Memorandum submitted by National Grid
INTRODUCTION
1. National Grid owns and operates the high
voltage electricity transmission system in England and Wales and,
as Great Britain System Operator (GBSO), we operate the Scottish
high voltage transmission system. National Grid also owns and
operates the gas transmission system throughout Great Britain
and through our low pressure gas distribution business we distribute
gas in the heart of England to approximately eleven million offices,
schools and homes. In addition National Grid owns and operates
significant electricity and gas assets in the US, operating in
the states of New England and New York.
2. In the UK, our primary duties under the
Electricity and Gas Acts are to develop and maintain efficient
networks and also facilitate competition in the generation and
supply of electricity and the supply of gas. Our activities include
the residual balancing in close to real time of the electricity
and gas markets.
3. Through our subsidiaries, National Grid
also own and maintain around 18 million domestic and commercial
meters, the electricity Interconnector between England and France,
and a Liquid Natural Gas importation terminal at the Isle of Grain.
EXECUTIVE SUMMARY
4. National Grid believes there are low
carbon technologies with direct relevance to our operations. Such
technologies have potential not only in helping the UK reach its
2020 carbon emissions targets, but also in securing the supply
of energy within the UK and providing an economic opportunity
to expand the UK's green economy.
5. Carbon capture and storage (CCS), smart
metering, smart grids and renewable gas are technologies which
National Grid believes will make a significant contribution, not
only to our future operations but also the UK's green economy
as a whole.
6. However for all the potential of these
low carbon technologies we also recognise that there are barriers
to deployment and specific requirements which need to be addressed
as a matter of priority.
7. We welcome the Government announcements
and support for advancements in technologies such as smart metering
and carbon capture and storage (CCS), however we also believe
that more work needs to be done in creating the optimum commercial,
legislative and regulatory environments for which the associated
stakeholders can have confidence and clarity to operate.
8. Key specific requirements include the
need for a clean coal policy to facilitate the application of
CCS, consumer engagement and education to realise the potential
benefits within smart technologies, and the clarification of regulatory
regimes for low carbon technologies to be implemented. Co-ordination
of new technologies and their application is a vital part of the
UK achieving a status as the world leader in low carbon technologies.
9. Finally on the opportunities of a new
green deal, National Grid already recognises the potential of
low carbon technologies in generating and sustaining new industries
and the jobs within them. Through evaluations of potential projects
in CCS and smart grid trials we can already estimate the likely
immediate and indirect economic impacts of large scale deployment
of low carbon technologies.
10. We also recognise the need for the correct
skills to implement such innovative technologies. We have already
started to take the necessary actions in order to foster the future
home-grown skills we require. Looking towards the future will
continue to work with schools and young people to share information
and encourage young people to pursue careers in engineering.
What are the most important drivers, nationally
and internationally, for a low carbon economy in the UK?
11. National Grid is committed to playing
its part in addressing climate change. In addition to our own
targets to reduce carbon emissions, we are conscious of the role
that our networks play in facilitating the UK's climate change
objectives. In order to reach the Government targets of 80% emissions
reduction by 2050, and 15% renewable energy sources by 2020 we
will need Government, industry and consumer collaboration to determine
a route-map or masterplan for meeting these targets.
12. A joined-up approach is essential to
get the right legislative and regulatory frameworks in place and
ensure necessary infrastructure investment is available in a timely
manner. This will facilitate the connection of new renewable sources
of electricity generation, and development of technologies such
as biogas production, the deployment of CCS and integrating smart
meters and smart grids.
Which low carbon technologies have the biggest
potential and what is needed to achieve the development and deployment
of new technologies?
13. National Grid recognises that a number
of key low-carbon technologies will play a major role in our current
and future operations. In particular we believe that carbon capture
and storage will contribute to the decarbonisation of electricity;
smart meters will help achieve greater energy efficiency; and
the role of renewable gas will be important as we seek to reduce
the carbon content of gas and ensure security of supply.
CARBON CAPTURE
AND STORAGE
(CCS)
14. CCS represents an opportunity to significantly
reduce CO2 emissions from fossil fuelled power
stations, and could be the largest contributor to meeting global
emission reduction targets. The technology is proven for each
stage of the capture and storage process at varying scales, and
there are no major technical issues to scaling up to full scale
generation levels. Pipeline transport of CO2 is
already carried out onshore in the US for oil recovery and offshore
in Norway for CO2 sequestration, both without
significant issues.
