1 Introduction
1. The 2007 Energy White Paper set out two long-term
challenges for the UK's energy policy—the reduction of carbon
dioxide emissions; and ensuring secure, clean and affordable energy
supplies. Britain's electricity networks will play a crucial role
in the delivery of both these objectives.[1]
A large proportion of our network assets are now approaching the
end of their useful life. The need for renewal, combined with
the necessity to respond to future challenges, presents a once-in-a-lifetime
opportunity for us to revolutionise Britain's electrical energy
system and facilitate the transition to a low-carbon economy.
This is why we chose to consider the future of Britain's electricity
networks as one of our first inquiries.
2. Britain's current electricity infrastructure
was designed to support post Second World War economic growth.[2]
The system is characterised by a relatively small number of large
fossil fuel-based and nuclear generators, which are connected
to a high voltage transmission network—often referred
to as the national grid. This allows the efficient transportation
of electricity nearer to the sources of demand. It is delivered
to consumers via 14 lower voltage regional distribution
networks. These are almost entirely passive in nature with relatively
little connected generation. Overall, power flows in one direction
across the system from higher to lower voltage levels, as illustrated
in Figure 1.Figure
1: electricity flows from generators to consumers
Source: Department of Energy and Climate Change
3. The transmission network in England and Wales
is owned and operated by National Grid Electricity Transmission.
Subsidiaries of Scottish Power and Scottish and Southern Energy
each own and maintain part of the transmission system in Scotland,
although National Grid has responsibility for overseeing and managing
the flow of electricity across the whole British network.[3]
Figure 2 shows the transmission networks in Scotland, and
England and Wales. Figure
2: the transmission networks of England and Wales, and Scotland
Source: National Grid
4. The 14 distribution networks across England,
Wales and Scotland are owned and operated by seven companies known
as distribution network operators (DNOs). These are shown in Figure
3. Scottish and Southern Energy and Scottish Power own both the
transmission and distribution networks in their respective regions.
Electricity supply companies pay the DNOs for consumers' use of
their networks. In turn, suppliers pass these charges on to consumers
through their bills. Figure
3: distribution network operators in Britain
Source: Energy Networks Association
5. The primary function of the electricity networks
is to balance supply and demand across the system at all times.
This is managed through the British Electricity Trading and Transmission
Arrangements (BETTA), which involves bilateral trading between
generators, suppliers, traders and customers across a series of
markets operating on a rolling half-hourly basis. Because changes
in demand are met by a near instantaneous response in the amount
of electricity produced, the total level of installed generating
capacity connected to the system has been designed to meet peaks
in demand throughout the day and across the year. Because there
is a possibility of some power stations not being available, historically,
there has been a capacity margin over peak demand of around 20-24%
to ensure security of supply.[4]
Today's transmission system has been built to accommodate the
simultaneous output of all power stations connected to the network.
This approach has underpinned the development of Britain's electricity
infrastructure in the modern era. As one witness told us: "nothing
has fundamentally changed since 50 years ago".[5]
6. However, there is now a new challenge. If
the likelihood of dangerous climate change is to be avoided, Britain
and the rest of the world must drastically cut their carbon dioxide
emissions in the next 40 years. To fulfil its part, the Government
has committed the UK to an 80% reduction in emissions over 1990
levels by 2050. As part of the trajectory to this objective, the
Government has also signed up to a legally-binding target for
15% of energy to come from renewable sources by 2020, as part
of an EU target for 20% renewable energy. To achieve this, the
Department of Energy and Climate Change's (DECC) lead scenario
suggests more than 30% of electricity could be generated from
renewables.[6] To meet
the longer-term target the electricity sector will need to be
almost entirely decarbonised by 2030, all the while maintaining
security of supply.[7]
The task is colossal, not least because demand for electricity
may increase considerably through the electrification of parts
of the heat and transport sectors. It is also ambitious by international
standards. One witness said: "there is nothing on the scale
that we are envisaging".[8]
7. Not only will the transition to a low-carbon
economy entail massive changes in the sources of electricity generation,
it will also necessitate a transformation in our networks. Indeed,
the Institution of Engineering and Technology told us that: "Without
the right networks, few of the UK's energy ambitions can be realised".[9]
The Department described the electricity networks as "a key
enabler" to future investment in generation capacity.[10]
Without the physical assets in place and the right regulatory
framework, there is a real danger of new generation being delayed,
increasing the likelihood of the lights going out. Furthermore,
the networks will be crucial in allowing consumers to play a greater
role in managing their own energy demands. To achieve this, we
need to become smarter at controlling the flow of electricity
across the system—"Making energy cleverer" as
one witness put it.[11]
This is the overarching theme of our Report.
8. We received a large volume of written evidence
for which we are grateful. We also took oral evidence from academics
with expertise in energy networks—Dr Michael Pollitt from
the Judge Business School, University of Cambridge, Professor
Goran Strbac from Imperial College, and Dr Jim Watson of Sussex
Energy Group; transmission network owners—National Grid,
Scottish Power, and Scottish and Southern Energy; the sector skills
council—Energy and Utility Skills; the main trade associations—the
Energy Networks Association, the Renewable Energy Association,
the British Wind Energy Association, Scottish Renewables, and
the Association of Electricity Producers; distribution network
owners—CE Electric UK and Electricity North West Ltd; the
Institution of Engineering and Technology; the regulator—Ofgem;
and the Minister and officials at the Department of Energy and
Climate Change.[12] We
would like to express our thanks to all those who contributed
to our evidence-gathering. We particularly thank Professor Goran
Strbac and Dr Jim Watson who were specialist advisers on the inquiry,
although we emphasise the conclusions and recommendations of this
Report are the Committee's own.
9. The remainder of this Report is split into
four chapters. Chapter 2 considers what a vision for Britain's
electricity networks should take in. Chapter 3 analyses the various
challenges faced by the transmission network. Chapter 4 looks
at the changing role of the distribution networks. In particular,
it highlights the importance of innovation in delivering networks
fit for the 21st century. Finally, Chapter 5 asks whether
the current networks sector workforce has sufficient skills to
deliver the changes required in the coming years.
1 Throughout this Report we consider only the electricity
networks of Britain-that is England, Wales and Scotland, though
we will refer to the UK with regard to energy and climate change
policy where appropriate. Back
2
Ev 264 (Prof Goran Strbac, Imperial College London) Back
3
Transmission in England and Wales is defined as 275 kV or above,
whereas in Scotland it is defined as 132 kV or above. Back
4
Ev 278 (P.E. Baker and Dr B. Woodman, University of Exeter) Back
5
Q 47 (Prof Goran Strbac, Imperial College London) Back
6
HM Government, The UK Renewable Energy Strategy, page
8, July 2009 Back
7
Ev 267, para 1.6 (Prof Goran Strbac, Imperial College London) Back
8
Q 63 (Dr Michael Pollitt, Judge Business School, University of
Cambridge) Back
9
Ev 187, para 4 (Institution of Engineering and Technology) Back
10
Ev 147, para 8 (Department of Energy and Climate Change) Back
11
Q 48 (Prof Goran Strbac, Imperial College London) Back
12
A list of those who gave evidence can be found on page 74. Back
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