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03 May 2007 @ 08:28 pm
Effects of an oil crisis on UK electricity generation  
Before we start, wwo_thomas reckons UK petrol is over a quid a litre. Nationally he's broadly correct but if you know where to look there's still a supermarket around here that sells at 98.9p/l... if you buy £10 of shopping from them! Generally a few stations are trying to keep things at 99.9p/l because it looks pretty, which works out at £0.999/l * 3.7854 l/US gallon * $2.05/£1 = US$7.75 per US gallon here in the UK. Ouch.

All right gang, eyes down and you might learn something ;o) This is all off the top of my head to keep the numbers simple - the specifics might not quite be right but the generalities are. Besides I don't want to give you all my trade secrets, do I?

Power in the UK is traded on the open market. It's created by lots of generators or by importing it from overseas. It's used by, roughly, either big industrial users or power distribution companies who will sell it on to small industrial users and individual consumers like you and me. There are six big power suppliers to consumers in the UK. Each of them own some power stations and will usually make too much electricity or too little electricity. It's up to traders like me to sell or buy to make sure everyone has just the right amount. There are also a few companies which own power stations and just sell the electricity they produce to whoever will buy it, either on the market or through long-term contracts. (Often a bit of both.) Muddying the waters there are investment banks who trade electricity like it's gold or orange juice or pork bellies or anything else they can make a profit on, and there are also brokers who will try to match up buyers and sellers when the market isn't doing so good a job and take their cut from the middle. It's all a zero-sum game, or even a slightly negative sum game.

Anyway, the consumers have a good idea in advance of how much they're going to need and will do deals in advance to get their positions roughly balanced, but predictions never turn out to be quite right and there's a balancing mechanism (don't worry, you're not meant to understand it - I'll explain it some day if we both get bored enough) to make sure that it all matches up, near enough, at the end of the day. You produce too much or you consume too little, you get rewarded a very little bit for it. You produce too little - for instance, when one of your stations stops working - or you consume too much, you get punished a lot for it, but the National Grid gets the electricity it needs from elsewhere. It all balances out and there's enough of a fat profit to be made to keep the system running.

As I said before, in the UK we generate our electricity from, very roughly, 35% coal, 30% gas, 25% nuclear, 8% renewables and 2% oil. Let's consider those one at a time.

The UK hasn't had a power station that burns oil first and foremost running 24/7 in active production for years, since the days of the $10 barrel. Littlebrook, Fawley and Grain still survive but these days they only ever get fired up for a couple of hours at a time and that's if the National Grid are really struggling to meet demand. Over time, likely those stations will get converted to use other fuels, maybe palm oil or the old deforestation diesel. My very rough guess is that they'll each have maybe enough oil in stock for a hundred hours of running at a completely wild guess, and normally on about 90% of days then that oil never gets touched. The oil crunch means that they probably won't be buying in any more and the Grid will have to look elsewhere for last-resort generation. 90%-95% of days, this has no effect. Most of the rest of the time, the Grid won't care much. Very occasionally - one day in a year, in two years, in three years, maybe - this could cause a problem. Probably not, but only probably.

Coal-fired power stations: coal has tended to be the cheapest of the fossil fuels for a while now and that's probably going to become even more the case these days - coal prices go up and down like all the rest but never nearly so much. Of course you need to get the coal to the plants (hello, 1970s strikes) and you need there to be enough coal in the first place. It's also relevant that when you burn coal you create a heck of a lot of pollution.

Nuclear stations: these cost an awful lot to set up, an awful lot to get rid of and - in theory - not so much to run in between. The cost of producing electricity from a nuclear station will hardly change these days, but the market price of electricity is going up up and away and the nuclear plants should get more money for their electricity. (At least, that which they haven't sold years in advance at a fixed price.) Trouble is that Britain's nukes are getting old - some have shut down and others just aren't working so well. Look at British Energy's share price around about last August, f'rex.

Renewables: oh boy. In theory these are the answer. In practice, they aren't, yet. Now they are getting better but they've always been five, ten or fifteen years away from being the answer for about the last fifteen or twenty years. I'm not saying that we shouldn't invest in them because I think we should, a heck of a lot, but they aren't going to be the magic bullet answer this year or next year or probably while I'm in the job.

