WÄRTSILÄ WEBINAR IMPORTANCE OF FLEXIBILITY AND RELIABILITY IN THE UK ENERGY MARKET - Wärtsilä
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WÄRTSILÄ WEBINAR
IMPORTANCE OF FLEXIBILITY AND
RELIABILITY IN THE UK ENERGY MARKET
1 © Wärtsilä Importance of flexibility and reliability in the UK energy market
Importance of flexibility and
reliability in the UK energy market
Ilesh Patel
Partner
Energy & Resources, Baringa Partners LLP
Ilesh.Patel@baringa.com
THE ENERGY TRANSITON
Making sense of the energy transition – policy and market context
Capacity Market auctions have
cleared at levels too low for large-
scale new build
The retail market price cap is proposed to come
Meanwhile, regulation
into force by year-end
struggles to keep up with
market changes
“We stand on the cusp of the next transformational
change in the energy sector, and that this can
move us beyond the trilemma”
The end of the trilemma?
“Our approach will be aligned with the key technological changes
which can help to cut costs, cut carbon, and maintain security of A significant policy
supplies – and drive towards a future where the three corners of the gap still remains for
trilemma work in concert, not opposition.” the UK to meet its
fourth and fifth
carbon budgets in the
power sector
Industry is still awaiting the government’s response to the Cost of Energy Review, which There is a lack of long-term clarity on the
criticised complex and inefficient policies for leading to higher costs UK’s Carbon Price Support and its ability
to stay in the EU Emissions Trading
Scheme after Brexit
3 © Wärtsilä Importance of flexibility and reliability in the UK energy market Source: Baringa Partners LLP
DRIVERS OF FLEXIBILITY
Fundamental Value Drivers of Flexibility in the GB Market
Evolution of installed capacity in the GB market* Renewable’s generation share
œ Less spare capacity: Capacity margins are tightening as large
generation closes to meet emissions limits (coal)
œ A peak 25% headroom in 2011 will reduce to below 5% in future periods
of low renewable output, high demand and low plant availability. In
2016 and 2017, tightening capacity margins are already increasing
wholesale and BM price volatility
œ Less synchronous and inertia providing plant: Intermittent non-
synchronous renewables will make up a greater share of annual
generation. This will necessitate increased provision from fast
response and inertia providing plant to match varying generation
œ A thermal to renewable capacity switch: Aging thermal generation
and increased penetration of intermittent renewables will mean less
mandatory (automatic) balancing actions from large thermal stations
œ The value of being close to demand – embedded benefits
* Baringa Reference Case
4 © Wärtsilä Importance of flexibility and reliability in the UK energy market Source: Baringa Partners LLP
INCREASING ROLE OF FLEXIBILITY
Increasing renewable energy system require multiple forms of flexibility
SEASONAL
WEEKLY
Fuel as a form of energy storage
DAILY to balance seasonal variation
Longer duration energy
• ”Shift” solar energy from summer
balancing and system reliability is
Minute, hourly and daily to winter
ensured
variations in generation are by flexible thermal generation • Power-to-gas and existing LNG
handled mainly by energy storage infrastructure required
• Week-to-week
• Second and minute level
• Example: calm dark periods
balancing
during winter, monsoon season,
• Daily shifting of energy sand storm
5 © Wärtsilä
FLEXIBILITY ACROSS MARKETS
Monetising flexibility across different timeframes and markets
œ Bi-Laterally traded wholesale power (#1 – 4): Most
Year Season Month Day-ahead “Gate Closure” Delivery Settlement North West European power markets are bi-laterally
Ahead Ahead Ahead (t – 24 hr) (t – 1 hr) (t + 0 hr) (t + 0.5 hr) traded markets, where parties are required to buy and
sell electricity ahead of time
1 Grid Trade Master Agreement (GTMA) bilateral OTC
forward markets œ The Role of National Grid: Prior to delivery of the
Half-hour electricity bought in forward timeframes, National Grid
Bi-lateral contracts between generators and electricity suppliers. settlement takes control of the system, receiving the contracted
2 Season and month ahead period
positions of all parties
future contracts
ICE, Endex futures. Very limited œ Balance Responsibility (#6): All parties are balance
liquidity responsible, in that they will be penalized/paid cash-out
3 Day-ahead (DA)
Exchanges prices (‘SSPs’) if their out-turn generation/demand
differs to what they had notified the System Operator
N2EX and APX Exchanges. Increased Balancing Mechanism and
liquidity since 2011/12 Balancing Service actions to œ Real Time Electricity Balancing (#5): Post gate
4 Intra-day (ID) alleviate energy and system closure, the System Operator uses a suite of tools
Spot imbalances called Balancing Arrangements to manage real time
N2EX and APX 5 National Grid’s electricity supply and demand (the BM, FFR, FR and
Balancing Actions 6 Imbalance STOR)
Balancing Settlement
Balancing œ Settlement (#6) – ‘NIV Chasing’: The cost accrued in
