Ofgem today announced the results of its survey of the future electricity supply "capacity margin", which is the quantity of available generation over and above the level of expected peak demand (Electricity Capacity Assessment Report. In addition, see Ofgem's press release.)
Although striking, the results only confirmed what many have long suspected (not least ourselves in 2008: see Electricity Prices in the United Kingdom, written with Hugh Sharman). Namely, that in some plausible circumstances the margin in 2015/16, when the effects of the European Union Large Combustion Plant Directive (LCPD), really bite, falls to very low levels. As Ofgem's own press release puts it: "Margins are projected to fall from 14 per cent in 2012/13 to 4 per cent in 2015/16"
Examination of the main study shows that Ofgem's rather downbeat conclusions may even be optimistic, since they assign a very high Capacity Credit to wind (the proportion of the installed wind capacity that can be relied on at a particular time to provide security of supply). Ofgem refer to this as Equivalent Firm Capacity (EFC), and suggest that if there is 13 GWs of wind in 2016/17 then in terms of of its contribution to security of supply this will be functionally equivalent to 2,854 MWs, or 22% of the nominal wind capacity (see paragraph 1.28 of Appendix 4).
As Ofgem admits, this is significantly different to the approach taken by National Grid itself, which has in previous work assumed that only 8% of the installed wind capacity could be relied on as contributing to the supply margin.
The difference here is largely that between a statistical model, as developed by Ofgem, and an engineering calculation as presented by National Grid. Ofgem's model is, thoughtful, extremely interesting, and apparently sophisticated. However, it is open to question whether any engineer responsible for system reliability and security would wish to depend on its outputs.
In research for us published in 2010 Paul-Frederik Bach, formerly the Planning Director of Eltra, the Danish National Grid, wrote that his practical experience and analysis led him to conclude that that for "planning and analytic purposes [...] the power system must be prepared for operation without any contribution from wind power, even in large areas such as Germany and Denmark combined." (see Paul-Frederik Bach, The Variability of Wind Power 2010, 28.)
In other words that for planning purposes the system operator should assign a very low, even a 0%, Equivalent Firm Capacity.
This is not to say that Ofgem's model is certainly flawed, rather that it may not be as practically valuable as one might wish. A statistician might tell you that the probability of a dangerous collision with an iceberg is very low, and that the cost of robust lifeboats is needless; an engineer might accept the statistics with reservations, but nevertheless insist on precautions partly because of the reservations and partly because the practical costs of error are so high.
Interestingly, other evidence published published today suggests that government itself seems to be inclining towards a more conservative approach to firm capacity. In a press release from the Department of Energy and Climate Change ("Hayes gives investors in biomass a boost"), the new Minister of State for Energy confirmed the fact that there is increasing support and encouragement for coal stations to convert to biomass (for REF's remarks on earlier indications of this new policy see "Treasury Forces DECC to Cut Costs by Replacing Wind with Biomass").
Mr Hayes remarks:
“Converting from coal to sustainably sourced biomass is good news for both investors and consumers. It provides a new beginning for our existing power stations, enabling them to achieve radical reductions in emissions, whilst providing affordable, secure and clean energy."
Certainly, few would disagree that such conversions have the potential of providing lower cost green MWhs, since they make use of existing assets and transmission connections, and are firm (reliable) generation with lower system management costs.
However, this does not appear to be the Department's only motivation. In the final paragraph of the Press Release, commenting on grandfathering of subsidies, the department raises the possibility that converting stations might switch back to coal:
"Subsidies for converted plant which switch back to using some coal will not be assured at original levels, but will be re-grandfathered after each switch at the subsidy rate which applies at the time."
Since the subsidies are likely to decline over time, this is probably a disincentive to reverting to coal, but the mere fact that the possibility is acknowledged is highly significant.
Could it be that biomass conversion is being used as a convenient means of allowing opted out coal stations to survive the LCPD, and then, if circumstances merit it (a very low capacity margin for example, as predicted by Ofgem, or reduced biomass availability and consequent high prices) move back to coal to shore up security of supply?