Mind the Gap

A flurry of hosepipe bans and applications for drought orders has raised the spectre of our water supply being cut off. Last winter many UK industrial companies received warnings to shut down as our gas risked drying up. Is our electricity supply next? Is the looming energy crisis going to return us to a world of power cuts and a three day week?

The government is in the midst of an energy review aimed at identifying ways to address the looming gap in the UK’s energy supply. This vital work requires a clear understanding of what the gap might actually be and when it might occur. This paper focuses primarily on our electricity supply and sets out to size the gap by drawing together for the first time conclusions from a range of available research and subjecting these to a rigorous scenario analysis.

Mind the GapThe black hole at the heartof the UK s energy supplyWhite paperReleasing your potentialUntitled Document01Mind the GapThe black hole at the heart of the UK s energy supplyMind the GapThe black hole at the heart of UK EnergyForewordThere is a looming energy crisis in the UK. Domestic prices have risen 30 - 40 percent in two years, with further rises announced in the last month, we havebecome a consistent net gas importer for the first time in 30 years and in Marchthis year National Grid issued its first ever balancing alert , to warn industry thatit may need to shut off their gas supplies.This crisis is primarily caused by the decline in our indigenous fuel and the ageing of ourgeneration capacity. There is now a significant risk of an energy gap , where our supplyof energy is no longer sufficient to cope with the levels of demand, leading to voltagereductions and power cuts.The government is in the midst of an energy review to identify ways to address the futureprovision of the UK s energy supply. This vital work requires a clear understanding of:what sizethe gap might actually be, andwhenit might occur. Mind the Gap - The black hole at the heart of the UKs energy supply sets out to sizethe energy gap by drawing together for the first time conclusions from a wide range ofavailable research and subjecting these to a rigorous scenario analysis. This documentis a scaled down version of the full white paper and is intended as a short summary ofour key findings.Having been at the forefront of energy change worldwide for the last 30 years,LogicaCMG passionately believe in the need for a safe, secure energy supply. We havebrought our expertise to bear in developing this paper to help in creating a clearerunderstanding of the problems facing the UK, and the challenges the Energy Reviewmust address.ForewordSummaryBackground to the Energy GapScenariosAppendicesIntroductionThis paper sets out to scale the looming energy gap by bringing together researchfrom a range of sources. The paper is structured as follows: Foreword by the Managing Director of Energy & Utilities, LogicaCMG.A summary of optimistic and conservative scenarios for the energy gap for 2005-2010; 2010-2015; 2015-2020 in periods of average demand (normal demand) andpeak demand (typically around 6pm on a very cold winter s day)."Sets out how energy usage is measured within the UK and the ways in which an energy gap needs to be calculated"Describes current supply"Summarises why a gap is appearing across the energy chain:"the source of the raw fuel for energy source"generation: turning raw fuel into energy"transmission and distribution - moving that energy to homes and businesses "Summarises options to fill the gap and the opportunities and risks of the different approaches."Provides energy provision and gap scenarios for three periods: 2005-2010; 2010-2015; 2015-2020. For each period the paper considers an optimistic case and a conservative case . These are derived by using different assumptions for the opportunities and risks above. For each scenario the paper provides: "Summary graphs showing optimistic/conservative cases for average/peak demand"A consideration of whether the conservative case is realistic"A table of assumptions that underpin the scenario modelling.These provide the basis for the detailed analysis behind the scenarios:"A: Energy measurement"B: Energy demand; "C: Current supply "D: Decline in supply"E: Future supply options"F: Scenario assumptions"G: References"H: Population statisticsKieron BrennanManaging Director,Energy & UtilitiesLogicaCMGPage0102040821Untitled DocumentMind the GapThe black hole at the heart of the UK s energy supply031. SummaryNo water...., no gas...., no electricity....?A flurry of hosepipe bans and applications for drought orders has raised thespectre of our water supply being cut off. Last winter many UK industrialcompanies received warnings to shut down as our gas risked drying up. Is ourelectricity supply next? Is the looming energy crisis going to return us to a worldof power cuts and a three day week? The government is in the midst of an energy review aimed at identifying ways toaddress the looming gap in the UK s energy supply. This vital work requires a clearunderstanding of what the gap might actually be and when it might occur. This paperfocuses primarily on our electricity supply and sets out to size the gap by drawingtogether for the first time conclusions from a range of available research and subjectingthese to a rigorous scenario analysis. The paper considers the potential gap for average demand, the electricity demand fora typical average day, and for peak demand, electricity demand at the peak time of day(around 6pm) on a very cold winter s day. It also refers to the situation in a 1 in 10 winter, when demand may be 5 per cent above the peak. For each situation the paperconsiders an optimistic case and a conservative case , based on differingassumptions for supply and demand for energy. The key conclusions are:2010Optimistic case: It will be possible to meet peak demand with a 15.5 per centcontingency. This is below the 24 per cent long term contingency that has historicallybeen used, but within the short term 10 per cent contingency. It is acceptable giventhe relative short term and advances in energy technology and the current operationalregime. Conservative case: There will be a gap of nearly 5 per cent gap in energy supply andno contingency. This is equivalent to an area the size of Wales losing all electricity forseveral days in winter. There is no contingency, effectively raising the gap to nearer 15per cent - equivalent to the great storm of 1987.2015Optimistic case: It will be possible to meet average demand with a 21 per centcontingency, close to the acceptable historic level. At peak demand there is only some 4per cent contingency, raising significant risks of major power outages. Conservative case: There will be a 23 per cent gap in energy supply at peak demand.This is equivalent to an area the size of London and the South East losing all electricity atpeak times over a number of days in the winter. Even at average demand there is a 9per cent gap, equivalent to Eastern England losing supply on a normal day. 2020Optimistic case: It will be possible to meet average demand with a 41 per centcontingency and peak demand with 17 per cent contingency - outside historic goodpractice. Conservative case: There will be a 31.5 per cent gap in energy supply at peak demand.This is equivalent to an area from Scotland to the Humber Estuary losing all electricity atpeak times over a number of days in the winter. There is no contingency, effectivelyplacing half the country at risk. Worryingly the gap could be up to 16 per cent at averagedemand, equivalent to all the area south of London losing supply on a normal day.The purpose of this paper is to scope the problem, not identify definitive solutions - that isthe role of the Energy Review. However, based on these findings, in the first instance, weurge the government to:"  Establish a clear energy policy framework with intra and inter-party commitment to provide a basis for investment decisions and an enduring energy infrastructure"  Make it a top priority to extend the life of current generation capacity"  Streamline planning regulations to facilitate storage and generation development"  Maintain a commitment to diversity of fuel sources"  Champion a clear European energy policy, with particular emphasis on gas provision"  Establish clear guidance on the future price of carbon"  Accelerate the development of energy efficiency and local energy provision.The risk of a gap is very real. The impact on our business and social framework shouldnot be underestimated. These issues can and must be addressed.The risk of a gap is very real. The impact on ourbusiness and social framework should not beunderestimated. These issues can and must beaddressed. 