zero, reliability, resiliency, energy security, and cost, is critical if we are to meet our net zero electricity by 2035 and net zero energy by 2050 targets.’ – Fintan Slye, Executive Director of the Electricity System Operator (ESO), which is transforming into the FSO

We are solving the problems of a transition to a different energy system, so the energy security risk is likely to be higher in this decade of change. We will have to invest a bit more in the ‘back-up’ in the short term: more nuclear; more storage; more interconnection; fossil fuel plants with CCS in reserve; increased fossil fuel production; dual-balancing market systems that the ESO will operate for a few years; and so on – similar to high insurance premiums during a construction phase. But by 2030, we will know how to manage our majority wind and solar energy system with tried and tested solutions to respond to climate events or days with no wind, and knowledge of how to operate distributed infrastructure in a way that increases our energy security.

In summary, a future system dominated by wind and solar will be a different system. But in 2030, when scale is achieved, the supply chain has adjusted, market reform has been completed, and solutions to disruptions are tried and tested, the UK energy system should be more secure and resilient, as there will not be daily exposure to internationally traded inputs or imports (for example, we don’t need to buy wind or solar energy). The challenge is navigating what will be a rocky transition over the next eight years.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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