15. Large scale CO2 output
from a number of power stations is best transported from a local
gathering system and then piped via a "trunkline" to
an offshore distribution hub. This has a number of advantages.
It spreads the risk and cost of individual shipping and storage
projects. It allows the system to be more effectively operated
through managing the compression of the CO2 in
the trunkline and allows more efficient use of the fields used
to sink the CO2. With offshore pipeline costs around
40-70% higher than onshore pipeline technology, it makes sense
to marshal as many CCS inputs down a single offshore route.
16. Clusters could, in time, capture CO2 from
coal and gas-fired power stations and large industrial users.
There is the potential to create clusters in the Humber, Firth
of Forth, Teeside and the Thames Estuary. Creating a cluster in
the Humber region looks to be the most significant, in terms of
initial benefits to Britain, as 40% of UK power stations would
be within reach of a CCS network.
17. We envisage that the Humber region could
capture up to 60Mt of CO2 per annum, additional sites
in Scotland could capture up to 18Mt of CO2, while
the Teeside based cluster could capture 19Mt of CO2
per annum. In addition to this the installation of CCS technology
in the Thames Estuary area could add a further 30Mt of CO2 being
captured and stored p.a. In total with CCS operational at all
four locations the total CO2 captured would equate
to around 15% of annual total UK emissions, a significant proportion
of the CO2 reductions needed to made by 2020.
18. Investment in the network element of
a CCS cluster in the Humber region would cost around £600
million. The additional investment required to bring on line the
capture and storage elements of the cluster would increase investment
in the region to around £4 billion enabling the envisaged
cluster to capture around 10-15Mt per annum of CO2 per
year. With subsequent investments of around £10 billion,
the cluster would be expected to potentially capture 60Mt per
annum.
19. When considering additional onshore
and offshore network elements in the UK we estimate that £700
million would be required to establish a network cluster in the
Thames region, while the Tees and Forth would cost around £450
million and £300 million respectively, these estimated costs
vary according to physical infrastructure cost and locational
factors.
Requirements for UK deployment
20. With the right vision, incentives, and
implementation plan, a cluster could be achieved in the Humber
area by 2020. In our view, we think Government should bring forward
a coherent, strategic clean coal policy, central to which is a
strategic ambition that will enable the investment in carbon capture
and storage.
21. Such a strategy will need to include
the following:
— Government clean coal policy that will
underpin its climate change and security of supply responsibilities
and give clear guidance of frameworks for permissible investments
in new coal fired power generation within the UK.
— Incentives for commercial generators,
and both onshore and offshore infrastructure providers to invest
in CCS until it becomes evidently economic.
— A stable regulatory regime to licence
onshore and offshore activities.
— A clear licensing regime for onshore
and offshore activities.
— Health and safety and planning polices.
22. National Grid therefore welcomes the
Government's 2009 Budget announcement that it intends to
put in place levy a mechanism which will assist the implementation
of up to four CCS demonstration projects.
23. With coal consumption forecasted to
increase by 65% between 2005 and 2030, we recognise a major
an opportunity for UK to develop intellectual and manufacturing
expertise in a leading edge technology in a truly global market.
Such an advantage would allow the UK to retain a manufacturing
base which is a major user of energy
24. As a first mover of scale on CCS, the
UK would continue to demonstrate its position as a global leader
in the fight against climate change. It would also provide a model
for, as yet unmitigated carbon-intensive generation in parts of
Eastern Europe, China, India and other developing economies.
SMART METERS
25. National Grid welcomes the Government's
commitment to the roll-out of domestic smart meters across the
UK by 2020 and its recognition of the importance of smart
metering in the creation of "smart grids".
26. We believe that smart meters (and the
associated technology) can provide consumers with insight into
their energy consumption behaviour and also provide them with
the associated cost. Their greater involvement in their energy
purchase decisions is likely to result in both energy efficiency
savings and reductions in peak demand.
27. It may also be possible to deliver greater
energy savings than those achieved by manual consumer intervention,
by automating appliances' response to price signals. For example,
by integrating price sensitivity into the appliance's control
system, clothes washing, air conditioning and heating could be
set to avoid peak hours in a day dependent upon the consumer's
preference for "economy over immediacy".
SMART GRIDS
28. National Grid, in co-operation with
our customers, already balances supply and demand in real time.
In short, the Transmission System is already relatively "smart",
that said the advancement of smart grid technology will provide
potential for demand side management methods which could enable
electric vehicles and new balancing services from distributed
generation.
