Andrew Dykes
Welcome back to the Megawatt Hour podcast Box set series brought to you by Energy Voice in partnership with Video. In this series, we're examining how energy storage technologies are reshaping, reinforcing and recharging energy markets in the UK and further afield.
I'm Andrew Dykes, content editor at Energy Voice, where we are leading the global energy conversation. This is our first episode of 2023 and we're starting off strong by diving into arguably the most important aspect of how we are going to use and deploy energy storage. That's the network that underpins much of our electricity and energy systems; in the UK that's the National Grid.
The UK already has an ambition to run a zero-carbon capable grid by 2025 and to reach 100% clean energy all the time by 2035 to get there. However, the grid faces challenges on multiple fronts, whether that's building infrastructure to connect gigawatts of new renewables capacity, grappling with how to ensure electricity can be sent to where it's consumed, and increasingly, as we've already discussed, how to incorporate new ways of managing flexibility and demand on the grid as well as generation.
Energy storage is undoubtedly going to play a major role in solving some of those challenges, and we're hopefully going to dig into some of the solutions over the course of our episode. I'm delighted once again to welcome back co-host David Bevan, corporate finance partner at BDO.
We are also joined today by Barney Wharton, the director of future electricity systems at trade body Renewable UK. Barney leads the organisation’s thinking and strategy on the future of the electricity system, with the role that merges into flexibility, markets, energy storage, the roles of EVs and the future of hydrogen.
All of which we might get to touch on today. Thanks again to you both for joining me.
We've talked a lot about projects. We've talked about access to markets, we've talked a little bit about funding and regulation. David, you're really keen that in this episode we talk about some of the bigger picture stuff that's going to tie all this together.
David Bevan
Absolutely, Andrew. Absolutely. And as you said, I mean the intro, in many ways this is the kind of most important episode because this is really all about the, the grid's perspective on the service it's providing and how storage in all its different forms fits into that. You know, as you say, we've talked about the various different markets and revenue streams that different types of storage can access, but we haven't really talked about the basics of how we all get our electricity, how the generators and the users are all paired and matched together. So I thought we'd start by just exploring some of those basics around, you know, what is the grid? How does it work in the UK? What are the main sort of components of it and sort of who is it? You know, who is the grid? Who owns the grid and what are the key stakeholders are there in this amazing magical electrons process that we all benefit from.
So, Barney, I suppose the first question then on this sort of back to basics part is really how does the grid work and who owns it?
Barnaby Wharton
What is it? What is the grid? It's a big question. I think the probably the place to start is that you know we talk about the grid as if it's this kind of sort of single homogeneous thing, and it's a lot more complicated than that. I think the point to start is there are really two aspects to it.
The first is the physical infrastructure, so the cables and the wires that we see travelling around the country, the big 400-kV pylons, you know, as you drive across the country, and then the smaller cables that take the power to our homes.
And that's the big level, the transmission system and then the distribution system close to homes and businesses.
So this is the physical infrastructure, and then the other side of it is the system operator, and the system operator is responsible for deciding how the power should flow around the physical infrastructure. And those are two very separate bodies, both called National Grid. You have National Grid TSO, which is the transmission owner who owns the wires, and then National Grid ESO, who is the system operator.
They're going through a process of being split up at the moment, so in a few years we will no longer have National Grid. ESO will have the future system operator, which would make the conversation about the grid a bit clearer, but in essence it's the physical cables and wires and then the kind of the way that the electrons are managed around those as two separate parts of the grid as a whole.
David Bevan
OK. And that's really helpful. Is it right to think of, as I usually do, the ultimate customer of battery storage, for example, or storage in general is the grid in whatever form it takes, because they are the people or the systems that need storage capability. Is that the right way of thinking about it?
Barnaby Wharton
I guess I would say that ultimately, the customer is you and me as consumers of electricity wanting to keep, you know, the lights on and when you sort of come home from work, flicking the switch, turning on your oven, it's there and working, so it's you and me that are kind of the ultimate customers, but it is the ESO that is responsible for making sure that happens.
You know that they're, I think it was one of the guests on your previous Podcast was saying that it's their primary job to keep the lights on and make sure that system works. So, yes, they’re the grid. The ESO is the customer but very much on our behalf as consumers.
David Bevan
OK and how in doing its job the grid, or the two components of the grid, what determines what their strategy is other than their, well, I guess, obligation to provide this service to customers and perhaps there are other stakeholders involved here beyond just the grid and the customer. There are government agencies, etc, that are involved. How do they determine what the grid does or can and cannot do?