Wind power makes up the vast majority of renewable energy in the UK today, mostly from lots of tiddly little wind farms. The UK has something like 70,000 MW of power stations up and down the country. When it's not cold enough for people to need to turn on their heating and it's not hot enough for people to need to turn on their aircon then Britain needs about 40,000 megawatts at most during the day and maybe 25,000 MW at least during the night - subtract 5,000 MW at the weekends. During a cold, cold winter, the most Britain will ever need is about 60,000 MW. Last winter wasn't so bad, the highest demand got was somewhere in the middish fifties thousand, maybe the highish fifites. (In short, we've got loads left in the tank.) Bear in mind that a good sized wind turbine produces roughly one of those megawatts, and a great big too-big-for-land put-it-out-at-sea turbine could do two, three or - theoretically with whizzy science - possibly a whole whopping great five. Considering how many people don't like wind turbines (though I think they're pretty) wind ain't really ever going to play that big a part in generation.

The other problem with wind power is that the turbines only produce electricity when the wind blows, not too hard, not too soft and in the right direction. The UK may have the best wind in Europe for generating power but wind turbines only produce something like 27% of their maximum output. 27%! That's even before maintenance. I don't want to say anything confidential but you could easily expect 80% rather than 27% for coal or gas or oil. The other other problem is that wind farms are pricy to build - the 1,000 MW London Array is supposed to cost a billion and a half pounds. Cha-ching, especially as it'll only produce 27% of that 1,000 MW on average.

Solar power? If you'd asked me a couple of days ago I'd have said "ha ha, NO" but I'll upgrade the "ha ha, NO" to merely a "yeah, right", which is better, or at least less bad. See, I thought Muhlhausen was the state of the art: 30 acres big, or about fifteen football pitches, sixty thousand solar panels, US$65 million, ten megawatts. Ten megawatts! I burp with more power than that. As the article says, the only reason it's a going concern is that local law guarantees to pay ten times the going rate for solar-generated electricity. Gee, that's a market that performs well and without manipulation, thank you.

The reason I'm a bit - bit - less dismissive of solar than I was is this fancy bit of malarky. Pretty cool and at least it looks a lot prettier and takes up less footprint, so it might be an option for, say, the Sahara desert where land is effectively free. On the other hand, as the article says, "Is it true that this power is three times more expensive than power from conventional sources? Yes, but prices will fall, as they have with wind power, as the technologies develop. Also, a more realistic comparison is with the cost of generating power from coal or gas only at times of peak demand - then this solar system seems more attractive. " Says it all to me. Looking at the data, the whole project costs €1,200 million, or about eight hundred million quid, and is set to have a whopping 300 MW capacity. That makes wind power look good.

There's also the fact that solar power only works when it's sunny. The 11 MW project that's up and running is set to generate generate 24.3 GWhr per year. Divide 24.3GWhr by 11 MW and you get something like 2200 productive hours per year... that works out at this whole solar array producing electricity for 25% of the time. And I thought wind power's 27% was bad... To be fair, solar power does a pretty good job for water heating and the more you use solar for water heating then the less electricity you need in the first place, but photovoltaic panels are things to research for another couple of years rather than to rush into service now, I reckon.

Tidal power looks interesting, but the numbers aren't pretty. Even at the most optimistic, the Severn Barrage might cost as little as ten billion quid and produce 4.5 GW. The science reckons it ought to be productive for about five hours out of every 12.5 hour tide cycle, so we're talking 40% rather than 27%, but it's hardly great. Well worth lots of research into this, though.

So that's the renewables myth... not busted, but given a heavy dose of reality. I'm not against renewable energy, it's just not there yet. I want to see more of it used and I want there to be lots of money pumped into researching it, but I want people to realise that it's not all that good yet. It won't be good enough this year or next year either.

