Achieving net zero is one of the biggest challenges facing the power sector today. Time is running out to decide which technologies will allow us to decarbonise the power sector lowest cost for the system while keeping the lights on. Our new analysis, commissioned by SSE, shows that making certain technology, market design and network decisions today could significantly reduce the cost of reaching net zero.
Our analysis shows that a renewables centred energy system supported by decarbonised gases and long duration storage can reach net zero faster and achieve system cost savings of over £48bn between now and 2050, relative to the current trajectory envisaged, with a further £28bn of benefits accrued through to 2060 to reach £76bn in total.
Go big on offshore wind
A renewables-led energy system centred on offshore wind achieves significant system cost savings versus more conventional pathways where greater levels of new nuclear capacity are deployed. This is primarily because the cost of offshore wind has come down significantly and now represents the cheapest technology that can be deployed at scale.
Low carbon thermal generation and long duration storage to complement renewables
As renewables are intermittent, the power system will still require firm power to be used during periods of low renewable output. We propose that the cheapest way of providing firm power is through low-carbon thermal generation such as gas carbon capture and storage (CCS) and hydrogen power generation. With the excess renewable generation we’ll see in the future, we see more of a role for longer duration storage technologies such as pumped storage and green hydrogen (produced by electrolysers). Both technologies are key to balancing a renewables-led system, and the early strategic development of storage options maximise these benefits. In order to maximise the utilisation of renewable power, we need long duration storage which can help store energy during periods excess generation for use when it is most needed.
The need for market reforms
The most significant cost-saving we saw in our analysis was from valuing all low-carbon generation equally through electricity market reform. Once low carbon assets come to the end of their support period, they are exposed to the wholesale market and the impacts of price cannibalisation. This occurs because when it’s windy, high levels of wind generation will drive the power price down. Without another mechanism in place, this effect means existing renewable assets may not be able to cover fixed costs – most of which are transmission network charges. Supporting existing assets through more economic life extensions, refurbishments or repowering – rather than only supporting new assets – could save the system £20bn, the largest single component of the £48bn total savings.
Coordinate offshore transmission network
Lastly, a coordinated offshore transmission network can significantly reduce the network costs associated with a high renewable system. The UK Government has a target of reaching 40GW of offshore wind by 2030 and our Low Cost High Renewable scenario shows wind capacity reaching 93GW by 2050. Ensuring that offshore network infrastructure is coordinated will allow offshore wind farms to share transmission assets and reduce costs.
Summary of savings from LCP’s Low Cost High Renewable pathway, 2021-2050
Reducing carbon cost-effectively
Looking at this analysis from a decarbonisation perspective, we see that the GB power system can reach a gross carbon intensity of 25gCO2e/kWh by 2035 and do so cost-effectively. Once negative emissions from Bioenergy with Carbon Capture and Storage (BECCS) are included, we see the power sector being net negative from as early as the 2030s. This will support decarbonisation across the economy and be the engine of the UK’s efforts to reach net zero. However, policy decisions about when the GB power system becomes net negative as well as to the role of existing gas generation capacity will need consideration to ensure value for money for consumers.
We’ve shown that reaching net zero can be a lower cost than the current trajectory, now we need decision-makers to put the right framework in place to turn this scenario into reality.
The analysis identifies five steps to achieving a net zero power system. To take a deep dive into the analysis and read the full report, click here.