Barnaby Wharton
So the first point is you have Ofgem, so that's the office of the gas and electricity markets; they are the economic regulator and they regulate everything to do with the energy system. So electricity and gas, but the retail side as well as the generation supply side, and they basically control how much money the various elements of the grid can spend on new networks or new services, and they decide what the rules are or approve suggestions to how the rules should change.
So Ofgem are a really critical part of the picture because they really kind of control and govern the rules of the system, and then they take some direction from the government. So the government has set a net-zero target for 2050, when we need to decarbonise our entire economy, and the electricity sector is going to be the first part of that to really get there. It's the government that are kind of setting targets for decarbonisation of the power system. So, you know, offshore wind, we have a 50-GW target by 2030, as well as ambitions and strategies that will put in place the markets that will drive lots of investment in lots of the technologies that we need.
So it’s actually a really complicated picture. Lots of different players and trying to navigate that either as a regulatory and policy sort of person like me or as a business. If you're in the storage side it can be quite challenging.
David Bevan
Sure. And I think we may come on to that a little bit later on in terms of signalling, particularly for new new types of storage and wanting to encourage that kind of investment. We'll touch perhaps later on how the grid and Ofgem and others go about that planning process.
Andrew Dykes
You mentioned that kind of net zero was the ultimate target for the energy system: that's 2050. We've also got these kind of middle targets of 2035 and 2025, which kind of mainly reflect on the electricity system. Could you talk a little bit more about them?
Barnaby Wharton
Yeah. So it's a net-zero economy by 2050, but kind of an earlier target, as you say, is for the electricity system alone to be zero-carbon by 2035. Since the beginning of 2022 with what's happened in Ukraine, there's been an important caveat to that, which is Net Zero by 2035, subject to security of supply, because that is obviously at the forefront of government thinking right now, but the target there is to essentially remove all the fossil generation or unabated fossil generation off the system.
So at the moment we currently get on any given day between 20% and 60% of our power from gas, essentially, that will have to come off the system unless the carbon from that those power plants can be captured through CCS, and that's going to be replaced primarily by offshore wind, onshore wind and solar.
So there’s a huge change that we're going to see between now and 2035. That's the long-term target and but on that road we have a target for 2025, which is to be able to run the system for short periods without any fossil fuel generation on the system, and that's only a couple of years away now, and that's going to be a really important staging post. If we can manage even 5-10 minutes when there's no fossil fuel on the generation, that's going be really impressive and it's going to be difficult because there are certain services and features of fossil fuel generation that are really important to maintaining the stability of the grid, and they can't always be provided by renewables. But storage and different types of storage can either mitigate those challenges or replace the role of fossil fuels on the system.
Andrew Dykes
That probably takes us into storage's role and where we're going with that. How does the grid balance all those different competing needs for supply and demand at the moment and kind of what does the wedge that storage just is coming into, or the gap that storage is coming in to fill, to get us to those key 2025 and 2035 targets?
Barnaby Wharton
So, I mean, essentially the way it works right now is you have lots of generators on the system and then you have the suppliers, so the people that are, you know, sending the power, or negotiating the power, to our homes and businesses, and even a year out from today those companies are negotiating and trying to work out how much power they need at any given moment a year ahead and buying and selling that in the energy market.
So it's really driven by the suppliers and generators, what we call doing self-dispatch, so working out what they need to generate when. Obviously a year out it is quite difficult to know what the wind is going to be doing, but as we get closer and closer and closer to real time, those predictions and forecasts can get more accurate until we get to literally 30 minutes before we call gate closure, so every half-hour block, at which point everyone says this is what we can provide.
And then it's National Grid ESO, the system operator’s job to look at all of those commitments and actually see what's happening on the system and then step in and do any of the final tweaking that the system needs to keep things balanced.
And that's really, though, that short term, a day and intraday market is where storage comes into its own because there's still a lot of uncertainty, particularly around weather impacts that will need to be balanced, and storage can play a really important role at that point.
David Bevan
And what tools does the grid have in relation to that tweaking you referred to in that final half an hour? What can it do, and presumably there's like a ranking of things, I’ll do this first that's cheaper or easier, or I’ll do this next? How does that work?