So, for now, least worst are gas-fired power stations, my specialist subject. Essentially you pump lots of natural gas out of the North Sea and burn it to (eventually) drive round the turbines that generate the electricity. If you're clever then you can do all sorts of useful things with the steam and waste heat in what are considered Combined Heat and Power plants or Closed Cycle Gas Turbines. Gas-fired power stations are great because they don't emit nearly as much as coal plants and you can turn their level of production up or down pretty easily - turn them down, or off, overnight when the prices aren't there and turn them up to maximum when the prices are good.

Gas prices tend to be very variable, more so than any other fuel source, so this tends to determine whether the gas plants are being fired hard or not - if gas is pricy then gas plants will run to meet long-term contracts and that's about it. Gas prices tend to vary with the oil prices on a global basis. Supplies of gas in the North Sea are a bit uncertain in the long term, but not likely to run out this year or next. In any case, a large chunk of natural gas used in the UK comes from the continent - there's long been a pipe that flows into Zeebrugge and gas flows one way or the other depending on which end will pay more for it. Last October there was another pipe opened, Langeled, which has brought loads of gas in from Norway. Result: natural gas prices this year dropped to a fraction (and I don't mean a fraction that works out at more than one) of what they were last year. That's why British gas bills have gone down. To be fair, the gas companies didn't put them up nearly as much as they could (or "should") have done when the prices went up.

This is really interesting because we have a great big international market for natural gas. Loads of the world's natural gas supplies are in nice sensible countries like Russia, Iran and Qatar (and Algeria?) which makes for all sorts of fun - see the Russia-Ukraine gas dispute, for instance. There's also the possibility of shipping natural gas around the world on big tankers as a liquid. More of that some other day.

Part of the reason why the UK uses so much gas for its electricity is that gas stations are small and relatively cheap to build. You saw how much the renewable ones cost up there? Eight hundred million quid will build you 300 MW of solar power that produces output 20% of the time or a two thousand megawatt gas-fired station that shouldn't run too far off full blat full time if the price is right. That's no isolated example - half a billion quid gets you a gigawatt elsewhere. It's not the long-term solution, but it ought to do the trick for the next couple of decades or so, and it's so much better than oil or coal. Plus you don't have nasty nuclear waste to try to fly into the sun, or something...

The gas price in the UK has gone up and down like nobody's business over the last few years - see this graph, for instance, then read this story about the day when people couldn't give natural gas away for free. (Man, that was a weird time. Electricity traded overnight at prices last seen in the 1960s.) Does anyone have a better graph of this? If not then, very roughly, UK natural gas traded at an average of 50p per therm over late 2005 and early 2006, 30p per therm in late 2006 (after Langeled) and 20p per therm in early 2007. If you know where to look, you can see what the oil crunch is doing these days and UK natural gas is back up around 40 pence per therm. Perhaps domestic gas bills aren't going to keep going down any more.

So now there's much less oil around, everyone reckons the natural gas price is going to go up and up. This would dictate that the gas plants would produce less and the coal plants would produce more, but that brings about its own problems. Can you see what they are?

Of course there's a lot more finesse to it than that - all the big players have great big tanks of natural gas that they pump gas into or take gas out of according to whether they think gas prices are going to go up or come down in some sort of quasi-derivative play. Really the great big price spikes in the British gas market came because the biggest gas storage facility broke. (Heh, there was one other time Rough storage had problems, when it got hit by lightning, and the gas price went up to a fiver per therm for a day. Cha-ching!) There is something very similar you can do with electricity on a small-ish scale, to do with pumping water up and down hills. Pump water up a hill while electricity is cheap, let it flow back down and convert the potential energy back into electricity when it's worth big money. Electric Mountain is for real - it was real state-of-the-art eighth-wonder stuff in 1959 and it's standing the test of time brilliantly today. Some day I'll tell you about kettles and solar eclipses.

Crikey, I've gone on and on and on here. In short, that's why the lack of oil means that gas prices are going to go up, electricity prices are going to go up and all sorts of people are going to flap ineffectively about renewable energy. Watch this space; I'll be taking a keen interest in developments because it affects my job. Hopefully I'll have the chance to tell you how it's going to affect your life, just probably not on days when I have to work twelve-hour shifts ;o)

Two weeks before I go on holiday and I can't wait to get away from all this!
 
 
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