As nuclear strategy falters, the Brexit deal must prioritise electricity trading
The collapse of government talks with Hitachi this week takes almost 3GW of future nuclear capacity off the table. While opinion on nuclear is polarised, the UK had been relying on it to meet long term climate targets. With this week’s announcement, 9GW of proposed nuclear capacity has now been suspended. This leaves an increasing low carbon energy gap which will have to be filled by 2030 to meet legal carbon targets.
The only way to plug this gap, without increasing emissions, is to develop more offshore wind, remove existing barriers to onshore wind, solar and batteries, cut energy demand and increase energy efficiency. But increasing renewable capacity comes with the significant challenge of intermittency and grid balancing; in other words, the problem of providing power when the wind doesn’t blow and the sun doesn’t shine becomes even more acute. In such a scenario, the ability to import power when needed and export surplus power via interconnection with Europe will be an important factor in managing our energy supply. Interconnectors are subsea high voltage cables that link countries’ electricity systems and allow this energy trading.
Interconnection gives us cheaper electricity and greater energy security
Our new analysis, Better Connected, sets out the significant benefits that interconnection with Europe offers, besides helping to balance our electricity system.
For the end consumer, interconnectors make electricity cheaper. The UK is one of the least connected countries in Europe and has one of the highest wholesale prices. We have found that, with a combination of renewables and cheaper imported energy, the UK could save £1 billion a year by doubling the current 4GW of interconnectors to 8GW. All the combined benefits of interconnectors could shave at least £23 off the average annual electricity bill a year by 2030 with a doubling of interconnection.
Interconnectors also improve energy security. Currently, they meet seven per cent of our maximum electricity demand, helping to provide stability when we need it most. By 2030, this could quadruple to 27 per cent (with 17GW of interconnectors), providing much greater security at higher electricity demand and with more intermittent supply.
As our neighbouring countries do not experience peak demand in electricity at the same time as the UK, and weather conditions vary, surplus generation and demand can be managed via interconnectors and balanced across borders. This would reduce our need for backup generation capacity by 35 per cent at optimal levels of interconnectors (17-19GW).
Trading electricity allows faster decarbonisation
More interconnectors also help us to speed up the decarbonisation of our energy system. A pan-European response could reduce the need for 73GW of wind and 16GW solar across the continent by connecting the best locations for wind and solar generation. These savings would be worth €300 billion to governments, energy markets and bill payers across Europe.
Of course, European countries are not decarbonising at the same rate. Ireland, Germany and the Netherlands are further behind than the UK, France, Denmark and Norway, so we should be prioritising interconnection with those countries that are ahead.
The UK is currently off track to meet its carbon budget for 2023 to 2027. Our analysis shows that increasing interconnection with the right countries to 17GW would enable us to reduce gas generation by the equivalent of 22 per cent of the UK’s electricity demand today, removing 70 megatonnes of CO2 over this period.
Energy storage will be a major need in a renewables dominated system. Interconnectors can also facilitate markets for storage as well as supply, linking to large energy storage reserves in countries like Norway.
The UK is already on course to increase its interconnector capacity to 8GW. But, as described, increasing this capacity to 17-19GW would bring much wider benefits. This can only be achieved through agreements which, most critically, depends on the outcome of Brexit.
If we leave the EU with no deal it could cut the existing connections and cost the UK £2.2 billion a year in lost value. But staying in the internal energy market and the EU standards bodies would allow us to gain the maximum benefits of connection to our neighbours whilst exiting the EU.