Barnaby Wharton
Right. So they've got to balance lots of different aspects to it and the most critical one is making sure that the volume of supply and the volume of demand are the same. And so they run what they call the balancing mechanism, and that's essentially looking at what the difference is or what the forecast difference in any given moment is between supply and demand. And they can go to the market and say actually, you know, so and so, there's too much power. We want people to turn down, we do not want people turn up, and they run a market to do that so people can bid into that balancing market, and obviously the cheapest generation there is that the National Grid will then buy on consumers’ behalf to balance the system, so that's the most sort of critical tool that that we have, and storage is playing an increasing role in that. So I think that the second point, though, is when it gets much more complicated, is as well as that balancing market sort of keeping supply and demand in balance, the system stability. So they got, they've got to keep the frequency of the grid at 50 Hertz. For historic reasons it's 50 Hertz; in the US, it's 60 Hertz. I don't really understand why, but depending what's going on system, that frequency can fluctuate around quite a lot and it can happen quite quickly as well, and if it goes outside a really tight band that can cause problems with machinery, computers and all sorts of things.
The great thing about batteries is in particular that they can respond really, really quickly to changes in frequency, and National Grid run all sorts of different markets to manage the frequency and it's batteries that are really, really operating efficiently in that market, really keeping the whole system not just in balance, but also very stable, and that's a critical role they'll be playing, going forward.
Andrew Dykes
It's really worth saying as well that we've obviously talked a lot about batteries and other forms of storage in the past. But we already have storage capacity previous to batteries on the grid, we have things like pumped hydro. This is not a new concept, but it is one which is going to become an increasing part of the grid end of the market.
Barnaby Wharton
Obviously going forward, yeah, as we build more renewables, and we're moving from a decade ago where wind was, I think, 5% of generation. Last year it was 25% and by the end of this decade, it's going to be 60% of generation.
So, as we move to more and more renewables on the system, we need to be able to capture and balance much more efficiently, either by capturing the excess wind and generation and then balancing it when it's not there, and storage is going to play a much, much more important role in that. We've had pumped hydro on the system for I think 100 years now, but, yeah, it's really coming to the fore as we move towards a higher renewable system.
David Bevan
Just going back a step to the 2025 commitment the grid’s made. You mentioned that we're getting closer and closer to having, for short periods at least, a fully carbon-free system. How close are we, have we ever been at that point? And what will the grid consider is a success, to be sort of doing it once a week or once a month, or just once in that period?
Barnaby Wharton
I think the success will be if they can do it once in 2025, I think that’ll definitely be a tick against the KPIs and I think, you kind of read, it'll be it'll be a relatively benign but windy kind of low-demand autumn afternoon, kind of second week in October, that sort of time.
David Bevan
Headlines guaranteed.
Barnaby Wharton
I'm not putting money on that. Once it can be done, Once it does work and we can do it, then I think it'll happen more frequently. We've got really close. You may have seen that in the run-up to the New Year, and just after New Year, we broke a number of wind generation records. So wind, I think 21 GW of generation, I think that on its own it was about 60% of demand, but then when you build in the onshore wind side of things, sorry not the onshore, the solar, and also nuclear is obviously zero-carbon as well, we're pushing 80%, and there have been times when the available generation has actually been over 90% of demand, but because we need to maintain system stability, and there are still some challenges around how you technically do that in a high renewable system, National Grid actually has had to turn down some of the wind and then turn up some gas to maintain system stability.
So we are getting closer and closer and closer, but it's just fine tuning and understanding exactly how the system works in those high renewable situations that we need to get to grips with. But we are getting closer and closer, kind of every year.
David Bevan
That's really interesting. So are we saying that actually as we get closer and closer to that target, the sort of the marginal challenge or the marginal difficulty of getting to that 100% increases because of, what you said, system stability. Are there other things that have to be considered when you, I suppose, essentially switch off all fossil generation. Does that have other impacts that cause step challenges that maybe haven't even been experienced yet because we're still only at 85 or whatever percent?
Barnaby Wharton
So the key thing is, as you say, the sort of system stability. So in your fossil fuel thermal plant you've got very large spinning bits of kit and that spinning gives the system inertia, it keeps everything else, kind of, all the plates spinning, as it were, and that's a really crucial service. So taking that off the system makes the whole system a lot less stabler and it could be more difficult to balance.
So taking it all away is going to be a big step. That's the critical thing. Then there are then other kind of minor, less critical, I suppose, challenges, such as a battery you can turn on or turn off in seconds. A gas turbine actually takes minutes to get going, and that's once it's already warm.
And we've seen in recent weeks when it's been low wind, National Grid warning coal power plants that they need to warm up days in advance of their use, because it takes that long to get things going.