02Untitled Document05Mind the GapThe black hole at the heart of the UK s energy supply2.12.2 2. Background to the Energy GapThere is a growing energy crisis in the UK. Domestic prices have risen 30 -40 per cent in two years, we have become a consistent net gas importerfor the first time in 30 years and in March this year National Grid issued itsfirst ever balancing alert , to warn industry that it may need to shut off theirgas supplies. There is a significant risk of an energy gap , with theprospect of power cuts. This paper uses existing research to establish thesize and timing of this gap. Sizing the GapIt is important to understand the pattern of energy usage and supply to accurately sizethe gap. This paper uses three accepted measures for demand:Average demand: Average electricity consumption in Great Britain1is currently runningat around 39 GigaWatts2. This increases by about 3 GW in winter and decreases byaround 3 GW in the summer. [23] Peak demand: The average consumption pattern varies significantly according to timeof day and year. The current annual peak in consumption is around 60 GW. Thistypically occurs on a cold winter s weekday around 5:30-6pm pm. [23] One in ten' demand: exceptional demand, for example around 7pm on a cold winter sday during an exceptionally cold winter that might occur once every ten years.This paper focuses on average and peak demand. In addition, a commentary isprovided on one in ten demand. The paper primarily focuses on electricity. There aremajor issues in respect of gas supply which would require a separate paper. In thispaper, they are considered in terms of their effect on electricity supply, since 35 per centof our electricty is generated by using gas. The electricity we use is primarily supplied by large scale generation plant. Over thecourse of the year these are not fully available - their output is limited by routinemaintenance and unplanned problems. This paper assumes average plant availability is65 per cent. The detailed figures for each different type of generation are based onDUKES [15]. Generators make strenuous efforts to ensure plant is available at peaktimes. We have hence assumed peak availability is 90 per cent. This is broadlyconsistent with history - for example in the winter of 2004/5 NGT estimate 5-6 GW,about 9 per cent of plant, was unavailable. [18]Current UK SupplyCompared with many other countries, the range of electricity source and generationcapacity in Britain is diverse, as shown in Figure 1 [3] which gives the perecentages ofelectricity generated from each type of plant in 2004.C o  a  l 3  4  %O  i l 1  %u  c  l e  a  r 1  9  %R  e  n  e  w  a  b  l e  s   3  %N  e  t I m   p  o  r t s   2  %The predominant sources are: [2]"  Gas - 25GW capacity: Historically this has been largely sourced from the North Sea and burnt in Combined Cycle Gas Turbine (CCGT) plant"  Coal and Oil - 31GW capacity: This is sourced both from the UK and imports"  Nuclear - 12GW capacity"  CHP & Renewables: 7GW capacity"  Interconnector: 2GW of capacity import of electricity from France.The nature of this mix has changed significantly in recent years, with a massive increasein the amount of gas-fired generation coinciding with a decline in the proportion of coal-fired and nuclear generation. This is a trend which is expected to continue.What is causing the gap?The gap is arising because of a range of factors right across the energy chain:Source: We currently source about 75 per cent of our primary energy ourselves. [20]This will drop to about 20 per cent by 2020. The UK has been self sufficient in gassince the 1970 s, but in future most of our gas will come from countries such as Russia,Algeria and Norway. Our coal imports have increased from 31 per cent to 59 per centof our needs since 1997. [20]Generation: [1] [2] [8] We will lose about 50 per cent of our existing generation capacityby 2020. The nuclear fleet is ageing and all bar one station will close by 2020. Coalstations will either need to be upgraded to meet stringent EU requirements or close;about 50 per cent will close by 2015. Coal is also a major producer of CO2and weneed to reduce consumption to meet our Kyoto commitments.Transmission: There are exciting opportunities with new renewable energy sources.However, our energy infrastructure, the wires do not support this. The vast majority ofwind and wave power is in Scotland and more than 1bn investment is required tobring this South. An equally significant issue is that planning permission will need to beachieved in the face of concerted opposition.Demand: Demand increases every year as people and businesses use energy intensivedevices. These figures have been rising steadily at over 1 per cent per annum for anumber of years, and current forecasts expect that demand will continue to rise bybetween 1.3 per cent and 2.4 per cent per annum between now and 2020. [2]2.3Figure 1:Electricity supply mix 20041This paper primarily discusses thesituation in Great Britain since thisis the basis on which most data is published. Northern Ireland hascomparable issues, and the development of the All Island Project makes it most likely that the situation in Northern Ireland will be addressed jointly with that in the Irish Republic.2See appendix A for an explanation of electricity measurement.04Untitled DocumentFilling the gap Options and Risks07Mind the GapThe black hole at the heart of the UK s energy supplyThere are a range of options open to theUK to fill the energy gap. Each of thesehas the potential to contribute to fillingthe gap, each has advantages and eachhas risks. The table opposite sets out the broadopportunities and the risks that mayprevent them fulfilling their potential. Thisis the used as the basis for the scenarioanalysis.2.4How could we fill the gap?06Primary OpportunitiesThe Building Research Establishment estimates householdenergy usage could be reduced by 46 per cent with efficiencymeasures. [21]Industry similarly has efficiency opportunities.Price rises are driving interest in energy efficiency.New Norwegian pipeline onstream in 2006, capable of delivering14m therms per day (pd). [4]Expansion of the Bacton gas interconnector to 24m therms pd.[4]Development of further Liquefied Natural Gas (LNG) terminals.Development of additional gas storage for the UK.Government approves nuclear build and stations, which can nowbe developed in 4-5 years, start to come on stream by 2016.Clean coal technology significantly reduces CO2emissions andenables greater investment in coal power stations.Substantial gas plant constructed to use new gas supplies -9.7GW currently planned. [2]8.2 GW of renewables constructed to plan. [2]800MW of capacity added from the Netherlands interconnector.[2]No additional requirements for transmission to cater for newrenewables.Primary RisksDemand increases greater than expected due to economic growth.Demand increases due to our increasing electronic/digital lifestyle.Capital outlay inhibits take up of efficiency opportunities.Gas is not available through the Bacton interconnector due to problems with the supply from Russia.Gas is not available due to excessive demand on Continental Europe.LNG diverted to other countries offering higher prices.Storage delayed due to planning problems.Current ageing plant experiences increasing problems and downtime.Lack of clear conclusions from the Energy Review delays nuclear build.Escalating cost of waste disposal delays new nuclear build.Planning approval requirements delay new build.Global demand for uranium soars on increased demand from India and China, restricting supply.Current ageing plant experiences increasing problems and downtime.Global demand for coal soars restricting supply.Planning approval requirements delay new build.Reluctance to build because of uncertainty over gas supply.Lack of clear conclusion from Energy Review delays investment.Concerns over cost of renewable energy delay investment.Wind power not available on the coldest days.Market rules do not encourage CHP/renewables.Problems with availability (see source - gas above).Disagreements over transmission funding and planning delay build.Planning approval requirements delay new build.Overall cost and build effort is prohibitive leading to delays.Costs of up to 54bn have been estimated. [22]AreaDemandSourceGasGenerationNuclearCoalGasCHP/RenewablesInterconnectorsTransmission &DistributionCost and BuildUntitled Document09Mind the GapThe black hole at the heart of the UK s energy supplySummary - the position in 2010The scenario is broadly based on current planned infrastructure being implemented. Inparticular the Langeleld pipeline to Norway