29. Looking ahead, we believe there could
be increasing pressure for distribution network operators to move
away from their historically passive roles and take an increasingly
sophisticated "operator role". This would allow DNOs
to optimise capacity on their networks, particularly against the
expected demand growth from electric vehicles and heat pumps.
30. We share Government's view that electric
vehicles may play a significant role in mitigating transport emissions.
However, for electric vehicles to succeed to mass-market levels
and enjoy the greatest environmental and economic benefits, the
charging process must be concentrated overnight. Conversely, if
charging is conducted during times of peak demand, the vehicle
will generally be charged from the least fuel efficient and most
marginal (and expensive) plant. Mass-charging at peak will drive
the need for additional generation and network infrastructure.
Fortunately, overnight charging is likely generally to be appropriate
to consumers' needs if supplemented with other daytime and/or
rapid charging options.
31. Moreover, we believe that smart metering
and smart grids will play an essential role in facilitating overnight
charging behaviour with customers. In the short term, via the
smart meter, consumers will be able to access time of use tariffs.
These are likely to reflect the differential economic and environmental
costs of overnight charging when compared with a daytime alternative
32. In the longer term, mass charging of
many hundreds of thousands of vehicles will require co-ordinated
charging, almost certainly via a smart grid. This will maximise
environmental benefits whilst minimising network costs. Moreover,
the smart grid will also help facilitate the operation of public
charging facilities which, in future, may provide fast and rapid
charging services. These in turn permit electric vehicles to explore
an extended range.
33. In our US business, where we do own
and operate electricity distribution networks we plan to run a
number of smart grid pilots—in both Massachusetts and New
York.
34. The pilot in Massachusetts will cover
1% of our customer base. It will include a variety of customers
from urban, suburban and rural settings with varied electricity
usage patterns. The pilot will test the addition of distributed
generation and will build in options for adding renewables and
plug-in hybrid vehicles (PHEV) to the system.
35. In New York, we have recently applied
to build and operate two 40,000 customer smart grid demonstration
projects in the Syracuse area and the Capital District. Under
the programmes, all customers will receive a smart meter. As an
option, customers can have additional equipment installed in their
homes that include special programmable thermostats and other
devices that provide data and support energy management. Participating
customers will be asked how they prefer to receive their energy
information—via text message, from the Internet, or on a
PDA—and arrangements will be made for them to view and monitor
energy consumption on a real-time basis. Additionally, customers
will have the option to receive a new rate plan that allows them
to save money during periods when electricity use is at its highest
across the region.
36. Our findings from these two trials in
our US business will provide valuable data and experience which
we will readily share with UK policy makers and parliament.
REQUIREMENTS FOR
UK DEPLOYMENT
37. Within the UK, to realise the benefits
of smart-enabled demand-side services we need to move quickly
and effectively to provide:
— Consumer education: A coordinated and
consistent communication campaign to achieve early education of
consumers in how to exploit the potential from smart meters and
appliances.
— Smart metering with the correct universal
functionality: Smart metering and its infrastructure that is rolled
out with appropriate functionality to provide two way metering
for distributed generation and price signals to consumers, appliances
and later on electric vehicles.
— Smart appliances: appropriate encouragement
of the consumer and white goods manufacturers to produce appliances
which are capable of acting on price signals from smart meters
and incorporate frequency response technologies. Earlier adoption
of these technologies will automate the economic benefits to the
consumer and carbon benefits to the country, which is likely to
happen only if manufacturers see a market for this type of product.
— A high degree of confidence that the
roll-out will be complete by 2020 would help to provide a
period for the demand response effectiveness to embed and to ensure
that the majority of benefits are in place against the changing
generation mix.
RENEWABLE GAS
38. Renewable gas has the potential to make
a significant contribution to the UK's renewable energy and carbon
reduction targets for 2020. Injecting renewable gas such as biomethane
into the grid represents a unique large scale solution. Unlike
other options, such as district heating and heat pumps, renewable
gas utilises the existing heat infrastructure (ie gas grids) which
are already largely paid for by the consumer.
39. In the longer term, with the right Government
policies in place, renewable gas could supply a significant proportion
of UK residential gas demand. Renewable gas will potentially not
only contribute to the UK renewable energy and climate change
targets by 2020, but also address issues around security of supply.
Renewable gas production in the UK would mean that this country
would continue to have an indigenous supply of gas on which it
could rely as North Sea reserves run down. Furthermore, the renewable
gas solution creates the possibility of importing biomass for
gasification, increasing diversity and thus security of supply.