So if you start taking off these sorts of thermal plants off the system, you can't bring them on straight away, so it needs to balance. You need to understand kind of what's going to be happening in the next sort of minutes and hours and even days ahead to know exactly how much you can take off the system at National Grid safely, because you can't bring it on instantaneously if you do need it.
David Bevan
So in a carbon-free grid nuclear would be considered carbon-free, I guess, and that provides the kind of inertia that you talked about. I know that the UK's nuclear capacity's been sort of reducing, if anything, in recent years, but are there any steps where additional nuclear capacity could come online to make this job a little bit easier in the next three years?
Barnaby Wharton
I don't think you'd bring nuclear online in the next three years. As we're well aware, Hinkley Point has taken a little bit longer than that to be built, but I think in the long term, I think everyone recognises that there will be some sort of role for nuclear, that you do need to bring on this sort of these inertia services to keep the system stable.
And actually, there are some really interesting storage technologies that can do that. So pumped hydro provides inertia in itself because that is a spinning mass at the end of the turbine. But then you've got technologies coming forward like liquid air storage, and that provides inertia because again, it's a “proper” turbine in that it can be synchronised with the grid and provide those sorts of services. So as more and different technologies for storage come on board we can replace the role of a thermal plant with these other technologies, and that's kind of a really exciting aspect to all of this.
Andrew Dykes
We are going to take a quick break there and we will be right back.
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Andrew Dykes
So we've talked a lot about the fact that we're going to need storage. The next question, I suppose from my point of view, is how much and how do we decide how much and where to build it. I've heard a couple of metrics being thrown around when people say things like, oh, for every one MW of renewables, you need 3 MW of fossil or 5 MW of storage or all these sort of rules of thumb. I'm slightly sceptical of these myself, but is there a good metric that you can help us with, Barney?
Barnaby Wharton
Short answer, no.
Andrew Dykes
That's always helpful.
Barnaby Wharton
You do see those things thrown around, and I struggle to understand how and if you take a MW of variable renewables off the system you need to replace that with three. Sure, you just need the one MW to replace it. But yeah, there are lots of very clever people who do lots of modelling of the future system and look into this really hard.
You've got to make lots of assumptions about what the future system is, like the volume of wind generation and solar generation in the system, what do you think nuclear is going to do and all these sorts of things, so it isn't an easy answer, but you can look across the broad range of all of those models and the future energy scenarios that National Grid ESO produces, and you get to a kind of number in the 50 to 80 GW capacity of storage across the board, and that includes batteries, including hydro. But I think 20 GW of battery capacity seems to be where the consensus is for 2030, 5 GW of which is easily achievable if you look at the pipeline that we have today, and then as you build out the system more and you get more and more electrification that obviously will grow with the system.
So it's a question of what do you think the system's going to look like? What are the other factors that are going to be; e.g. how many EV's are going to be in the system and EVs, of course, are a form of storage as well, when we get vehicle to grid service.
So there are lots and lots of assumptions that have to go into this to get to the point where you can say how much you think we're going to need. I think the answer is actually going to be that rather than building a target that we can have a pretty good indication, it's going to be making sure that the markets are there and the signals are there to bring forward the investment in storage so it's there when we need it. And lots of work is going on with that at the moment.
David Bevan
Do you think those signals are, I mean, from my perspective we see lots of transactional work in the utility-scale battery storage and the sizes of these projects are getting bigger and bigger and the volume seems to be going up, so there doesn't seem to be any sort of fear in my mind that there's going to be a lot more battery storage. Is there a role for other types of technology and do you think there should be more singling or incentivisation for technology such in the larger-scale, longer-duration storage like pumped hydro? Should there be more of that?
Barnaby Wharton
Definitely. I think the short-duration storage, so batteries which are really playing in these sort of inertia and frequency response markets that we've already talked about, that's doing really well and you're seeing the sort of the volume and the pipeline grow and grow and grow, and projects coming forward, and the batteries are getting bigger and they're doing more and more exciting things.
So that shorter-duration battery market is doing really well. But it is that long-duration stuff, so when you start moving away from just managing day-intraday markets, so our minute to minute, hour to hour through to day-to-day week to week and even into seasonal storage, that's where we don't have the sort of markets we need right now in existence. And there hasn't been a really large-scale storage project built for a very long time. There are projects in the offing. There's a couple of pumped hydro storage projects being developed. There's a role for hydrogen as well, as well as things like compressed air and liquidised air storage. But yeah, without a really clear market, they're not going to come forward.