should be completed and provide asignificant boost to our gas supply next year. Given the relatively short timescale, thereshould not be problems with the planned infrastructure. Furthermore, the nuclearshutdowns will have had limited impact, hence overall the scenario is relatively benign.This could change rapidly if there are unplanned problems with the nuclear fleet.Optimistic CaseThere should be no risk to the UK energy supply based on this scenario. There is ahealthy 33 per cent contingency at average demand and an adequate 15.5 per centcontingency at peak demand. Conservative CaseThere is little risk to average demand with 17 per cent contingency even in theconservative case. There is a serious risk to peak demand. The scenario indicates a gap of 4.6 per centdemand in the winter of 2010/11 with no contingency. This is equivalent to the whole ofWales losing supply for several days in winter. Moreover, within this situation there is nocontingency therefore the gap could be around 15 per cent. This would drive asignificant percentage of residences and businesses off supply - equivalent to the greatstorm of 1987.The key issues that could drive the conservative case are: increasing failures of ageingcoal and nuclear plant [17], commencement of shutdown of coal and nuclear beforeadequate alternatives can be built; failure of wind power on cold days; failure of gasimports or storage to feed the UKs growing gas dependence - the UK will become asignificant importer during this period and any interruption to storage or pipelines, ashappened in the winter of 2005/6 will have a profound effect. 3.2.13. ScenariosIntroduction to Scenario DevelopmentThis paper develops optimistic and conservative scenarios in order to identify the scaleof the energy gap and when it may occur. Optimistic Case: These take a set of optimistic assumptions and map them toaverage and peak demand for the periods 2005 - 2010; 2010 - 2015 and 2015 - 2020.Conservative Case: These examine issues and problems that may create barriers tochanges in our energy supply and hence develop a set of more conservativeassumptions and map them to average and peak demand for the same periods.There are obviously a huge range of potential scenarios. These scenarios aim torepresent a 75 percentile and 25 percentile view of likelihood.The graphs show the availability of of different types generation according to the legendshown left.Contingency is represented by energy supply above the red demand line. Historically aplanning contingency of 24per cent was used. For short term planning a margin of 10per cent is typically used given the greater certainty. [2]The gap is represented by the red shaded area between the imported gas supply areaand the red demand line.5 0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 08  0  . 07  0  . 06  0  . 02  0  0  5  / 0  62  0  0  6  / 0  72  0  0  7  / 0  82  0  0  8  / 0  92  0  0  9  / 1  02  0  1  0  / 1 1Y  e  a  rG  WP e  a  k   d  e  m   a  n  d  , o  p  t i m   i s  t i c   c  a  s  e   s  c  e  n  a  r i oA  v  e  r a  g  e   d  e  m   a  n  d  , o  p  t i m   i s  t i c   c  a  s  e   s  c  e  n  a  r i oP  e  a  k   d  e  m   a  n  d  , c  o  n  s  e  r v  a  t i v  e   c  a  s  e   s  c  e  n  a  r i oA  v  e  r a  g  e   d  e  m   a  n  d  , c  o  n  s  e  r v  a  t i v  e   c  a  s  e   s  c  e  n  a  r i o5  0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 06  0  . 02  0  0  5  / 0  62  0  0  6  / 0  72  0  0  7  / 0  82  0  0  8  / 0  92  0  0  9  / 1  02  0  1  0  / 1 1Y  e  a  rW5  0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 08  0  . 07  0  . 06  0  . 02  0  0  5  / 0  62  0  0  6  / 0  72  0  0  7  / 0  82  0  0  8  / 0  92  0  0  9  / 1  02  0  1  0  / 1 15  0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 06  0  . 02  0  0  5  / 0  62  0  0  6  / 0  72  0  0  7  / 0  82  0  0  8  / 0  92  0  0  9  / 1  02  0  1  0  / 1 1WG  W3.13.2 Mind the Gap2005 - 2010D e  m  a  n  dG  a  pI m  p  o  r t e  d   g  a  sU  K   G  a  sI n  t e  r c o  n  n  e  c t o  rC  H  P   &   R  e  n  e  w  a  b  l e  sC  o  a  l &   O  i lN  u  c l e  a  r08Untitled Document11Mind the GapThe black hole at the heart of the UK s energy supplyAreaDemandSourceGasGenerationNuclearCoalGasRenewablesElectricityInterconnectorsTransmissionOptimistic case assumptionNo demand growth (i.e. growth of 1.3 percent from economic growth is balancedby efficiency gains). [derived from 2]100 per cent of gas required forgeneration is available.2.3 GW closure.90 per cent availability.1 GW of plant closes.5 GW of new plant available.13 GW of renewable generation available.Full capacity.Transmission development not required inthis period.Conservative case assumptionDemand grows at 2.4 per cent pa.[derived from 2]Only 85 per cent of gas required forgeneration is available.2.3 GW closure.Only 85 per cent availability due toproblems with ageing plant.1 GW of plant closes.Only 85 per cent availability due toproblems with ageing plant.5 GW of new plant available.Slow down in build due to lack oftransmission.Limited availability due to lack of wind.Interconnector runs at only 75 per centcapacity as energy diverted to thecontinent.Slow transmission approval delaysrenewable uptake.Changes in energy provisionNew Norwegian pipeline onstream in 2006.Expansion of the Belgian gas interconnector.2.3 GW of nuclear plant closes. [2]No new build in this timeframe.1 GW of coal plant closes. [8]No new build in this timeframe.5 GW of gas plant constructed to use new gas supplies. [2]6.2 GW of renewables constructed to plan. [2]800 MW of capacity added from the Netherlandsinterconnector. [2]Additional requirements for transmission to supportrenewables.RisksDemand increases greater than expecteddue to economic growth and digitallifestyle.Efficiency improvements do not keeppace with historic achievement.Gas is not available through the Belgianinterconnector due to problems with thesupply from Russia.Availability decreases as plant ages withincreasing planned and unplanneddowntime.Availability decreases as plant ages withincreasing planned and unplanneddowntime.Delays in gas construction.Not enough gas to run generation.Wind power not available on the coldestdays.Capacity not built to schedule.Capacity not available due to highcontinental demand.No risk in this period.2010   Scenario Assumptions10Untitled Document13Mind the GapThe black hole at the heart of the UK s energy supplySummary - the position in 2015The key issue is that at least 10 GW of coal plant and 7 GW of nuclear plant will haveclosed. [2] [8] This is coupled with the increasing dependence of the UK on importedgas during this period. The scenario primarily assumes that gas plant will be built sinceit is extremely unlikely that it will be possible to build nuclear plant in this timescale. [16] OptimisticCaseAt peak demand there is only a 3.8 per cent contingency. This is well below historicbest practice and raises significant risks of limited power outages. At average demand levels there is a minimum of 21 per cent contingency just aboutadequate in accordance with traditional planning levels.Conservative CaseIn the conservative case there are very major deficiencies to the UK energy supply. Ataverage demand there is a gap of 9 per cent, equivalent to Eastern England losingsupply. At peak there is a gap of 23 per cent - this is a substantial shortfall andequivalent to the whole of London and the South East losing supply for several daysover the winter. These kind of figures raise the spectre of a 3 day week and energyrationing.3.3 Mind the Gap2010 - 20153.3.12010 - Is this conservative case realistic?It is an icy cold winter s day across the UK and much of the European continent. Thelong-awaited 1 in 10 winter has finally arrived and children are playing in the snow.Sian Lloyd is advising us that the current anti-cyclone which has been settled over theUK for the last two weeks looks like it is here for at least another week.Energy demand across the UK increases by 5 per cent compared with normal levels ofdemand for the time of year as people turn up the heating and stay inside, driving upusage of a range of appliances. The UK has made substantial progress in developing wind turbines to produce cleanefficient energy, but across the UK these stand stationary as the anti-cyclone meansthere is no wind whatsoever. This is exacerbated by delayed build of transmission dueto planning problems and limited funds approval.Across Continental Europe the demand for gas soars as people heat their homes andmajor European countries such as Germany, Italy and Spain, who rejected nuclearenergy and use large amounts of gas for generation, drive their generation plant at peakload. As a result of this, the gas interconnector to the UK runs at only 50 per cent of itspotential capacity. National Grid issues warnings and interrupts gas to industry tomaintain the domestic supply.Electricity interconnection from both France and The Netherlands is reduced as thosecountries struggle to support their own demands.Ageing nuclear and coal plant, which is due to be decommissioned in the next twoyears anyway, starts to experience unplanned failures as it has been running non-stopduring the last two weeks of the anti-cyclone. As a result of the loss of 5 GW of capacity, energy supply is no longer able to meetdemand and the lights go out across an area equivalent to the size of Wales. All these events are plausible and indeed many have already occurred. In many waysthe events feed each other - for example anticyclones will drive peak demand and willnegate the use of wind. This is a serious option for the Energy Review to consider.5 0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 08  0  . 