The future of Britain's electricity networks - Energy and Climate Change Contents

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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Prepared 23 February 2010