Montel Magazine 1 2021 - Carbon's rise 1 - 2021 - Page 23

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“ We still need coal when gas prices are high and there are not enough renewables ”
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January at less than 20 %, compared with more than a quarter in the same month last year .
“ When the wind blows , it ’ s great . But as we know , it doesn ’ t consistently blow . We still need coal when gas prices are high and there are not enough renewables .” But despite this , Bryan says , the UK has not been overhasty in its efforts to exit coal . “ Hasty is perhaps a strong word , but it may have been remiss . Coal has been helping not only here , but also across Europe . As we get closer to the mid-decade coal phaseout deadline , will we have sufficient renewables ? We should know better in a year to 18-months .”
But without coal , there will be more extreme power market price volatility , he says . For example , already in early January , hourly day-ahead prices cleared at a considerable GBP 1,500 / MWh and GBP 1,494.7 / MWh at the Epex Spot and Nordpool N2EX spot auctions , respectively . This compared with a December average of just GBP 54.98 / MWh , Nordpool N2EX data showed . In response , front-month prices on the Ice exchange spiked to nearly GBP 105 / MWh on 12 January , up around 30 % from the start of the month .
“ We ’ ll see GBP 1,000 / MWh prices coming back and this tells us we ’ re still not out of the woods ,” says Bryan . “ If we had all the tools in place , prices wouldn ’ t be up there . The power market is very reliant on gas .” He says while new interconnectors were coming online – such as the 1 GW IFA2 interconnector between France and the UK early this year – continental demand was often driven by the same factors as the UK . “ If it ’ s freezing cold or there are supply disruptions , why would they send [ power ] over here ?”
Arup ’ s Ebohon agrees interconnectors provide some risk to energy security . “ Making allowances for interconnector supply is tricky to do , because if it ’ s tight on the continent , both [ the UK and continental Europe ] will be fighting for electricity ,” he says . Therefore , when the UK ’ s coal-fired capacity is completely phased out , the market will be a lot more reliant on gas , Ebohon adds .
Paolo Coghe , analyst at Acousmatics , says while power price spikes will become a more regular feature of the system – as the country ’ s remaining coal-fired plants close – such price fluctuations are also a necessary function of the market . “ If there were no price spikes , then no one would invest in peak units . These units generally stand there doing nothing for most of the time , only operating for a few days a year . This is where they make their money .”
Coghe notes that if there was a rule stating , for instance , that prices could not go above GBP 100 / MWh , then power firms would not want to invest in such units . “ They would say ‘ it ’ s not worth it ’ and the system would need to find a solution to providing power at peak times ,” he says . “ The reality is that there have not been power blackouts , despite the grid warnings . The lights will not go out , but it may be a bit more expensive to keep the lights on .”
Over the coming years there will be developments to help with supply and demand , such as carbon capture and storage , new nuclear capacity or hydrogen , domestic solar panels , energy storage and systems to better monitor consumption , Coghe says .
“ There will be teething problems , but we can hope that in 5-10 years , the problems may not be as horrible as they look today .” Bryan agrees . “ In the next couple of years , we will still need coal . But we are making positive plans , so coal won ’ t be an issue by 2030 .” n
Montel Magazine 1 – 2021
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