Oxford Institute’s Malcolm Keay on the future electricity system

The future electricity system

In adopting “technology push” measures to decarbonise electricity, little consideration was given to the system consequences, argues Malcolm Keay, senior research fellow, Oxford Institute for Energy Studies.

Keay believes that governments, businesses, and analysts need to learn from mistakes in the decarbonisation of electricity and adopt a systems approach to the wider decarbonisation of energy.

Stressing that there will be no return to the electricity system, or indeed, energy system of the past post-pandemic, the energy policy expert believes in the need for fundamental changes to how the electricity system is planned, analysed, and operated if decarbonisation ambitions are to be reached.

To date, electricity has been the key focus for decarbonisation in Great Britain, highlighted by a plummet in emissions since 2010 which have seen electricity emission reductions form over three-quarters of total emission reduction.

Keay highlights that the emergence of low-carbon solution technology, alongside no requirement for operational change on the part of the consumer, have made the electricity decarbonisation politically easy but stresses a much greater complexity exists in the process.

“The outcome is that electricity as a system is changing rapidly, for example, the cost structure was once mainly marginal costs, but the future system will be mainly capital costs. Logically, pricing should change too because pricing in a short-run marginal cost basis doesn’t make sense when you have an industry that does not have short-run marginal costs. This has not been fully recognised and I believe will come back to bite us over time,” he states.

Another example of change outlined by Keay, which he believes has yet to be fully appreciated is the structural change to generation moving from a centralised system to a decentralised one. “In the UK, renewables have been multiplied 15-fold since 2000 but decentralised generation has multiplied 1,000-fold, meaning we are getting a very differently structured industry. How we think about industry must change.”

The Senior Research Fellow believes that a theoretical appreciation of change exists but believes little recognition has been given to the potential implications. Highlighting that, at present, governments drive virtually all investment and that even in relation to operation, prioritisation of renewables means little influence by markets, Keay believes that “electricity markets are broken”.

Similarly, he believes that regulation is effectively broken, pointing out that the four traditional elements of regulation (two competitive and two monopoly), neglect an emerged fifth element: consumers and prosumers.

“The distinction between the monopoly and non-monopoly elements is fading,” states Keay. “We have seen, for instance, in the UK capacity market, the interconnector has been competing with generation and you have a network asset competing with generation assets.”

Policy

Emphasising that overall policy is lagging behind events, Keay says that piecemeal interventions, for example, a focus on offshore wind, fail to address the need for whole system optimisation.

To some degree, the pandemic years of 2020 and 2021 provided a glimpse of the future energy system. Changed work and travel system meant that in Great Britain, generation from renewables exceeded that from fossil fuels for the first time, while the carbon intensity of generation dropped 95 per cent below 1990 levels and decentralised generation rose to over 30 per cent at times.

The pandemic accelerated some trends that were predicted to happen on a longer timescale, meaning that some outcomes were foreseeable, however, as Keay explains, not all change has taken place as previously expected.

For example, balancing cost as a share of generation cost increased, as expected, but unexpectedly, large discontinuity was seen in relation to price. The balancing price as a share of total generation cost in Great Britain went up from 5 per cent to 25 per cent in 2020.

“This discontinuity has two possible consequences,” explains Keay. “Firstly, that fairly low-level problems can suddenly jump up and bite when you are not prepared for them and secondly, that the validity of pricing is further undermined. The increased costs have to be borne somehow and along with many other costs, such as renewable support, are smeared across the price. So, the prices are increasingly not having much of a function in demonstrating cost, instead they are simply a mechanism for cost recovery.”

Other unexpected outcomes during 2020/21 highlighted by Keay is that the misconception that nuclear is needed as baseload generation was somewhat disproven as the grid paid nuclear plants to turn off when there was excess generation. Additionally, he says that in the demand side, placing energy efficiency at the centre of policy is “simply wrong”. “When you have a situation where you have 40 per cent of wind power being

“In the UK, renewables have been multiplied 15-fold since 2000 but decentralised generation has multiplied 1,000-fold, meaning we are getting a very differently structured industry. How we think about industry must change.”

Malcom Keay, Senior research fellow, Oxford Institute for Energy Studies

dispatched down, energy efficiency is not what you need, you need a better system with demand side flexibility,” he says. “Energy efficiency may have a part to play in demand side policy but to emphasise it as the centre of policy is wrong and risky in terms of the future ability of the system to cope. Emphasis on energy efficiency is not going to deliver the new system which is needed.”

The UK’s National Infrastructure Commission estimates that system optimisation could be worth £8 billion annually and Keay highlights that with growing intermittency in the system, a range of options for balancing exist. However, he states that different price and regulation regimes of these options are problematic.

