The environmental threats of climate change and extreme weather are forcing us to rethink our energy production and usage. As a society, we know how to produce clean low-carbon electricity and deliver it to customers in a reliable, efficient and economical manner. In this article, from our publication On Resilience, Dr Robin Preece, Dr Eduardo Alejando Martínez Ceseña and Professor Paul Jarman examine why the quickest, cheapest and most realisable of our net zero decarbonisation strategies are based on electrifying two major aspects of our domestic lives: heating and transport.
- Increasing electrification will mean at least a doubling in electrical energy demand. To maintain reliable energy, we would need at least to double network capacity.
- More resilient electrical networks are needed, but there is no standard way of assessing or measuring network resilience. Without regulation, networks have little incentive to improve system resilience or cost-effectiveness.
- Regulators must introduce an investment process to increase the resilience of the electricity network, with key stakeholders establishing a consistent framework for assessing network resilience.
There is growth in sales of electric vehicles (EVs), and the UK government has pledged to stop the sale of new internal combustion engine driven (ICE) vehicles by 2030, with sales of new hybrid ICE-EVs banned from 2035. Alongside road transportation (being the vast majority of UK transport energy use), trains, ships, and even potentially planes are seeing increasing electrification in a bid to decarbonise. Additionally, there are plans for widespread electrification of domestic heating. Despite the government delaying plans to ban gas boilers completely, schemes and grants are available promoting a switch to electric heat pumps.
Doubling demand – doubling capacity?
This need to electrify will mean at least a doubling in electrical energy demand in terms of kWh. The peaks in power – when everyone heats their homes on cold winter days, for example – that determine the size of the transmission and distribution systems might be even higher if not managed well. To cope with this unmanaged demand, we would need at least to double network capacity, especially if we want to maintain the exceptionally reliable supply we currently enjoy.
Doubling network capacity would be expensive – a cost that would ultimately be paid by electricity customers under current regulations. Arguably, this cost is tiny compared to the costs of climate change and curtailed renewable energy caused by local transmission capacity issues. There is actually significant spare capacity in some parts of our existing system caused mainly by the need to cover peak demands, which only occur at certain times daily and annually, and by falling electricity demand following efficiency measures. But more investment is needed. We can mitigate the costs with a combination of vital network upgrades as well as smarter and more flexible energy use.
The need for power system resilience
Power system resilience is the ability to limit the extent, severity, and duration of negative impacts of extreme events such as windstorms and floods. To mitigate risk to infrastructure (telecoms, hospitals, and computer networks, for example), diesel and battery backup systems were typically installed. However, resilience cannot be achieved with current reliability standards, which do not cover the impacts of such large events. This is becoming painfully more evident as we face harsher and more frequent weather shocks such as Storm Arwen.
Although the UK has experienced storms for many years, Storm Arwen in November 2021 revealed shortfalls in electrical networks under the pressures of extreme weather events: nearly 1 million homes lost power, with roughly 4,000 homes without power for over a week. The impacts of losing our electricity supply will be more devastating with increased reliance on electricity for heating and transport. Current electrical systems are reliable on average (UK customers only experience about 30 minutes of interruption on average each year) but are not resilient to extreme shocks and are susceptible to failure under extreme circumstances.
More resilient electrical networks are needed, but defining resilience is not a simple thing to do. There is no standard way of assessing or measuring network resilience – no agreed level that networks should achieve. Without such regulation, networks have little incentive to improve system resilience or develop mechanisms to coordinate investments to improve cost-effectiveness. The UK regulator, Ofgem, has funded a number of innovation projects on this topic. This should help move this area forward – but will it deliver fast enough?
Investing in resilient electricity systems
Investment in electricity networks is controlled by the regulatory framework, which has been periodically adapted over the decades to address different challenges. Before 1990, investment was centrally planned by government on the advice of the regional generating and distribution boards. This provided very reliable electricity for the whole of the UK but came with a high price tag.
Privatisation came with price cap regulation of the network company’s income (with the undesired effect of cutting maintenance and most investment each year) aiming to sustain, rather than develop networks, and incentivise cost cutting to pass on savings to customers. This delivered savings, at the expense of reductions in workforce and customer service. Changes in regulation then incentivised reliability, customer support and other services with increasing levels of success, but it became evident that cost-centric regulations lacked incentives for innovation. This resulted in a network which is very slow to change and incapable of keeping pace with the upcoming net zero grid transformation needed.
In response to required net zero grid transformations, innovation mechanisms were added to the network regulation, culminating in Revenue from combinations of Incentives, Innovation and Outputs (RIIO). RIIO delivered lower costs for consumers by keeping electricity networks’ running costs approximately the same now as in 2015 (£128 per customer). This represents a real-terms cost saving even if bills are much higher now due to spiking wholesale energy costs. However, RIIO failed to release investment ahead of need in the networks. The new Accelerated Strategic Transmission Investment framework should address this to some extent, but are similar schemes needed at the distribution level as well to cope with the electrification rush?
Although intended to enhance investment opportunities, it can be argued that the plethora of incentive mechanisms now included in regulatory settlements lead to additional micro-management by the regulator, introducing uncertainty and delay into the process. Although these issues are slowly being addressed (for example, by introducing Ofgem’s costing tool), there are questions on whether the existing regulatory framework and direction can deliver the transformational network investment required ahead of need, rather than lagging years behind. Fundamental reforms should recognise that the risk of stranded investment in networks is tiny compared to the risk of lowering network resilience or failing to provide the key targeted capacity increases required for the net zero transition.
Similarly, investment is needed in data, communications, and legal infrastructure. There is increasing frustration as network capacity issues cause delays to much needed net zero infrastructure development. Balancing long-term strategic investments, which will last decades with short-term customer savings, at a time when customers are struggling with energy costs, is a difficult position to straddle. Arguably, customers are not served well when lack of investment results in curtailed renewable generation. This stifles new connections required for net zero and shows an inability to supply unmitigated peak demands.
Introduce an investment process to maintain resilience of the electricity network. The long-standing regulatory position – of building as little and as late as possible to avoid asset under-utilisation – has been short-sighted, and is not delivering our long-term energy needs. The UK’s network regulation is constantly being updated – now is the time to introduce a suitable investment process.
Key stakeholders should be brought together to establish a consistent framework for assessing network resilience, to ensure that investments to improve the network are properly justified. This was achieved with network flood risk assessment but must be expanded to consistently include more complex resilience issues associated with storms, extreme weather and climate change.
It is urgent to complete this now, in order to release funding needed to accelerate the transition to resilient electricity networks – which can be relied on as the backbone of our net zero energy infrastructure – especially considering high costs and long lifetimes of network assets.