07  0  . 06  0  . 0Y  e  a  rG  WP e  a  k   d  e  m   a  n  d  , o  p  t i m   i s  t i c   c  a  s  e   s  c  e  n  a  r i oA  v  e  r a  g  e   d  e  m   a  n  d  , o  p  t i m   i s  t i c   c  a  s  e   s  c  e  n  a  r i oP  e  a  k   d  e  m   a  n  d  , c  o  n  s  e  r v  a  t i v  e   c  a  s  e   s  c  e  n  a  r i oA  v  e  r a  g  e   d  e  m   a  n  d  , c  o  n  s  e  r v  a  t i v  e   c  a  s  e   s  c  e  n  a  r i o5  0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 06  0  . 02  0  1  0  / 1 12  0  1 1  / 1  22  0  1  2  / 1  32  0  1  3  / 1  42  0  1  4  / 1  52  0  1  5  / 1  62  0  1  0  / 1 12  0  1 1  / 1  22  0  1  2  / 1  32  0  1  3  / 1  42  0  1  4  / 1  52  0  1  5  / 1  62  0  1  0  / 1 12  0  1 1  / 1  22  0  1  2  / 1  32  0  1  3  / 1  42  0  1  4  / 1  52  0  1  5  / 1  62  0  1  0  / 1 12  0  1 1  / 1  22  0  1  2  / 1  32  0  1  3  / 1  42  0  1  4  / 1  52  0  1  5  / 1  6Y  e  a  rW5  0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 08  0  . 07  0  . 06  0  . 05  0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 06  0  . 0WG  W... energy supply is no longer able to meetdemand and the lights go out across anarea equivalent to the size of Wales. 12D e  m  a  n  dG  a  pI m  p  o  r t e  d   g  a  sU  K   G  a  sI n  t e  r c o  n  n  e  c t o  rC  H  P   &   R  e  n  e  w  a  b  l e  sC  o  a  l &   O  i lN  u  c l e  a  rUntitled Document2015   Scenario Assumptions15Mind the GapThe black hole at the heart of the UK s energy supplyThe main issue is the substantial loss ofgeneration plant, both nuclear and coalto 2015: 10 GW of coal plant and 17 GWof nuclear plant will have closed, but itmay not have been possible to buildsignificant alternatives other than gas. Nuclear plant is unlikely to be built in thistimescale. Renewables may not be builtbecause of uncertainty over their role ifthe Energy Review throws its weightbehind nuclear or because of planningdelays. Renewables will also requiresignificant transmission upgrades- theseare still under discussion between NGTand Ofgem. On June 26th 2006, the UKpresss reported that Ofgem had signalledit may only approve half of National Gridsrequest for transmission upgrade money.Further, the majority of plannedrenewables is wind, which is, bydefinition, highly susceptible to theweather and may not function on colddays.The key issue will again be the UKs gasimport dependence with very highdisruption as the result of any problems.AreaDemandSourceGasGenerationNuclearCoalGasRenewablesElectricityInterconnectorsTransmission &DistributionOptimistic case assumptionNo demand growth (i.e. growth of 1.3 percent from economic growth is balancedby efficiency gains). [derived from 2]100 per cent of gas required forgeneration is available.Availability at 90 per cent.Availability at 90 per cent.10 GW of new plant available.35 GW total.17 GW of renewable generation available.Full capacity available.Required transmission fully available.Conservative case assumptionDemand grows at 2.4 per cent pa.[derived from 2]Only 85 per cent of gas required forgeneration is available.7.1 GW closure.Only 85 per cent availability due toproblems with ageing plant.No new build available.10 GW of plant closes.Only 85 per cent availability due toproblems with ageing plant.Delays to 3 GW of plant due to planningor development problems.Slow down in build due to lack oftransmission.Limited availability due to lack of wind.Interconnector runs at only 75 per centcapacity as energy diverted to thecontinent.Slow transmission approval delaysrenewable uptake.Changes in energy provisionNew pipelines to support expansion in gas generation.Development of gas storage to give the UK greater reserves.7.1 GW of nuclear plant closed sine 2006. [2]10 GW coal plant closes by 2015 due to EU LargeCombustion Plant Directive (LCPD) regulations. [2] [8]No new build in this timeframe.Further construction at 1 GW pa. [derived from 2]Further construction at 1 GW pa. [derived from2]500 MW of capacity added from the Netherlandsinterconnector. [2]RisksDemand increases greater than expecteddue to economic growth and digitallifestyle.Efficiency improvements do not keeppace with historic achievement.Gas is not available due to supplyproblems from Russia.Gas storage slow to become availabledue to planning problems.Downtime increases as plant ages.No new build because: no clear mandatefrom policy review; planning problems;decommissioning overruns; build overruns.Downtime increases as plant ages.New build restricted by planning problems;no clear mandate.Delays in gas construction. Not enough gas to run generation.Wind availability on coldest days.No clear mandate from energy reviewrestricts investment.14Untitled Document17Mind the GapThe black hole at the heart of the UK s energy supplySummary - the position in 2020This is 15 years beyond the present day and, even allowing for the long term planningcycle of major generation plant, there should be sufficient opportunity to fill the gap. Thegreatest risks will be whether the chosen strategy proposed by the Energy Review isadhered to, or whether a change of government or world or economic events derail it.There will also almost certainly be a residual risk of UK dependence on imported gas,unless the government undertakes a dramatic change in strategy.Optimistic CaseThe optimistic case, based on on-time delivery of nuclear build, a significant expansionof gas and continued development of renewables, provides an adequate 16.7 per centcontingency at peak demand and a healthy 41 per cent contingency at averagedemand. Conservative CaseIn the conservative case there are very major deficiencies to the UK energy supply.At average demand there is a gap of 16 per cent and at peak a gap of 31.5 per cent.The primary driver behind such a gap would be a significant change of strategy. In thescenario, we have considered what could happen if a nuclear strategy was adopted,but then not followed due to changing events. We would emphasise this type ofscenario is not limited to nuclear. For example, if the review adopts a very strongrenewable strategy, but this is unsuccessful, there would be insufficient time to buildnuclear or coal plant.3.4 Mind the Gap2015 - 20203.4.12015 - Is this conservative case realistic?The justification for this scenario is almost exactly the same as that painted for the 2010scenario, but it is made much worse by the fact that there have been considerable plantclosures since 2010. 7.1 GW of nuclear capacity and up to 10 GW of coal and oilcapacity, about 20 per cent of current capacity, will have closed. New build will almostcertainly not keep pace given that there is as yet no clear policy decision and new buildwill need to go through a substantive planning process.This has left the UK highly dependent on gas. However, by this period the UK will only beable to supply about 25 per cent of the gas it requires. [1] [3] There are many encouragingsigns on gas imports, in particular the signing of long term contracts with Norway for gasacross the Langeled pipeline. There are also developments to import LNG. However, this still leaves the UK highly vulnerable to a range of events:"  Uncertainty of Russian gas supplies. There is a continuing debate about the dependence of the EU and UK on Russian gas supplies. This was fuelled by Russias decision to quadruple prices to the Ukraine in January 2006. It should be noted that Russia has supplied gas all through the cold war and that Ukraine was receiving gas at well below market price, but the political dimension will inevitably remain. Of equal importance is the fact that there are competing markets for Russian gas. Europe is not Russias only market. The burgeoning economies of Indian and China will provide a very attractive alternative market for Russian energy."  