Andrew Dykes
So that's interesting. I know for some of those major pump projects, they've said as much and that they need some kind of market mechanism. What routes could a future systems operator, or the SO as it is now, take to incentivise those and to provide that platform so that they can build that out?
Barnaby Wharton
So this is one of the situations where actually it's probably more the government. So now we've got the bid, the Department for Energy Security and Net Zero, which we haven't decided how to pronounce yet, they're going to be the ones that are deciding what these markets look like and then pass that on to the National Grid and Ofgem to deliver.
But the leading idea, I think there's broad consensus on this, is having a cap and floor mechanism, which is what we have at the interconnectors as well, and essentially all that says is if you're a storage project, it's a very variable volatile market, but you won't get less than a certain amount of revenue, but we're going to cap it as well, so you don't get all the upside risk.
So you'll be able to play and operate in a volatile market, which will drive the behaviours you need for storage, but at the same time minimise that risk to both the investors and consumers, so that's where I think we're heading.
We're still waiting for government to come out and confirm what that's going to look like. Hopefully in 2023 that'll happen.
Andrew Dykes
It's fair to say that the market mechanisms as they stand are probably not enough to begin to work into this long duration or more strategic storage angle as it is.
Barnaby Wharton
As things kind of stand, I think these projects are very capital intensive. You have to spend lots and lots of money to build a very large lake on top of a mountain and then you are reliant on quite volatile markets which for investors, it's probably a bit of a bit of a leap to make at the moment.
David Bevan
I guess where ultimately there's a sort of simple solution where if you can't encourage the right level of investment in the right types of storage or you just can't model it, the scenarios are too complicated. I guess one, that the end-solution is sort of demand management. And then ultimately, I mean in some countries there are planned outages where consumers get a different kind of service; they have to make their own planning around their demand. Do you think the modelling that we talked about earlier, this scenario planning, do you think that is ever considered as realistic? I mean, I remember power outages were quite common in the 70s and 80s. It was quite fun and amusing, and I know there are some users that for which it's not fun and it's serious, but you could envisage a situation where at certain exceptional times power outages have become just a reality of renewable grid system. Is that a real, realistic scenario to model?
Barnaby Wharton
I hope not, and I don't think it needs to be. We've seen this winter the new demand flexibility service that National Grid has introduced, which is basically a demand response service. So I think the customers of some suppliers get a text message or e-mail saying, you know, if you turn down your usage between 6:00 and 7:00 o'clock tonight we’ll pay you up to six pounds a kilowatt, which is a vast amount of money, when you think we're currently paying 50 pence for it.
So that demand response has been proven, I think Octopus has said that they essentially got what is effectively a power plant of 100 MW. Just from that service that they can provide a service of flexibility on the demand side to National Grid, which is quite an impressive thing. That's just one supplier and then if you scale that up across the market, you could actually add quite a lot of flexibility to manage these times when the system is quite tight, if there's low wind or whatever, so that sort of demand flexibility side of things is starting to be much more a feature of models. And when the government talks about system flexibility, it's not just the batteries providing flexibility or generators finding flexibility, but also the consumers providing flexibility as well. So you can manage both the supply and demand much more dynamically, and avoid blackouts. And I don't think anyone intends there to be times when we are managing total blackouts on the system.
Andrew Dykes
Well, that's good news. You mentioned the complexity of the system as a whole. I wondered whether it is a rolling stone, as we gather more data on this and more patterns and more flexibility and how all these things interact. Do we have better models going forward, or are we still kind of at the mercy of whether, to a certain degree, we are going to need to be able to make these 30-minute calls, and it might not get more predictable than that?
Barnaby Wharton
Weather forecasting is getting much better. So I think when wind started becoming a significant part of the system 10 years ago you were really talking, as a generator, six hours. You have a pretty good idea and you still do get gusts, so you still get a lot of variability within it, but now you know with weather forecasting being what it's being, and with machine learning, 48 hours. I think ahead of a time when generators can probably predict within 95%, or 5% of what they actually, what they're going to be doing, so that's getting much better. And then if you do start combining that sort of generation with onsite co-located storage, you can actually get wind farms pretty much being able to say we're going to generate X, you know, a couple of days in advance, which makes it much easier for National Grid and others to balance the system.
So we are heading in that direction. And then on the flip side, we're getting here instead of things, you getting kind of AI talking about being able to manage things like Tescos, for example. It has a huge number of fridges across the country. Now if you can use AI to turn those fridges up and down, that's a huge amount of demand that you can also vary. And if you replicate that across all the other supermarkets, it can have a huge impact.