40. Produced mainly via a process of anaerobic
digestion (AD) or thermal gasification of the UK's biodegradable
waste, renewable gas represents a readily implementable solution
for delivering renewable heat to homes in the UK. Renewable gas
can also deliver greater security of energy supply for the country,
as well as a solution for waste management as UK landfill capacity
declines.
41. In terms of the cost to the UK of delivering
renewable gas, it is estimated that the marginal cost (ie that
over and above the cost of the waste infrastructure which must
be built anyway in the UK to deal with reducing landfill capacity)
would be in the region of £10bn. This cost compares well
with the likely cost of delivering other large scale renewables
such as wind. The unit cost of renewable gas would be of a similar
level to the cost of other sources of renewable energy which are
currently supported with subsidies.
REQUIREMENTS FOR
UK DEPLOYMENT
There are no insurmountable technical or safety
barriers to delivering this solution (the technology is already
being deployed in many other countries). In order to deliver renewable
gas injection into the grid the following policy developments
are urgently required:
— A commercial incentive for renewable
gas producers to upgrade and grid-inject their gas rather than
generate electricity. The generation of electricity is currently
incentivised under the Renewables Obligation (RO) scheme despite
being generally a much less efficient use of the valuable waste
stream.
— A comprehensive waste management policy
for the UK to ensure that each waste stream is directed to the
most appropriate technology to maximise energy recovery and recycling.
— A regulatory framework to provide incentives
and to clarify the roles and responsibilities of the gas transporters
with respect to renewable gas connections.
— Continued support for R&D in renewable
gas production and upgrade technologies.
43. Importantly, the use of renewable gas
does not require consumers to find the money for new heating installations
in the home. This technology also avoids the disruptive road works
that would be required to build more network infrastructure.
44. We strongly support the proposal for
the Renewable Heat Incentive (RHI) which Government will be consulting
on this summer. It is important that the level of support should
vary by technology, particularly to ensure that production and
grid injection of biomethane is incentivised to a level which
makes it competitive with other sources of renewable heat.
What opportunities exist for the creation of a
green new deal whilst pursuing a low carbon economy?
45. When looking at individual low carbon
technologies, it is apparent that their application can have a
wide impact on the economy—both through direct employment
and throughout various supply chains and their associated multiplier
effects.
46. For example over the construction period
of the previously mentioned National Grid supported CCS cluster,
"Yorkshire Forward" estimate that 55,000 new jobs
in the region could be created with the cluster network underpinning
several thousand more key jobs in the power generation, heavy
manufacturing and coal industries in the region.
47. In the case of National Grid's proposed
smart grids trials in the USA, we estimate that the two New York
projects could create 200 jobs. Some will be directly related
to the pilot's implementation and others will be indirectly related.
While our Massachusetts smart grid trial will directly create
more than 100 National Grid vacancies; opportunities will
also be created for participating contractors and vendors, all
can be considered "green" jobs. We will share findings
from our US experience of smart grid trials with UK policy makers.
48. National Grid believes strongly that
the low carbon economy cannot be achieved if we do not get the
right skills, in the right places, at the right time and in the
right quantities to enable business to take advantage of the growing
markets in this area. Engineering expertise is also critical to
maintain security of supply through the operation of the electricity
and gas systems.
49. Consequently, looking ahead to 2020 and
beyond there is a both a challenge and an opportunity in ensuring
we can recruit and retain staff with the skills and expertise
to manage our future networks. National Grid is going to need
to recruit at least 1,000 new engineers solely in UK electricity
transmission within the next 12 years. These people will
be vital to run the gas and electricity networks and therefore
to deliver a low carbon energy future.
50. There is a real concern about the steep
decline in young people taking up Science, Technology, Engineering
and Maths (STEM) subjects. At present only 6% of UK undergraduates
are studying Engineering and Technology subjects and only one
in six students reading Engineering and Technology subjects are
female. This current shortage therefore conflicts with the energy
industries need to recruit the necessary skilled staff to develop
low carbon technologies.
51. National Grid has recently carried out
a research project with schoolchildren, parents, teachers and
our own young engineers to look at attitudes to engineering as
a career. It is clear that perceptions about engineering will
have to change in order to attract a wide range of people to the
profession. There is now an opportunity for us to ensure that
we have the future home-grown skills we require, and as such will
be working with schools and young people to share information
and encourage young people to think about careers in engineering.
We are sharing the results of our research project shortly with
Government, professional bodies and the engineering community.
May 2009
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