Services Calculate cash-out
Mechanism one of these tools, the balancing mechanism, is used to
prices and settles
calculate the imbalance price to be charged/paid to out
cash-flows arising
of balance parties. Generating to be intentionally out of
from balancing
balance is often called ‘NIV Chasing’
actions
7
Capacity Contracts with the System Operator, DNO or Bi-Laterally œ Capacity Markets (#7): In addition to the wholesale
traded and balancing markets, in GB, assets can
8
Embedded Benefits receive capacity payments
9 œ Embedded Benefits (#8): Assets on the distribution
Retail Electricity network can avoid ‘use of system’ charges – embedded
benefits
6 © Wärtsilä Importance of flexibility and reliability in the UK energy market Source: Baringa Partners LLP
THE UK EXPERIENCE
GB Distributed Energy Build-Out
Capacity market Contract Award Summary (15 year) Gas Recip Engine Contracts by Party
3 800 725
700
2,5
2,5 600
CM Capacity (MW)
515
500
CM Awarded Capacity (GW)
400
2
300
200 160
114 112 102 91
1,5 70 47 44
100 40 30 27 27 26
0
Walker & Son (Hauliers)…
Power Balancing…
Viridor Waste…
1 0,9
Centrica
STOR Ltd
Edge Power
Enersyst Limited
Greenfrog
Alkane Energy UK Limited
UK Power Reserve Group
Energy Circle
Mercia
TGC Emerald Limited
Gas Generation Ltd
InfraRed
0,7
0,5 0,4
0
DE Gas Recip DE Diesel DE Storage DE Engine
Unknown fuel œ Where CM participants provide their company details we can estimate the
awarded CM contracts by company. It should be noted that it is not clear who
2018/19 2019/20 2020/21 2021/22 Total (T-4 only) owns all of the CM contracts. As such it is likely that the above summary
underrepresents, or omits some portfolios
7 © Wärtsilä Importance of flexibility and reliability in the UK energy market Source: Baringa Partners LLP
Importance of flexibility and
reliability in the UK energy market
Melle Kruisdijk
Vice President, Europe
Wärtsilä Energy Solutions
melle.kruisdijk@wartsila.com
OUR VISION
Towards a 100% renewable energy future
The energy landscape is in transition towards more flexible
and sustainable energy systems.
We envision a 100% renewable energy future.
Wärtsilä is leading the transition as the
Energy System Integrator – we understand, design, build
and serve optimal power systems for future generations.
Engines and storage will provide the needed flexibility
to integrate renewables and secure reliability.
9 © Wärtsilä 30.10.2018
UK POWER MIX
The UK power system is rapidly going green
Capacity mix Generation mix
GW Other flexible capacity TWh
300 Demand response 400 100%
Other
Utility-scale batteries
90% Solar thermal
Small-scale batteries 350
250 80% Small-scale PV
Other
300 Utility-scale PV
Solar thermal 70%
Offshore wind
200 Small-scale PV
250
Utility-scale PV
60% Onshore wind
Offshore wind Biomass
200 50%
150 Geothermal
Onshore wind
40% Hydro
Biomass 150
100 Geothermal 30% Nuclear
Hydro 100 Oil
20%
Nuclear Peaker Gas
50 50
Oil 10% Gas
Peaker Gas 0 0% Coal
0 Gas Renewables share
Coal
Source: Bloomberg New Energy Finance
10 © Wärtsilä Importance of flexibility and reliability in the UK energy marketCENTRICA POWER PLANTS
New flexible capacity in the UK energy market
• Wärtsilä supplied two 50 MW gas engine
power plants in Brigg in North East
Lincolnshire and Peterborough in
Cambridgeshire
• The two plants each utilise 2 x 5 Wärtsilä
34SG engines running on natural gas
• They are the biggest medium-speed
engine-based gas power plants in the UK
• Wärtsilä delivered Engineering,
Procurement and Construction (EPC)
solutions for both sites
11 © Wärtsilä Importance of flexibility and reliability in the UK energy marketFLEXIBILITY IS KEY
Fast-starting flexibility supports intermittent renewables
• Centrica plants will balance the stability of the grid
“The under two-minute start up time
• Electricity to 100,000 homes in less than two that Wärtsilä’s solutions deliver is a
minutes rare feature and very important to the
• The two-minute fast-starting flexibility will support UK grid.”
-Mark Futyan, Distributed Power Systems
local peaks in demand and the inevitable Director from Centrica Business Solutions
fluctuations in supply from renewable sources
• Fast one minute shut down
• Both plants can be started remotely
• Operational flexibility ensures having energy
available when the supply from renewables drop
12 © Wärtsilä Importance of flexibility and reliability in the UK energy marketKEY TAKE-AWAYS
UK needs flexibility and reliability to move towards renewables
• The UK is rapidly moving towards renewables
• Renewable energy systems require multiple forms of flexibility
• Increased gas capacity brings the needed flexibility to the system and supports the
introduction of renewables
• Engine power plants contribute to decarbonisation and improved system efficiency
• Outcome: reliable energy at an affordable price
13 © Wärtsilä Importance of flexibility and reliability in the UK energy marketTHANK YOU FOR JOINING!
Melle Kruisdijk
Vice President, Europe
Wärtsilä Energy Solutions
melle.kruisdijk@wartsila.com
Ilesh Patel
Partner,
Baringa Energy & Resources
Ilesh.Patel@baringa.comYou can also read
