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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Energy policy in flux: implications for
electricity markets
Jim Watson, Research Director
LCRI Conference: Low Carbon Market
Transitions, Llandudno, Nov 2013

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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

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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

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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

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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?

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What roles for markets?

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What roles for markets?

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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?

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Thanks
http://www.ukerc.ac.uk
https://twitter.com/watsonjim2