Continental European growth. The UK is at the end of a very very long pipeline, with many hungry energy users in between. In the winter of 2005, we have already seen the gas interconnector to The Netherlands running at well below peak capacity while UK prices soared. With European countries declaring no nuclear energy policies, European demand for gas can only increase. At the same time last winter, the electricity interconnector to France also ran at only 50 per cent of capacity for periods while energy was diverted to fulfil local needs."  Corporate uncertainty in the UK. UK companies have signed up to contracts for Norwegian gas. This creates important diversity of supply. However, these companies are subject to takeover, with the risk that contracts may be moved to other regions of supply."  LNG economic uncertainty: LNG is a highly transportable commodity - subject to contract it will go where the price is highest. Again, in the winter of 2005, we have already seen LNG supplies diverted from the UK to seek higher prices."  Lack of storage. The UK can store only about 4 per cent of its gas needs, this compares to about 20 per cent in France and Germany. [derived from 4] Storage development is a critical requirement, but in the current year, major storage developments have been dropped because of planning problems.All these events are highly plausible and again many have already occurred, even thoughit is only 2006 and this scenario is trying to look ahead to 2015. This is a serious optionfor the Energy Review to consider.5 0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 08  0  . 07  0  . 06  0  . 0Y  e  a  rG  WP e  a  k   d  e  m   a  n  d  , o  p  t i m   i s  t i c   c  a  s  e   s  c  e  n  a  r i oA  v  e  r a  g  e   d  e  m   a  n  d  , o  p  t i m   i s  t i c   c  a  s  e   s  c  e  n  a  r i oP  e  a  k   d  e  m   a  n  d  , c  o  n  s  e  r v  a  t i v  e   c  a  s  e   s  c  e  n  a  r i oA  v  e  r a  g  e   d  e  m   a  n  d  , c  o  n  s  e  r v  a  t i v  e   c  a  s  e   s  c  e  n  a  r i o5  0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 06  0  . 0Y  e  a  rW5  0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 06  0  . 0WG  W2  0  0  1  6  / 1  72  0  0  1  5  / 1  62  0  1  7  / 1  82  0  1  8  / 1  92  0  1  9  / 2  0Y  e  a  r2  0  0  1  6  / 1  72  0  0  1  5  / 1  62  0  1  7  / 1  82  0  1  8  / 1  92  0  1  9  / 2  02  0  0  1  6  / 1  72  0  0  1  5  / 1  62  0  1  7  / 1  82  0  1  8  / 1  92  0  1  9  / 2  02  0  0  1  6  / 1  72  0  0  1  5  / 1  62  0  1  7  / 1  82  0  1  8  / 1  92  0  1  9  / 2  01  0  0  . 09  0  . 08  0  . 07  0  . 06  0  . 05  0  . 04  0  . 03  0  . 02  0  . 01  0  . 00  . 016D e  m  a  n  dG  a  pI m  p  o  r t e  d   g  a  sU  K   G  a  sI n  t e  r c o  n  n  e  c t o  rC  H  P   &   R  e  n  e  w  a  b  l e  sC  o  a  l &   O  i lN  u  c l e  a  rUntitled Document2020 Scenario Assumptions19Mind the GapThe black hole at the heart of the UK s energy supplyAreaDemandSourceGasGenerationNuclearCoalGasRenewablesElectricityInterconnectorsTransmission &DistributionOptimistic case assumptionNo demand growth (i.e. growth of 1.3 percent from economic growth is balancedby efficiency gains). [derived from 2]100 per cent of gas required forgeneration is available.Availability at 90 per cent on worst days.New construction at 1 GW pa since2015.Availability at 90 per cent on worst days.A further 5 GW of new plant available.40 GW total.21 GW of renewable generation available.Full capacity available.Required transmission fully available.Conservative case assumptionDemand grows at 2.4 per cent pa.[derived from 2]Only 85 per cent of gas required forgeneration is available.8.8 GW closure.Only 85 per cent availability due toproblems with ageing plant, declining to80 per cent in 2019.No new build available.10 GW of plant closes.Availability 85/80 per cent as for nuclear.Delays to 5 GW of plant due to planningproblems or reluctance to invest.Slow down in build due to lack oftransmission.Limited availability due to lack of wind.Interconnector runs at only 75 per centcapacity as energy diverted to thecontinent.Slow transmission approval delaysrenewable uptake.Changes in energy provisionNew pipelines to support expansion in gas generation.Development of gas storage to give the UK greater reservecontingency.8.2 GW of nuclear plant closed sine 2006.[derived from 2]Further construction at 1 GW pa. [derived from 2]Further construction at 1 GW pa. [derived from 2]No further additional interconnection.Major transmission developments to support renewables.RisksDemand increases greater than expecteddue to economic growth and digitallifestyle.Efficiency improvements do not keeppace with historic achievement.Gas is not available due to supplyproblems from Russia.Gas storage slow to become availabledue to planning problems.Downtime increases as plant ages.No new build because of: no clearmandate from policy review; planningproblems; decommissioning overruns;build overruns.Downtime increases as plant ages.New build restricted by planning problems;no clear mandate.Delays in gas construction.Wind availability on coldest days.No clear mandate from energy reviewrestricts investment.18Untitled Document21Mind the GapThe black hole at the heart of the UK s energy supplyAppendicesEnergy MeasurementThe basic unit of electric power is the watt (W) - domestic electrical equipment istypically rated in terms of the number of watts which they consume - e.g. a 100W lightbulb or a 1000W electric fire. The power output of larger appliances is usuallymeasured in kilowatts (kW), where 1kW equals 1000W.The basic unit of electric energy is the watt-hour, which is the amount of energyconsumed if a 1W appliance runs for one hour. Energy consumption in the home isnormally measured in kilowatt-hours (kWh). Leaving a 100W light bulb on for ten hoursconsumes 1 kWh. A typical domestic property is now estimated to consume around 4700 kWh each year.Overall domestic energy consumption has increased by 32 per cent since 1970 and by19 per cent since 1990. However, since 1990 the number of households has increasedby 10 per cent, with the consumption per household actually falling slightly.The output from a power station is usually given in megawatts (MW), though smallerstations may be rated in kW. 1MW equals 1000kW; 1MWh equals 1000kWh. Themost modern nuclear power stations typically have a capacity of around 1200 MW; theUK s largest coal-fired power station, at Drax in Yorkshire, has a capacity of 4000 MW,or 4 gigawatts (GW); 1GW equals 1000MW, and 1GWh equals 1000MWh.Finally, overall annual consumption across the country is measured in gigawatt hours orterawatt-hours (TWh); where 1TW equals 1000GW and 1TWh equals 1000GWh.Overall average consumption per day is 39 GW, per annum is 355TWh. [derivedfrom2 and 23]To summarise the units:1000W  = 1kW1000kW = 1MW1000MW = 1GW1000GW = 1TWNote: all volume to energy conversions assume a Calorfic Value of 39 MJ/m3Appendix A Table 1:Conversions betweenenergy unitsThe conversion table, basedon information from NationalGrid s Gas Ten YearStatement [4], may also beuseful. To convert from theunits on the left hand side tothe units across the topmultiply by the values in thetable: 2020 - Is this worst case scenario realistic?Consider the following possible sequence of events between now and 2020:The Government s Energy Review is published in July 2006. It recommends a sensiblestrategy to tackle the energy gap on every front possible. This includes:"Energy efficiency measures"Framework for renewable investment"Framework for local generation (for example, domestic combined heat and power)"Commitment to clean coal"Nuclear new buildNuclear generation is seen as the only viable way of replacing the substantial lossesfrom coal and nuclear closures while reducing emissions. The increasing stability andstrength of the UK nuclear sector is recognised and European countries, particularlyEDF from France, agree co-operation.However, during the initial stages of the nuclear planning process, there is a change ofLabour leadership or change of government. A nuclear sceptic prime minister takes thepost. General nuclear scepticism grows fuelled by:"Dramatically escalating costs in the decommissioning programme, rising from an original 57bn to 120bn"Delays in decommissioning, which means new power stations cannot be built on old sites until they are clear. Therefore build is either delayed or has to take place on new sites, with significant problems around planning."Delays in the build itself as companies experience