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4th May 2012

A Response to the Economist UK Energy Summit in London

Roberto Vogel, MD at KRR ProStream, comments on the apparent lack of policy direction at this high profile event.

At KRR ProStream, electricity generators are our core customers.  Our services to conventional coal power plants and Energy from Waste (EfW) plants are aimed at increasing  their efficiency, reducing their down time and helping them to generate more energy.

It was therefore with great interest that we attended The Economist's UK Energy Summit in London on 3rd May.  The event played host to a number of high profile speakers, including senior representatives from government (Tim Yeo MP, Chair of the Energy and Climate Change Select Committee) and the CEOs of major energy suppliers such as EDF Energy, Scottish Power and E.ON.  A variety of other influential organisations were also represented, including Ofgem, the National Grid, the Carbon Trust, The World Wildlife Fund and the Association for Energy Conservation.

  • As a result of our attendance, we hoped to better understand a number of important issues facing the energy sector, namely:
  • What is the future mix of power technologies in general (nuclear, on-shore wind, conventional coal power, etc)?
  • What are the plans for developing biomass generation and co-combustion facilities?  Fouling from biomass fuels is usually much more pronounced, especially when a plant has been converted from an alternative feedstock, and requirements for services such as ours will therefore increase proportionally.
  • What role will Energy from Waste play? EfW plants form the traditional client base of KRR ProStream and this small niche has still has an important part to play in future energy security and base load provision.
  • In a future reliant on less predictable energy sources, such as wind power and solar, what is the thinking of policy makers on the subject of smart grids and energy storage?

Of course, since the summit, the government has also released its Draft Energy Bill for consultation.  Whilst the bill recognises the requirement for clearer policies and introduces a variety of measures to stimulate investment in the UK energy sector and create capacity, many important issues still remain unaddressed.  We will consider the bill in more detail in a forthcoming update.

Our Impressions of the Summit

The overwhelming impression resulting from the summit was one of a lack of leadership from the Department of Energy and Climate Change and frustration on the part of the big energy suppliers. Industry players (naturally) pushed their own agendas, whilst Mr Yeo defended the government position without volunteering any clear statements on strategy.  Unsurprisingly, shale gas was flagged as an important future resource, although increasing reliance on fossil fuels is clearly not compatible with a stated commitment to reduce green house gas emissions.  The minister also expressed public regret at E.ON's decision to withdraw from the development of new nuclear capacity and side-stepped the issue of fuel poverty by proposing that people should earn more. 

Anyone who was looking for leadership from the government was disappointed.  Of course, the politicians managed to avoid negative headlines, which would have been unavoidable if any particular course of action was unveiled, but would it be asking for too much from an elected official to put his head above the parapet and be honest about our energy choices?  This clarity at policy level is absolutely necessary to create an optimistic investment climate.

Important Issues

There are a number of issues, vital to the future of UK energy security, which were not covered or clarified by the summit.

The Energy Mix

We were hoping to find clarification on the projected energy mix and how our core clients (EfW and EfB operators), and by extension KRR ProStream, might contribute to future green house gas reduction and energy security measures.  From our research, EfW currently contributes around 0 .4% to the total UK electricity supply. If biomass generation and industrial waste are counted then this figure rises to around 4 or 5 per cent.  In the context of energy security and the need to increase base provision and stand-by capacity, this sector could make a valuable contribution.

Stand-by Capacity and Smart Grids

Increased reliance on unpredictable renewable sources begs the question: Should security of supply be achieved by having a large, rapid start-up stand-by capacity (gas turbines) or by developing our capacity for energy storage? A third solution is the smart grid, where supply and demand can be managed locally; for example, by switching off non-essential consumers for the duration of a low supply episode.

Generation Efficiency and Demand Reduction

Both the Energy Summit and the more recent Draft Energy Bill say very little about generation efficiency.  The recent example of the turbine retrofit at Drax power station, where a turbine upgrade allowed for a 5% increase in generation, shows that there is considerable potential for optimisation within the existing system.  It is also our opinion that increasing plant availability and efficiency (i.e. the proportion of time a plant is capable of delivering its full output) has the potential to deliver significant additional capacity. 

Demand-side efficiency is another area where the lack of leadership can put energy plans at risk.  The government must have the courage to put energy efficiency before "growth at any cost".

Conclusions

UK energy security is being placed in the hands of foreign investors, and the government is reliant on the mechanisms of the Draft Energy Bill to attract investment and help form a strategy. This is short sighted, and without clear direction there is a real danger that our future energy policy will be determined by the desires of these foreign investors, rather than by what is in our own best interests.  If the government believes it has a weak mandate to settle on a clear direction, then there is the need for a national debate on this subject, and we will be happy to contribute.  Just drifting is not a solution.

The points of view above are presented in a slightly provocative manner in order to stimulate debate.  Any feedback is welcome.