So there's AI data and forecasting. It is getting much better. The flip side of that is on demand TV, and no one now watches EastEnders at exactly the same time, so the kind of the EastEnders pick-up, when everyone would get up and put on their cup of tea after the drum beats, doesn't happen so much more. So we're getting some more complexity at another end, so it's a really interesting time, but data AI machine learning is going to be an absolutely critical part of the system going forward.
David Bevan
If you had to put your finger on the biggest single uncertainty, what would you say that was? Sounds like weather forecasting in the short to medium term is pretty good. Where do you think the biggest uncertainty lies?
Barnaby Wharton
Right now, the big question is what do you do about heat? You know, obviously most people heat their home with gas and their boiler, or if you're off the gas grid, you're probably using oil. If people start moving to electrification, so moving to heat pumps, which are getting cheaper all the time, that then puts a lot more demand on the electricity grid and the real challenge with that is that lots of people come home from work, if you're not working from home these days, then you want the heating to be on for the house to be nice and cosy when you get home at 5:00 o'clock; the peak heat demand on a day-to-day basis is, I think, about four times in the winter what the electricity demand is, and that's going up and down every day.
Managing that is going to be an incredible challenge, now that some people say one actually can use hydrogen, and that's an option for some homes, but it's going to be again about how do you manage your home. Do you need your heating on exactly when you come home? Do you have it on earlier in the day and how do all these things aggregate?
So that's the really big challenge, because if everyone moves to a heat pump and then there's no sort of smart way of managing it and plugs in their EV at the same time, you're going to see this sort of 6:00 o'clock spike, which we won't be able to manage. So the biggest question is: how do all these things come together in a very smart way with the necessary sort of system upgrades as well to the networks and the wires in a way that we can keep everything rolling? And I think that how big is that peak heat demand is the biggest uncertainty and probably biggest challenge we have.
Andrew Dykes
I'm going to get on a soapbox here and I think you see this in a lot of different sectors, which is to apply the patterns of right now, or the last few decades or whatever, to how things will look in the future. And I see it with EVs, especially things like range anxiety, this idea that you'll suddenly have to make an unplanned trip and you won't be able to use your car because it's too long or whatever, whereas the fact is that most people will charge up an electric vehicle overnight.
It will be ready, you know, in 95% of cases when they need it. I think to go back to your point about blackouts day, with a lot of this is the same for things like heat and power. You know where our patterns will be different and the way in which we use all these things will be different kind of by necessity and people are moving the goal posts a little bit to assume that everything will be the same in 2050 and we won't have had to adapt in any way. But we'll still have this service, as we expect it and be zero-carbon.
David Bevan
Yeah, lots of them agree. Lots of lots of lots of behavioural change needed. I think I totally agree with that.
Barnaby Wharton
There will be. This then ties into all the energy efficiency side of things. I've not got double glazing on the windows behind me and it's freezing in here right now, and that's probably doing nothing for energy security.
Andrew Dykes
You're going to end up in the Daily Mail for that, I'm afraid, Barney.
Barnaby Wharton
I should probably put a jumper on, and put a scarf on as well.
Andrew Dykes
Well, you mentioned co-location, which I think is interesting. It takes us on to another thing that we wanted to talk about, which is infrastructure and capital costs. So there's a point at which storage is to a certain extent replacing other kinds of infrastructure or avoiding the need for it. At this point, I think with batteries, you're able to store at certain sites and dispatch around local areas and things like that rather than, say, building much larger wires to more centres of demand.
To paraphrase loosely, is that an ongoing factor in the calculations of how much we're going to need, of again the different ways in which storage can replace those things?
Barnaby Wharton
Yes, storage will. It'll do a few different things. One is around balancing the demand and supply as we've talked about. The other thing is replacing wires, because if everyone is wanting to charge their EV at the same time, again not that it will, but say yeah, that wire in the street is going to get quite hot, so if you can have storage either at home or on the street or kind of other places in the grid, you can manage how the power flows around the grid much more efficiently and that will then avoid the need to build more cables, so you can be using storage to think about just how the power flows around the system much more efficiently. So it can be where it needs to be when it's needed, but doesn't actually have to travel across the whole system at the same time and that will make things much, much more efficient.
Andrew Dykes
We've talked about infrastructure and a bit about modelling. The other thing is obviously governance, and policy and regulation. Are the current frameworks that we have enough to get us to where we need to be, Barney?