the kind of problems common in major construction projects such as Wembley and the Scottish Parliament."Problems with waste disposal as The Irish government wins a case in the European court over potential impact of waste from Sellafield on the Irish Sea."Problems with the supply of Uranium. In 2006 some comments estimate there could only be 50 years supply of Uranium left at current rates of usage. [commentary in 16] However, during this period the Chinese and Indian economies continue their amazing growth and nuclear power is a key source for them. This drives up the price of Uranium and restricts supply."Lack of qualified UK resources as most of the knowledgeable population retire. Although France provides assistance, many of their engineers are also retiring and aredrawn to large salaries being offered in Eastern countries.During this period, there is also at least one change of government. The newgovernment broadly follows the nuclear strategy, as there is no other immediate option,but given the above problems curtails development and moves to a new strategy,incurring further delays.All these events are highly plausible. For example, nuclear decommissioning was costedat 56bn at the time of the Energy Act of 2004, by 2006 it has already risen to 70-90bn. This is a serious option for the Energy Review to consider.To:From: (below)GWhMillion cubic metres (mcm)Million ThermsThousand tonnes of oilequivalent (toe)GWhX10.83329.30711.630Million cubicmetres (mcm)0.092X2.7101.073Million therms0.0340.370X0.397Thousand tonnes of oil equivalent (toe)0.0860.9322.520X20Untitled Document23Mind the GapThe black hole at the heart of the UK s energy supplyThe most recent data continues a trend which has been apparent for some years, of asteady increase in the demand for electricity of something in excess of 1 per cent perannum. This is true of both the key measures of electricity demand used by NationalGrid; the level of demand at the annual peak, and the total overall annual consumption.Average daily gas consumption in Great Britain is of the order of 250 million cubicmeters per day, with peak daily gas consumption of c. 540 million cubic metres (mcm)per day according to the National Grids Gas Ten Year Statement. [4]This figure has recently been rising steadily from year to year at a rate in excess of 2 percent per annum. By comparison, over the previous ten years, the average growth ratewas 5.5 per cent per annum. The main source of the increase - as it has been for anumber of years - is the construction of additional Combined Cycle Gas Turbine (CCGT)power stations in order to meet the growth in demand for electricity and replace thepower stations which close. Although the so-called dash for gas has slowed in recentyears, it remains the most significant factor in the rate of increase of gas usage. Gas and electricity consumption are inextricably linked, with one-third of all the gasconsumed being used to generate electricity. The proportion of Britains electricitygenerated from gas will almost certainly continue to rise in the coming years - thus anygap in the availability of gas will have a disproportionate effect on the overall energygap.B2 - Forecasts of future demandForecasts of future change in demand are dependent on a complex range of variables,from the rate of economic growth to changes in fuel prices. To give an indication of thelevel of complexity involved, one key paper from the DTI [5] is based on a model. . . which comprised some 130 econometric equations of which approximately 60were fuel share equations, 20 were stock equations and the remaining 50 were energydemand equations.We have based our estimates of future demand on some of the most widely respectedused figures available. Each year National Grid, in its capacity as the Great BritainSystem Operator, produces a wide range of forecast information relating to theelectricity transmission system in Great Britain, including forecasts of the demand forelectricity over the next seven years. This document is accordingly known as the SevenYear Statement (SYS) [2]. We have taken the latest available forecasts, covering theyears 2006 to 2013, from the 2005 and 2006 SYS documents; and have extrapolatedthese through to 2020, based on the same underlying assumptions but with somemodifications.B1 - Current Energy DemandThe overall consumption of electricity in Great Britain is usually given in GW. For thepurposes of sizing the gap, we have considered average demand and peak demand.We have also provided some commentary on the concept of a 1 in 10 winter.Electricity consumption is currently running at an average of around 39 GW. This figureincreases by about 3 GW in the winter and decreases by around 3 GW in the summer.[derived from 23]Within a given day, and from day to day (and especially between weekdays andweekend days), demand can vary substantially from a low or base demand of around30GW, to a high or peak demand of around 50GW. [derived from 23] The pattern ofdemand variation shown in Figure 2 below is for a recent winter weekday, and isbroadly typical:The maximum demand recorded in Great Britain to date is 61.6 GW in the winter of2003/4. [2] Many factors influence the level of peak demand, of which one of the mostimportant is the weather. For this reason National Grid invariably adjust peak demandfigures to a standard Average Cold Spell (ACS), which is defined as the level of peakdemand that has a 50 per cent chance of being exceeded as a result of weathervariation alone. Peak and ACS demand is shown in figure 3 [2]Appendix BEnergy DemandFigure 2:Typical daily demandcurveFigure 3:Peak electricity demand6 0  0  0  05  8  0  0  05  6  0  0  05  4  0  0  05  2  0  0  05  0  0  0  04  8  0  0  04  6  0  0  04  4  0  0  04  2  0  0  04  0  0  0  03  8  0  0  03  6  0  0  03  4  0  0  06IN  D  O1  21  82  43  03  64  24  8W2 3   J  a  n  u  a  r y   2  0  0  6S  e  t t l e  m  e  n  t P  e  r i o  d6 46  26  05  85  65  42  0  0  1  / 22  0  0  2  / 32  0  0  3  / 42  0  0  4  / 52  0  0  5  / 6A  c  t u  a  l d  e  m   a  n  dA  C  S   c  o  r r e  c  t e  dY   r22Source: BMRAUntitled Document25Mind the GapThe black hole at the heart of the UK s energy supplyThese forecasts are adjusted to include ACS corrections - though what is very difficultto assess is how much these figures might be uplifted in an exceptionally cold winter.In 2002/03, for example, the actual peak in demand was 1 per cent higher than theACS corrected figure - but 2002/03 was one of a series of exceptionally mild winters.It is conceivable that in an exceptionally cold spell, demand could rise by as much as10 per cent compared with ACS corrected figures - and we have used this as anillustrative figure in our scenario modelling.Gas demandThe rates of growth in the demand forecast for gas are broadly comparable with thoseforecast for electricity. For example, the UK Offshore Operators Association (UKOOA)[3] forecasts a growth in annual consumption from around 95 billion m3in 2004 toaround 140 billion m3in 2020 - a growth rate of around 2.6 per cent annum, as shownin Figure 6 below. Similarly the analogous measure to peak electricity demand, the peak day gas demand,is projected to grow at a comparable rate to that in the high demand scenario forelectricity, i.e. by some 30 per cent over the next 15 years, as shown in Figure 7 [4]:Figure 6:UK gas consumption1970 - 2020Figure 7:Peak day gas demandElectricity demandIn the base scenario as envisaged by National Grid, over the next seven years (2006 -2013) total annual electricity demand is projected to increase by an average of 1.3 percent per annum. This is based on an economic forecast which assumes an averagegrowth in GDP of 2.7 per cent per annum. This is also in line with the latest projectionsin the Chancellor of the Exchequer s Budget forecasts of 22 March 2006, in which hepredicted a growth rate of 2.75 per cent per annum for 2007-2008. Thus the base scenario figures in Figure 4 below, can be taken as a reasonable estimate of the likelygrowth in electricity consumption.In our scenario modelling we have also considered the high demand case forecast byNational Grid, in which economic growth of 3.1 per cent per annum gives rise to anaverage increase in demand for electricity of 2.2 per cent per annum. This rate ofgrowth is slightly lower than the Chancellor s Budget forecast of a maximum of 3.25 percent per annum growth in GDP, so we have adjusted NGT s figures in line with theChancellor s forecast. These give rise to a steady average increase in the consumptionof electricity, adjusted for ACS corrections, of 2.4 per cent per annum, as shown below:Adjusting National Grid s forecasts for peak demand in the same way, gives thefollowing: Figure 4:Forecast electricitydemandFigure 5:Forecast peak electricitydemand5 5  05  0  04  5  04  0  03  5  03  0  02  5  02  0  0Bn   r iH  i  hn   r iY e  a  r1  0  0  . 