“As long as you have a position where the prices in one area are set in a different way from prices in a different area, it is impossible to see how the market is going to sort this out. However, there is no overall system planner. There is no one else sorting it out, so it is just not clear how we will get to an optimised solution.”

Keay explains that the impact of the lack of coherency spreads beyond electricity and into other spheres of the energy market. Highlighting the absence of a systematic overall approach to getting the right balance on price between sectors, he points to a current tax regime which potentially makes electricity more expensive than other fuels, due to bearing internal costs, which will act to discourage its use in heating and transport.

Average subsidy (£ per MWh)

Renewable source Sewage gas Hydro Onshore wind

Biomass

Solar

Offshore wind

Anaerobic digestion Small scale feed-in tariffs

Wave and tidal Subsidy 4.5

17

26.4

35.5

44.8

81.3

123.2

150.9

284.5

Although the UK Treasury has acknowledged that some of the tax costs currently being borne by electricity need to be shifted to gas, politically, no direct action has been taken.

Keay believes that a systems approach could reduce the cost of electricity through greater efficiency and the Carbon Trust estimate a £16 billion per year saving if such an approach was adopted.

“At present, one of the major problems with electricity is the average load factor being well under 50 per cent. By 2030, 40 per cent of wind power would be dispatched down and that is a very inefficient way to run a system. What you have to do is think of the energy system as a whole and ways in which electricity could be used across that system. That is not the current approach of the government, who are pursuing a piecemeal technology push approach, with various projects coming to fruition at various times and in various ways. 2050 may seem like a long time away but big decisions in relation to networks, hydrogen etc are needed now to get the right mix in each network.”

As Keay highlights, the issue is not just prevalent in the UK. In Ireland, for instance, dispatch down of wind power was in the past relatively minor at around 4 per cent but by 2020 it rose to about 14 per cent. EirGrid predicts that by 2030, this could rise to 40 per cent. “The system consequences need to be thought through properly,” he states.

Keay assesses that even with technical solutions, the political task of developing networks in an efficient manner and under a presumably liberalised market approach in the timeframe will be challenging. “The fact is that all the networks we have now were developed under a monopoly approach in one way or another and governments had not really thought about how they would develop these new networks and how they would get them in the right place at the right time under a liberalised system.”

Summarising, Keay says that it is clear that governments and most key stakeholders did not pay enough attention to the systems issues in decarbonising electricity and are still trying to pick up the pieces as a result. Given that systems issues will be even more fundamental in the next stages of decarbonisation, governments and stakeholders need to start thinking in systems terms.

Co-mingling boosts councils’ recycling rates

As we move towards a ‘zero waste economy’ and a society where waste resources must be fully valued both financially and environmentally, Joseph Doherty, Managing Director of Re-Gen Waste, says that his leading-edge infrared sorting technology is extracting high-purity, high-value end fractions from co-mingled household waste and boosting his customers’ recycling rates.

Doherty explains that: “Simplicity and convenience are the most significant factors in determining participation by householders and this means offering them a service where they can put all their recycling in one bin. Local authorities need to encourage the maximum number of people to recycle, to reduce their landfill costs and comingling with glass appears to be the most successful way to grow their recycling rates.”

These opinions are reflected in a recent national poll, carried out by Lucid Talk across all 11 council areas in March 2022, which revealed that 24 per cent of Northern Ireland householders said they are not happy with recycling service.

Yet, in council areas where household recyclables (plastic, paper, card, tins, and cardboard, etc) can be ‘co-mingled’ with glass in the same bin, 82 per cent of householders reported that they were happy with how their council had asked them to recycle, with Derry and Strabane Council’s householders being most content, at 88 per cent.

According to Doherty, the survey findings, when examined alongside DAERA’s latest figures for Councils’ 2020/21 Household Dry Recycling and Landfill Rates, it would seem to suggest that the convenience and containment of a single wheeled bin for dry household recycling is considered appealing by householders that use this service.

The councils with householders happiest with their recycling service generally had the highest household dry recycling rate per capita, and the lowest landfill rate per capita. These councils were those that offered a co-mingling service to their householders.

Doherty says: “Co-mingled or mixed recycling is probably one of the most versatile recycling services available to householders. It is practical, efficient, and convenient and means they can put numerous commodities into the same bin without any hassle.

“Councils we work with confirm that for them, it is the easiest and best value recycling system available for householders and increases their household recycling rates.”

The Lucid Talk survey found that Mid and East Antrim Council’s householders were least happy (61 per cent) with their council’s recycling collection method, followed closely by Belfast City Council (65 per cent).

