19 July 2019
National Grid’s annual Future Energy Scenarios (FES) is the most exciting release in the energy calendar. The FES is an annual update to National Grid’s long-term forecasts for the energy system out to 2050 and its 2019 edition was published on the 11th July. Its four scenarios reflect different pathways the GB energy system could take depending on meeting our climate ambition, the level of policy intervention, customer behaviour and future technology developments. These scenarios are used across industry to help market participants and policy makers plan for the future.
So what changes have we seen in this year’s FES? Here are my top takeaways:
Net zero analysed in the FES for the first time
National Grid’s four scenarios show different pathways the energy system could take with only the Community Renewables and Two Degrees scenarios meeting GB’s current 80% decarbonisation targets by 2050. Following the Government’s commitment to a net zero emissions target by 2050 National Grid has carried out some sensitivity analysis around what meeting this target would mean for the energy system. Net zero requires significant changes in how we heat buildings, decarbonise transportation and even create negative emissions from the power sector. Crucially, this will mean that around 20% more power generation needs to be built in order to do this when compared to the other scenarios that meet the 80% decarbonisation target.
Carbon Capture Usage and Storage
The role of hydrogen is becoming more prominent with two scenarios (Two Degrees and Steady Progression) showing significant amounts in the future. Carbon Capture Usage and Storage (CCUS) will therefore be needed for everything from power generation through to capturing carbon from electrolysis and Steam Methane Reformation. This is to allow many of those hard to reach sectors to be decarbonised while Bio-Energy with Carbon Capture and Storage (BECCS) will need to be deployed to remove CO2 from the atmosphere.
The difference in peak demand between the different scenarios is significant. In the Community Renewables scenario smart charging for EVs (as well as other products) reduce peak electricity demand. Energy efficiency plays a critical role in reducing overall demand for both electricity and gas demand which is why all measures to help reduce peak demand need to be at the forefront of government policy. Without these technologies the added cost of meeting peak demand is considerable and requires additional generation to be built.
Interconnectors and carbon pricing
The level of capacity for interconnectors is expected to continue to grow in the short term with a peak of 20GW capacity in the Two Degrees scenario. GB is still a net importer of power due to the higher carbon price in GB but as we see a more decarbonised system this disparity starts to level out in the 2030’s. However, this is primarily driven by GB having a higher carbon price than the rest of Europe – if GB had the same carbon price as Europe we would expect to see net flows equalise much quicker.
One of the big challenges we’re seeing across the scenarios is the level of installed capacity needed for a functioning energy system. As renewable capacity increases the level of firm capacity also needs to be increased to ensure security of supply – this is most evident in the Two Degrees and Community Renewables scenario that contain the most renewable capacity. This flexible peaking plant will have very low load factors which mean either payments for flexibility or a capacity market will be needed to make them financially viable in the future.
LCP has updated our forecasts to allow exploration of the 2019 FES scenarios. As the power system becomes more volatile with higher levels of renewables and heat/transport being more interlinked, there’s a need to ensure modelling reflects and captures these dynamics.