09  0  . 08  0  . 07  0  . 06  0  . 05  0  . 04  0  . 03  0  . 02  0  . 01  0  . 00Nm    nNm    nh  i  hY  e  a  r1  6  01  4  01  2  01  0  08  06  04  02  001  9  7  0   1  9  8  0   1  9  9  0   2  0  0  0   2  0  1  0   2  0  2  0Y  e  a  rH i s  t o  r i cF  o  r e  c  a  s  t7  5  0  . 07  0  0  . 06  5  0  . 06  0  0  . 05  5  0  . 05  0  0  . 04  5  0  . 04  0  0  . 0Y  e  a  r24Untitled Document27Mind the GapThe black hole at the heart of the UK s energy supplyCurrent SupplyCompared with many countries, electricity in Britain is supplied from a diverse range ofsources, as shown in Figure 8 [3] (note that this diagram shows the proportions ofactual energy supplied from each source):The generation capacity which provides this supply mix is [2]: "  Gas - 25GW capacity: The majority of this is modern Combined Cycle Gas Turbine (CCGT) plant, constructed since the beginning of the 1990s and which will be in commission to 2020. "  Coal and Oil - 31GW capacity: This is typically older plant and will require changes to meet the EU Large Combustion Plant Directive (LCPD). Note that capacity for coal is higher than gas, although gas generally provides more of our energy because the plant has higher availability. "  Nuclear - 12 GW capacity. A combination of older Magnox-fired stations and more modern Advanced Gas-Cooled Reactors, also one Pressurised Water Reactor (PWR).Much of this capacity - perhaps all but the PWR at Sizewell B - will end its operational life during the report period."  Renewables - 1GW: The renewables sector is growing slowly but steadily. At the moment the majority of developments in this sector are in the construction of wind-powered generation."  Interconnector - 2GW The cross-channel interconnector to France, which imports electricity, will remain in operation for the foreseeable future and is due to be upgraded. A further interconnection to the Netherlands is being added around 2010.The nature of this mix has changed over the last 10-15 years, with a massive increasein the amount of gas-fired generation coinciding with a decline in the proportion of coal-fired and nuclear generation. The next 15 years will see continued massive change.Appendix CFigure 8:Electricity supply mix 2004Factors influencing demandThe analysis (previous page) links demand growth to economic growth and adjusts thatto include historic demand efficiency achievements. There are other factors that maydrive growth up or down, for example: Demand Increases"  Energy intensive lifestyle: The availability of technology to provide consumer satisfaction has been a driver of energy demand for decades. New advances, or widespread increases in availability of new technologies, could fuel disproportionate demand increases. Possible examples include the use of air conditioning which - ironically - will almost certainly grow with global warming in the UK; and a widespreaddigital lifestyle. "  The decline in UK manufacturing, which has helped drive reductions in energy usage over the last decades is arrested. For example, the NGT s forecasts of the growth in demand for electricity are based on expectations of an increase in manufacturing output of around 2 per cent per annum.Demand Decreases"  Escalation in energy prices drives greater interest and uptake of efficiency for both businesses and consumers."  Government introduces more stringent efficiency requirements and incentives to help drive down our CO2usage and meet their commitments under international agreements such as the Kyoto Protocol."  Innovative technology improves efficiency of energy usage - for example, appliances on standby consume much less energy than at present (for existing appliances standby consumption can be as much as 85 per cent of that in normal operation)."  Continued decline in UK manufacturing output - which could very well be one result of the continuation of high energy prices.For scenario planning purposes, we have assumed that:Optimistic case: demand is static at 2005 levels; i.e. any increase in demand througheconomic growth is cancelled out by efficiency improvements (note this is moreambitious than achievements over the last twenty years).Conservative case: demand grows at 2.4 per cent a year - assuming the highesteconomic growth estimates, based on the Chancellor of the Exchequers forecasts.Demand and efficiency as a means of bridging the energy gap, is an issue which we willreturn to in a future paper.C o  a  l 3  4  %O   i l 1  %4  1u  c  l e  a  r 1  9  %R  e  n  e  w  a  b  l e  s   3  %N  e  t I m   p  o  r t s   2  %26Untitled Document29Mind the GapThe black hole at the heart of the UK s energy supplyNuclear generationBritain currently has just under 12 GW of nuclear generation capacity, providing around19 per cent of the country s electricity requirements. However, much of this plant isapproaching the end of its operational life and is planned for closure over the nextfifteen years. By 2020 it is forecast that only three nuclear stations will remain open,with a combined capacity of some 3.7 GW; these stations would then provide perhaps7-8 per cent of the country s electricity. [2]The current closure plan for the nuclear stations is shown in Table 2 below, and itsimpact can best be represented graphically as shown in Figure 10 below the table:[derived from 1, 2, 17]D2: GenerationTable 2:Planned nuclear plantclosuresFigure 10:Planned nuclear plantclosuresD1: SourceGasBritain s gas supply has been relatively stable for the last thirty years and more, sincethe development of the UK Continental Shelf gas field. Throughout that period the vastmajority of our gas supply has been provided from the North Sea fields, and since theinterconnector to Zeebrugge was constructed in the early 1990s Britain has been a netexporter of gas. This is a situation which is changing abruptly; for the first time in manyyears consumption is now outstripping production, and Britain is once again becomingan importer of gas. Even according to the most optimistic forecasts of production from within the UK, it isstill clear that by 2020 at least half of our oil and gas will have to be imported. Forexample, Figure 9 below shows the UKOOA s projections [3] for future production fromthe UK Continental Shelf alongside their forecasts of our demand for gas:CoalAlthough it has not received the high media coverage of our gas decline, ourdependence on imported coal has also been increasing. In 1997 imported coalaccounted for 31 per cent of our needs; by 2005, this had increased to 59 per cent.[20] The great majority of the UKs coal mining capacity has closed since the 1980s, asthe indigenous product was unable to compete with cheap foreign imports. However,the recent sharp increases in energy prices generally have led to moves to re-open atleast one UK pit.Coal is a high producer of CO2and other gases that mean the share of coal in ourgeneration is likely to decrease, therefore source is not seen as an issue. However,given the dramatic growth in coal consumption currently being seen in China inparticular, the provision of coal is not without risk.Appendix D:Decline in Supply Figure 9:Forecast gas production1 6  01  4  01  2  01  0  08  06  04  02  00C  o  n  s u  m  p  t i o  nP  r o  d  u  c t i o  n( c u  r r e  n  t p  l a  n  s )P  r o  d  u  c t i o  n( f u  t u  r e   p  o  t e  n  t i a  l )1  4  0  0  01  2  0  0  01  0  0  0  08  0  0  06  0  0  04  0  0  02  0  0  00Y  e  a  rA  v a  i l a  b  l e   C  a   a  c i tilStationDungeness ASizewell AOldburyWylfaHinkley Point BHunterston BHartlepoolHeysham 1Dungeness BHeysham 2TornessSizewell BCapacity MW45042043498012201190121011501110125012501188Published Lifetime20062006200820102011201120142014201820232023203528Untitled Document31Mind the GapThe black hole at the heart of the UK s energy supplyWhile the effect of these closures may not appear so immediately dramatic as thenuclear plant closures, because the percentage of this type of generation to be closedis lower, it should be recognised that the absolute amount of capacity to be close isactually larger than for the nuclear plant. Thus the closure of so much coal and oil-firedgeneration will actually make a larger contribution to the energy gap than will thenuclear closure programme - though the latter has so far attracted a much greatershare of the publicity over the issue.Table 3:Coal and oil plant closuresFigure 11:Coal and oil plant closuresIt is possible that plant refurbishment projects and the scope for potential