National Grid's future energy scenarios 2017

The energy world is changing rapidly and all those active in the sector have not only to keep up but also, perhaps more importantly, to work out what might happen next and plan accordingly. National Grid as Britain's independent electricity and gas system operator, is well placed to do this.

Every year in July it publishes its Future Energy Scenarios document, which is used as the starting point for its regulated long-term investment and operability planning as well as a reference point for other National Grid reports. Its Future Energy Scenarios 2017 (FES 2017) was launched to a packed audience on 13 July and provides a fascinating insight into how recent trends and developments in energy markets are impacting National Grid and the way in which the system is used and what the future of energy might look like.

Scenarios

Since it is impossible to predict exactly how things might pan out, each year National Grid model four different scenarios as to how the energy system might develop. Each scenario considers energy supply and demand on a whole system basis, incorporating gas and electricity transmission and distribution.

This year two of the scenarios are different from previous years. Gone Green has become Two Degrees – a world where environmental sustainability is top priority. This assumes the highest level of prosperity and is the only scenario where all UK carbon reduction targets are achieved. In our view it also seems the most unlikely of the scenarios, as it requires much investment and a great deal of policy support in the near future.

No Progression has become Steady State, recognising that if things carry on as they are, there will be some progress, it will just be very slow. This is a world focused on security of supply and short-term thinking, with the lowest level of prosperity.

The other two scenarios are the same as last year. Slow Progression is a world focused on long-term environmental strategy, i.e. there is green ambition but less money available to realise it.

Consumer Power is a world which is relatively wealthy and market driven. This seems to be the more likely scenario given current trends, but with the most fluctuation in supply and demand.

The scenarios have also been extended out to cover 2040-50 – so for the first time we can see if the UK will meet its 2050 Climate Change Act targets. It doesn't look promising – only under the Two Degrees scenario are the targets met; and that would take a concerted effort, not least from Government on the policy front, starting now.

Sensitivities

Recognising that even with four different scenarios, anything could still happen in the energy world, National Grid have introduced a number of sensitivities, representing possible futures beyond the confines of the four scenarios. They start with "what if" questions:

What if…?

…we used hydrogen to decarbonise heat?

So instead of using electrification of heat pumps to decarbonise heat, we were to use hydrogen (and CCS) instead of natural gas to meet our 2050 targets. This sensitivity uses the H21 Leeds City Gate project to convert Leeds to hydrogen as a starting point and assumes 17 cities are then converted, with hydrogen supplying 28% of total heating demand by 2050. This would increase gas demand to around 1,100TWh/year but the infrastructure could cope. Carbon capture and storage is essential for this sensitivity to work.

For more information about the potential for using hydrogen, see our thought piece article Hydrogen: more than just hot air?

…there was a rapid take-up of electric vehicles?

If the cost of electric vehicles continues to fall rapidly, and air quality becomes a key priority, then we could see a rapid take-up of pure electric vehicles. This could mean that all cars sold after 2040 will be pure electric vehicles (as indeed the Government has since announced) and the sale of plug-in hybrids ceases by 2025. The additional annual energy demand just to support these extra vehicles will be 21 TWh in 2030 and 90 TWh by 2050. Peak demand could be an extra 30GW per year (50% higher than now) if how those vehicles charge is unconstrained. This would obviously put a lot of extra strain on the network and is the reason why the government is keen to support the use of vehicle to grid technology, so that electric vehicles can help to manage, rather than increase, demand.

…millions of consumers and businesses install renewable generation in their homes and workspaces?

Consumers could become "prosumers" – producers and consumers of energy at the same time. This could mean the 2050 carbon target is met by having much more distributed generation with storage providing flexibility. The Smart Systems and Flexibility Plan, launched a week or so after FES 2017, could help facilitate this. By 2050, 65% of generation could be embedded or behind the meter. A large proportion of this is intermittent, so storage has a crucial role, with 42GW installed by 2050. It would still be difficult to meet high winter demand unless excess energy is stored as hydrogen and used later to provide heat.

…society switches away from fossil fuels to electricity with greater reliance on renewable generation?

The energy industry is divided about the best way to achieve decarbonisation and climate change targets and the Two Degrees scenario shows them being met in a balanced way, but to shake things up a bit National Grid have looked at what would happen if we went down the full electrification route. This would mean a widespread switch from gas to electric heat pumps, much greater use of electric and hydrogen fuel cell vehicles, and all this powered by more renewable generation, mainly wind. Total electricity demand rises to 475TWh by 2050, higher than in any of the four scenarios, but some gas (about a quarter of today's demand) is still needed, with investment in bioSNG and biomethane.

Trends

In all the scenarios and sensitivities there are some common trends:

Storage is common to all, and has a higher starting point and faster build compared to FES 2016. There is strong initial growth in storage to 2020 under each scenario, but then they differ.
Combined gas and electricity demand falls in all scenarios, driven primarily by decrease in gas consumption for power generation, but if not managed, peak electricity demand could grow by almost 1GW per year after 2020 due to the uptake of electric vehicles and the decarbonisation of heat.
There is a shift towards decentralised and renewable generation in all scenarios, only the pace and extent differs.
This brings a need for more flexibility to balance supply and demand.
New nuclear is needed in all scenarios, but there may be a gap between plants decommissioning and new plants coming online.
Offshore wind grows in all scenarios.
Imported gas becomes more important in three out of the four scenarios; and shale gas features in Consumer Power and Steady State.

Comment

If Britain has any hope of meeting its climate change targets, we need to start decarbonising heat and transport now. The scenarios and sensitivities show a number of ways this could be done, with very different outcomes, depending on whether a policy- or market-driven approach is adopted. What we do know is that there is a need for more flexibility and more storage solutions as we shift to more decentralised and renewable generation, but we should take a whole system view, looking at how electricity, gas and transport fuels interact. Whilst Government may have announced its Electricity Market Reform measures in 2013 its clear that true reform of the way in which we use and manage our energy needs has really only just begun.