Energy policy in flux: implications for electricity markets, by UK Energy Research Centre (UKERC) Research Director Jim Watson, November 2013

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UK Energy Research Centre (UKERC) Research Director Professor Jim Watson talks about "Energy policy in flux: implications for electricity markets" at the Welsh Low Carbon Research Institute on 05 …

UK Energy Research Centre (UKERC) Research Director Professor Jim Watson talks about "Energy policy in flux: implications for electricity markets" at the Welsh Low Carbon Research Institute on 05 November 2013.

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  • 1. Click to add title Energy policy in flux: implications for electricity markets Jim Watson, Research Director LCRI Conference: Low Carbon Market Transitions, Llandudno, Nov 2013
  • 2. Click to add title Overview  The UK’s low carbon transition  Energy policy tensions  What roles for electricity markets?
  • 3. The UK’s low carbon transition Keep the lights on at the same time Source: Committee on Climate
  • 4. The UK’s low carbon transition: so far, so good? Emissions: mt CO2 (equiv) 900 CO2 emissions are down 19% since 1990 800 700 600 500 400 But emissions rose 20% (1990-2009) on a consumption basis 300 200 100 0 1990 1995 CO2 emissions 2000 2005 Other GHGs Total GHGs Source: Department of Energy and Climate Change 2010
  • 5. Click carbon transition The UK’s lowto add title UK Electricity Generated and Supplied 400000 350000 300000 GWh 250000 200000 150000 100000 50000 0 1970 1975 1980 Conventional thermal & other 1985 CCGT 1990 Nuclear 1995 2000 2005 2010 Non-thermal renewables & storage
  • 6. The UK’s low carbon transition: CCC projection for 2020  12GW of fossil and 3.5GW of nuclear plant retires  EU renewables target: 30-35% of electricity by 2020  Energy efficiency; two CCS demos; 5GW unabated gas Source: Committee on Climate Change (May 2013)
  • 7. The UK’s low carbon transition CCC scenarios for 50g/kWh in 2030 Source: Committee on Climate Change (May 2013)
  • 8. The UK’s low carbon transition? ‘[A] substantial investment in gas generation and gas import infrastructure here in the UK is completely consistent with Britain’s plans to cut carbon emissions, set out in our Carbon Plan. In electricity generation alone, I expect new gas capacity of around 20GW to be built between now and 2030’ Ed Davey, 8th October 2012
  • 9. The UK’s low carbon transition? ‘An enterprise strategy means investing in renewable energy, and opening up the newly discovered shale gas reserves beneath our land. We are today consulting on a generous new tax regime for shale so that Britain is not left behind as gas prices tumble on the other side of the Atlantic.’ George Osborne, 8th October 2012 (Simultaneously!)
  • 10. The UK’s low carbon transition? These scenarios exclude carbon capture and storage (CCS) Source: DECC Gas Strategy
  • 11. Maintaining energy security  Important for many reasons: • High energy prices since mid 2000s • Geopolitics and conflicts (e.g. Iraq war; Russia-Ukraine gas disputes) • Impacts of extreme weather events (e.g. power blackouts; hurricane Katrina) • Ageing and/or inadequate infrastructure (power plants; gas storage capacity)  Debates often focus on international risks, but many risks closer to home  Domestic energy sources are not always more secure than imports
  • 12. Maintaining energy security Maintaining energy security: From gas exporter to importer / trader from gas exporter to importer 600.0 500.0 400.0 200.0 100.0 -200.0 Exports Source: DECC Pipeline Imports LNG Imports Net Imports 2010 2005 2000 1995 1990 -100.0 1985 0.0 1980 TWh 300.0
  • 13. Maintaining energy security: from gas exporter to importer
  • 14. Maintaining energy security Maintaining energy security: From gas exporter to importer / trader will the lights stay on?  Scenarios from DECC and Ofgem Source: DECC Energy Security Strategy (2012)
  • 15. Affordability: Affordability: Domestic gas & electricity prices domestic electricity and gas prices Index (2000 = 100) 400 Gas prices have trebled since 2000 300 200 100 Electricity prices have doubled since 2000 0 2000 2002 2004 Gas 2006 Electricity 2008 2010 2012
  • 16. Click and Fuel Poverty Affordabilityto add title Source: Department of Energy and Climate Change
  • 17. Affordability: what is causing higher bills?
  • 18. Affordability Affordability: Impacts of policies to 2020 (DECC) what is causing higher bills?
  • 19. Trade-offs between policy goals
  • 20. Click to add title What roles for markets?  Focus in 1990s on privatisation, liberalisation and economic efficiency: sustainability got lost  From late 1990s, environmental and social dimensions started to come back into regulation & market design  Planning (or co-ordination) has made a recent return: but can problems of State-owned era be avoided?  So what roles can markets play in future?
  • 21. Click to add title What roles for markets?
  • 22. Click to add title What roles for markets?
  • 23. Click to add title What roles for markets?  Tensions between need for investment from ‘Big 6’ and market reforms to bring in much needed new players. Should the Big 6 be broken up?  Electricity Market Reform promises more certainty through contracts: in theory, competition moves upstream (in practice, competition is scarce so far)  Increasing pressure to reduce ‘green taxes’; but efficiency policies (important for bringing down bills) could be under constant threat  Smart meters (and smarter systems) could help to open up markets in the medium term: but will benefits outweigh the costs?
  • 24. Click to add title Thanks http://www.ukerc.ac.uk https://twitter.com/watsonjim2