The National Grid Future Energy Scenario lays out four different, credible ways to decarbonise our energy system as we strive towards net-zero by 2050. We have highlighted the major points from this document:
– The outcome of these scenarios remain the same, with three meeting net zero by 2050 or earlier (Consumer Transformation, System Transformation and Leading the Way) and Steady Progression (only 73% reduction by 2050).
– National Grid doesn’t expect there to be any lasting impacts from COVID19.
– Consumer behaviour is pivotal to decarbonisation and therefore so are smart technologies, digitalisation, and data.
– Estimates of new storage requirements have increased by around 2GW in all scenarios to 2030 and by 4-7GW in the net zero scenarios to 2050. The highest estimate from the Leading the Way scenario forecasts 18GW of battery storage by 2030 and 63GW by 2050 will be required. This would mean an increase of current battery storage levels by 1200% and 4500% respectively, highlighting the massive opportunity within the battery market right now.
The power markets have been relatively stable this week, with wind ramping up consistently following extremely low levels of below 0.4GW on Monday to above 7GW on Wednesday and staying above seasonal expectations since. Solar generation has also been increasing this week and renewables have been performing above seasonal norms since Wednesday, reaching a high of over 8GW on Friday, which also helps to suppress demand.
Following the most volatile week of the year, where a bubble seemed to have burst before rebounding towards the end of the week, the forward market seems to have settled down a bit and is gradually moving towards a more fundamentally driven price. UK Baseload Winter 21 prices have dropped by £0.75MW to £94.00/MW, whilst Winter 21 gas prices have also dropped by 1p/therm to 92p/therm. Although prices seem to be dropping closer to what the fundamentals suggest, the market is still very much sentiment driven. Our analysts are expecting the EUA price to drive the curve, which could go up or down. The European Union has just announced a ‘12 pronged plan to combat climate change’, where they will be agreeing on a new reduction of EUA’s. The current expectation is for there to be a 63% reduction on 2005 carbon credit levels, so any variation on this figure would cause further volatility.
The EUA continues to be a predominant driver of the UK power market because the UKA is still too illiquid. The UKA has been following the movements of the EUA and following last week’s crash, reached the lowest price since its release, closing at £43.05/mt on Monday 12th July. Interestingly, when first released the UKA was trading at £5/mt premium to the EUA, but the EUA is now trading £2.20/mt higher.
Europe’s largest battery storage project, the 100-megawatt system in Minety in Wiltshire, south west England, is now fully operational. Controlled and optimised by Shell-owned Limejump, the battery will help balance the UK’s electricity demand, with the capacity to provide electricity for up to 10,000 homes in a 24-hour period before being recharged.
Catherine Newman, CEO of Limejump said: “Delivering the Minety project during Covid has been an amazing team effort, and with our colleagues at Shell, we can now focus on optimising Minety’s performance and supporting National Grid ESO.”
“This battery scheme will play a pivotal role in balancing the supply and demand, especially as we continue to successfully integrate more and more renewable energy nationwide. More batteries will be needed to add that extra boost of energy when the sun or wind are not out in force. We all want a greener and cleaner future and batteries are a key enabler for this.”
There is a high pressure system moving over western Europe which is forecast to result in an increase in temperatures as well as high solar generation. A high pressure system also results in a drop in wind and forecasts are predicting wind to ramp down to below July average. There continue to be improvements in availability across Biomass, CCGT’s and Nuclear power resulting in an extra 840MW of average supply heading into next week.