Barnaby Wharton
So the challenge we have is that we need to reach net zero and we need to do that at least cost and we've got from now until 2035, and 2050 to get there. So what we want to be doing really is sort of planning what that looks like and building out in the best way possible between now and then.
The difficulty we have is that your energy bills quite rightly right now are at the forefront of people's minds. What that's resulting in is a really strong focus on how do we do everything in the lowest-cost way possible, and what that is basically is not spending any money on infrastructure, sweating the assets that we do have and not building for the future. And that means that we've been doing that for sort of 30 years. So that means actually at some point we're going to have to build a huge amount more network to deliver all of this in one go, and when that hits, that's going to be really expensive. And the reality is actually that's basically happening now. We're starting to see it and need to build a lot more grid that we haven't really been building for 30 years. It's going to have to happen very quickly, which is going to be a challenge in itself and it's going to end up being quite expensive. We don't do it right.
Andrew Dykes
I know we're already struggling with trying to connect some of the larger renewables projects that we we're looking to bring online. So obviously it's not going anywhere as a problem. I think this week there was a warning from a lot of renewables groups about that. Does the same apply for, again, energy storage and making enough connection space available over the next 15 years?
Barnaby Wharton
Yeah, absolutely. If you want to connect any project to the networks now, if you apply, you'll be given a date when you expect to be able to connect and in some parts of the country, that data will be sometime in 2036-2037, because that's the earliest that National Grid is currently able to connect you in that area, which is crazy.
So we need to resolve this and, in a sense, that's a sign of actually how much investment and how much is coming forward, because it's just the sheer number of projects and lots of these projects are storage projects coming forward to the market as they see a real opportunity to support the net-zero transition, but if we can't get them connected in, in the next few years, then obviously go and do it somewhere else.
So while it's a reflection of the success of the market, it's also a huge challenge because we need to be able to connect these projects much, much earlier, and that's true of any project connecting to the network, whether it's a storage project or a renewables project, or even a new nuclear power station.
Andrew Dykes
And is there enough, I guess, political will and awareness to grapple with that issue and to get us where we need to be?
Barnaby Wharton
We're working on it.
Andrew Dykes
That's very diplomatic.
Barnaby Wharton
It has, I think, become much clearer, even in the past six months, what a big problem this is. We've got very ambitious offshore wind targets. We need to build all this this storage as well and I think politicians and policymakers in Ofgem are really starting to recognise this. So we have seen some developments in in the past six months in the proposals to accelerate onshore transmission from Ofgem, much more strategic designs of the network from National Grid, but it's still not happening quickly enough. So we need to continue to put pressure on the people making the decisions, to bring forward the investment in the network to connect these projects much more quickly.
David Bevan
Do you think there's anyone around the world, any other countries with a similar energy mix to the UK that are doing better in terms of storage than us and they have similar kinds of net zero decarbonisation, some strategies and policies, or actually are we pretty good globally?
Barnaby Wharton
I think we're pretty good globally. If you look at our generation mix, you know we're a world leader in offshore. And I think 40% of our generation last year came from renewables. So on that side of things, we're kind of a world leader and doing really well. There are other parts of the world that are doing really well with storage, and you look at what's going on in California, Australia, lots of battery storage is coming forward there. Again, both of those use lots of solar energy, so there are other parts of the world that are also doing really well, and we can all learn lessons from each other.
The big challenge this actually creates, though, is that everyone's heading for net zero. Everyone's introducing more renewables and more storage and therefore more network. And someone's got to build these cables and then install them, and we're all competing for the space in the factories and the materials you need to make the cables. And that's actually going to be a real crunch.
So again, coming back to this point, if you don't plan ahead, you can't rock up to a cable manufacturer and say: can you get me some cable next week, because they say ‘we've got 10 years of orders, so no, wait your turn.’ So that's another reason why we need this kind of strategic approach to the whole system to ensure that we can get the materials we need when we need them.
Andrew Dykes
The supply chain rears its head again once more in the energy debate.
You mentioned there, we've talked about heat and we've talked a little bit about capacity and constraint on the grid Obviously, EV charging infrastructure is another thing and transport, you know, is increasingly electrified; Is enough being doing to connect those dots as well, and linking up the goals of zero-carbon transport with how they get that power?
Barnaby Wharton
On the transmission level, so the big wires we have around the country, I think National would say we've got plans in place so that there won't be any problem getting power around the country and we're not going to be struggling to move power around. There are certain hotspots I think at the distribution revenue or on streets and towns where it may be more difficult. But I think those networks are looking at it.