Of the respondents who said they weren’t happy with how their council has asked them to recycle, 23 per cent rated their bin lids and boxes blowing away in windy weather as the top negative factor.

Reassuringly, 81 per cent of the householders surveyed across Northern Ireland said that they try to recycle everything they can, up from 74 per cent from the same poll held in 2019. However, 17 per cent of the respondents admitted to recycling only when it was convenient for them, but not always.

When asked what would encourage them to recycle more, of the councils that don’t offer a fully comingled recycling service with glass, over half said they would recycle more if there was one bin that took all recycling, including glass.

Doherty continues: “These survey results are very similar to the results of the survey carried out by Lucid Talk in 2019. Simplicity and convenience continue to be the most significant factors in determining the success rate of householder recycling.

“It is heartening to see more householders are saying recycling is very or somewhat important to them (95 per cent) and that eight out of 10 people say that they try to recycle everything.”

The survey found that 8 per cent of people across Northern Ireland who cannot recycle their glass along with the rest of their recycling waste, will put their glass in the municipal waste (black or grey) bin, compared to 1.8 per cent who live in council areas that offer a co-mingled glass recycling service.

In Belfast, 22 per cent of respondents said they put their glass in their municipal waste bin rather than recycle it, an increase of 2 per cent since 2019. This council area does not offer a co-mingled glass recycling service to half the district.

When respondents who live in council areas where glass is co-mingled were asked if they would recycle less if they had to place their glass waste into a separate caddy, one third said they would.

Doherty says: “It is patently obvious that if we make recycling easy for householders, they will recycle more. And if we provide householders with a recycling service that allows them to put glass into their recycling bins, the volume of glass in their black bins and therefore landfill, decreases dramatically. “Innovations in recycling technology are transforming the way we work, to improve the sorting of recyclables, at a rate unrivalled in history and Re-Gen Waste has made a conscious effort to keep pace.

“And the irony is, that contamination is still present in a kerbside sort system; the difference is that it is left in the box by kerbside sorters and the householder dumps it in their residual waste bin. This material can end up in landfill at a cost of £120 per tonne, resulting in an increased cost to councils. They also need to factor in the landfill tax. Co-mingled can create a higher value. It will be recycled one day when economics make it viable.

“Our recent £5 million development including an investment in 10 of the latest generation Autosort units, has already boosted dry recycling sorting performance.

The new units use sophisticated infrared sorting technology to increase the quantity of fibre and paper materials and have increased the output of plastic fractions, enabling Re-Gen Waste to move from their current mixed plastics output to more refined, higher purity single stream plastics fractions.

The equipment combines near infrared (NIR) and visual spectrometers (VIS) to quickly and accurately recognise and separate different materials according to their material type and colour, extracting highpurity, high-value end fractions.

The technology also provides Re-Gen with invaluable in-depth digital metrics and data about the status, performance and operation of their sorting equipment and the material waste composition it detects. Doherty says they can “quickly understand what materials are coming in and how they are changing due to shifting societal and household dynamics and the enactment of government policies”.

“We can then feedback to local authorities to help them understand where contamination is coming from and, in turn, provide more targeted recycling information to householders,” he adds.

“As one of Europe’s most advanced materials recycling facilities we have the investment capital and the operational expertise to provide next generation sorting technology that is diminishing the already low contamination levels and can transform how councils handle their dry household recycling.”

Research commissioned by Re-Gen Waste Ltd. Polling was carried out by Belfast based polling and market research company LucidTalk. The project was carried out online for a period of five days from 14th March to 18th March 2022. The project targeted the established Northern Ireland (NI) LucidTalk online Opinion Panel (13,816 members) which is balanced by gender, age-group, area of residence, and community background, in order to be demographically representative of Northern Ireland. 1,945 full responses were received. A data auditing process was then carried out to ensure all completed poll-surveys were genuine 'one-person, one-vote' responses, and this resulted in 1,770 responses being considered and verified as the base dataset (weighted and unweighted). Then in order to produce a robust and accurate balanced NI representative sample, this base dataset of 1,770 was weighted by gender, community background and additional demographic measurements to reflect the demographic composition of Northern Ireland resulting in the weighted data tables and weighted results set i.e., the final results –1,770 responses (weighted) and these are the results presented in this report. All data results produced are accurate to a margin of error of +/2.3 per cent, at 95 per cent confidence. NB all surveys and polls may be subject to sources of error, including, but not limited to sampling error, coverage error, and measurement error. All reported margins of sampling error include the computed design effects for weighting.