The big challenge is how much power generation are we going to need in the long term because a million extra electric vehicles is quite a lot more power and, going back to how you model and design the system, there's quite a lot of variability there.
So that's an interesting debate about how much more generation we will need. And there's lots of modelling from the Climate Change Committee and National Grid looking at that. And the flip side of that is that these EVs, if you can get your vehicle to grid charging sorted so that electric vehicles can be batteries in themselves and provide services to the grid, how much capacity can that offer as a service have we got the frameworks in place to enable that? We're only just starting to see the trials for vehicle to grid services rolling out, I think this month, which is really exciting, but it's going to be an absolutely crucial part of the system going forward.
Andrew Dykes
One thing to hark back to our last episode that Nicholas Beattie from Zanobi was talking about, I think it was one of the their original projects at a bus depot, they wanted to electrify their fleet, but the suitable grid connection to be able to discharge enough power to fill up buses or fill up their local storage at once was going to be years and cost millions of pounds that was not in their budget, and Zanobi thinks this was quite innovative really, and wanted to step in and provide that infrastructure as well. So do you see more of those kind of intermediate companies stepping in to provide solutions that can benefit both parties?
Barnaby Wharton
Yeah, absolutely. So you're seeing some really interesting projects coming forward close to substations, installing batteries to draw power off, particularly along motorways where lots of people may be charging. And everyone drawing power at the same time wouldn't be possible due to the capacity constraints in that example.
But if you have a battery alongside, you can share the burden between the battery and the network, and then when you haven't all the demand for the charging, you can charge up your battery as well, so I think those sorts of services you're going to see, and even in the home actually. So you're seeing increasingly people having batteries and solar at home, and EV chargers as well. So you can be charging your battery from your solar panel during the day and drawing that out in the evening when you need all your power, when in future if, as we move to a more flexible system, power may be more expensive in the evening, as we've seen this winter, so I think that those sorts of services to consumers, not just to National Grid, is going to be a huge part of the picture going forward.
David Bevan
I agree. Huge opportunities for lots of people, actually, in the home.
Andrew Dykes
And stay tuned for another episode on that later in the series as well. That's probably a good place to think about drawing the discussion to a close, but I did want to kind of pitch to both of you a question on the discussion so far, which is are we on a positive trajectory for that key, 100% electricity on the grid target, and within that is storage being adequately recognised as one of the tools in the toolbox to be able to get there? Barney, to you first.
Barnaby Wharton
We're definitely heading the right direction. I don't think we should be naive about the challenges on the grid and building enough generation to get there. But yeah, it's definitely achievable. The short-term storage I think is doing brilliantly and that's definitely being recognised. It’s that long-duration storage, those longer periods of when the wind doesn't blow that we need to really tackle and that's where I think this question about what's the market model there going to be is absolutely critical.
Andrew Dykes
On that, actually. I'm going to ask you another question which I shouldn't be doing at the end, but I was thinking about the long-term strategy for procurement for that and you mentioned about kind of hedging and power prices a year ahead. Do you see a point where we're getting into a hedge for a certain amount of hydrogen a year in advance and produced and stored? And it must be available at that time in the manner of a power market. Or do you see it much more like gas, where it's traded as a as a commodity.
Barnaby Wharton
I think it would go from one to the other. So in the very long term, we may get to that hydrogen commodity, but in the short term, short medium term, I think we'll probably see sort of hydrogen being used much more sort of location and locally to deliver specific services. So we'll be going through that transition over the next 30 years or so.
Andrew Dykes
David, from what you've understood so far, are we on that trajectory to 100% and should we be doing more?
David Bevan
Look, I think we are on the right trajectory. I think I agree with Barney. I think it's the longer-term stories, the bigger, the higher CapEx projects, some of which are really interesting, that we had on the previous episode, really innovative ways of doing longer-term storage. I think that's where the focus needs to be, not the short-term storage. We've said before on this series that there's been an absolute explosion in utility-scale battery storage. It's been phenomenal over such a short period of time. So it's really encouraging, but it's the longer-duration stuff that I think needs more work.
Andrew Dykes
Work another challenge for another episode, perhaps, but I'm going to thank both of you once again for joining me; David, and to Barney from Renewable UK, and to Amber, our producer. Thanks also to you for listening. You can let us know your thoughts through our social media channels or by emailing out loud at EnergyVoice.com, and every week the energy voice team get together to highlight important stories from the world of energy.
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I've been Andrew Dykes and thanks very much for listening.