lifetimeextensions could serve to extend the period over which closures of some nuclear plantstake place. For example, British Energy has recently announced a ten-year extension tothe operating life of its Dungeness B station, and is investigating a similar extension forHunterston B. However, various sources agree that there is no prospect of extendingthe life of the older Magnox reactors now owned by the Nuclear DecommissioningAuthority, all of which are due to close by 2010.It will readily be appreciated that, unless action is taken to ensure that the capacitywhich closes is replaced, the loss of such a high proportion of the existing nuclearcapacity will have a major impact on the development of the energy gap.Coal and oil-fired generationMuch of our existing coal- and oil-fired generation capacity also faces closure over thenext ten years. This is principally the result of the implementation of the EU LargeCombustion Plants Directive (LPCD), which is aimed at reducing emissions in the EU ofsubstances such as sulphur dioxide. The LCPD will require coal and oil-fired powerplants to install flue gas desulphurisation (FGD) equipment, or else face limited operatinghours and closure by the end of 2015. At the time of writing it seems likely that a small number of power stations within theelectricity generating industry (Drax, Eggborough, Peterhead and Longannet), togetherwith most of the existing combustion plant in the non-power sector, will continue tooperate under a National Emissions Reduction Plan (NERP). The remaining large powerstations will either comply with the Directive by adopting a different approach, known asthe emission limit values approach; or else opt-out of the LCPD completely by agreeingto only operate for a maximum of 20,000 hours after 1 January 2006 and to close byDecember 2015. Over half of the affected stations, many of which are reaching the endof their planned operating lives in any case, are expected to opt out of the LCPD andclose by that year. As a result, coal-fired generation is projected to decline sharply in the UK, from arounda third to approximately 16 per cent of capacity by 2020. In absolute terms thisamounts to a loss approaching 10 GW of generating capacity, but the exact figure willdepend on how and when the operators of these stations implement the 20,000 hourslimit over the coming years. A recent analysis [8] has identified the plant which isexpected to close, and the capacity which will be lost, as shown in Table 3 opposite.In Figure 11 opposite, we have attempted to specify which of the above stations willclose when; but we have assumed that the 10GW of capacity will be closed at a steadyrate between 2010 and 2015. In theory a station could use all of its available 20,000hours by as soon as the second half of 2008, but as this type of plant typically operatesat a load factor of around 65 per cent, the earliest closure date of 2010 seems moreprobable.StationCockenzieDidcot AFawleyFerrybridge Units 1 & 2GrainIronbridgeKingsnorthLittlebrook DTilbury BTotalCapacity MW1152198450098065096419401370105096903 5  . 03  0  . 02  5  . 02  0  . 01  5  . 01  0  . 05  . 00  . 0Y e  a  ri  A  v   i l    lil30Untitled Document33Mind the GapThe black hole at the heart of the UK s energy supplyE2: Source - gasAs discussed in Appendix D, the UK is increasingly dependent on imported gas. Fromaround 2015 Britain will need to import increasing quantities of gas from sources whichare not currently identified and for which no long-term contractual arrangementscurrently exist. At the same time the production of gas from the UK Continental Shelfwill continue to fall steadily - it has been predicted that without sustained investment infuture production, the UK could be importing 40 per cent of its gas and oil needs by2010, and 90 per cent by 2020. [derived from 1, 3, 4, 17]The key question then, of course, is where the required imports will come from. Atpresent about 70 per cent of our gas imports come from Norway. The new Langeledinterconnector from Norway is due to commence operation in 2006, and supplies fromthat source are contracted for at least ten years. It will have an initial capacity of 38million m3a day, or around 14 billion m3a year, equivalent to approximately 15 per centof our current requirements (as shown in Figure 6, the latter are currently of the order of100 billion m3a year). In addition, the existing interconnector between Zeebrugge andthe Bacton terminal was upgraded from a capacity of 8.5 billion m3/year to 16.5 billionm3/year on 8 November 2005. A second phase enhancement, due to be completed byDecember 2006, will bring the total import capacity of the interconnector to 23.5 billionm3/year, or about 25 per cent of our current requirements (but of course the latter willcontinue to grow, as shown in Figure 13 below and discussed in Appendix C earlier).[from 3, 4 various]The other option for importing gas is to bring it from further afield in the form ofLiquefied Natural Gas (LNG). This is a method which was used in the past, but theLNG terminal on Canvey Island was closed in the 1970s once the abundance of cheapgas from the North Sea field rendered this uneconomic. Now this technology is beingrevived, and a number of new terminals are under construction. However, the currentlevel of capacity is still very small. In any case, even if imports from Langeled continueat the same rate once the initial contract expires, by 2020 the decline in productionfrom the UK Continental Shelf means an increasing reliance on imports of gas fromoutside continental Europe. Figure 13 below is extrapolated until 2020 from figuresproduced by the UKOOA, and quoted in the energy review consultation paper [1]Figure 13:Forecast gas supply anddemandE1: OverviewThe major options for the future development of electricity supply may be summarised as:"Gas: Continued construction of new CCGT plant on a large scale. The 2005 NationalGrid Seven Year Statement (SYS), for example [2], forecasts that 6.5GW of additional CCGT capacity will be constructed by 2012. The 2006 SYS, by comparison, suggests that this figure could be as high as 9.7 GW in the same period. A similar rate of construction would need to be maintained through to 2020 in order to meet the prediction (see Figure 12 below) that two-thirds of the UK s electricity will be generated from gas by that date;"Coal: Investment in construction of new clean coal generation plant"Nuclear: The construction of a series of new nuclear power stations to replace the nuclear and coal-fired plant which will close during the period."Renewables: Continuing increase in the rate of construction of new wind, Combined Heat and Power (CHP) and other renewable plant, in line with the Government s target of increasing generation from renewable sources to around 20 per cent. The 2005 National Grid SYS, for example, forecasts that by 2012, there will be an increase of 5.5GW in wind generation capacity and more than 0.5GW of CHP capacity. The 2006 SYS, by comparison, forecasts that the increase in wind capacityby 2013 will be as much as 8.2 GW, with 3.3 GW of this to be constructed offshore;"Efficiency: Dramatic changes to building regulations and significant investment in current industrial, commercial and housing stock to reduce energy usage. This optionis not considered in detail in this paper - it will be the subject of a future paper. The optimistic case assumption for demand includes the need to increase efficiency over historic achievements.One projection of the resultant fuel mix, as predicted by the Department of Trade andIndustry (DTI) [3], is as shown in Figure 12 (in the same way as with Figure 8, this showsthe predicted sourcing of the electricity consumed, as opposed to the amount ofavailable capacity):There are, however, many uncertainties in such a scenario. For example:"Gas: will the gas be available to fuel the generation? Will companies build CCGTs without firm commitments on the availability of gas and a clear carbon policy?"Nuclear: Will there be public and political consensus on these? Will planning regulations enable them to be built? Can they be built in time?"Coal: Will companies invest in clean coal generation plant without a clear governmentmandate and long term price of carbon? Is this dependent on the development of carbon abatement technology?"Renewables: Will these prove economic and can they be scaled up in time? There is much focus on wind, but will wind be available during the coldest winter days? The largest renewable opportunities are in Scotland, but significant investment in the transmission network, the wires is required to bring this South.These are discussed in more detail opposite.Appendix E:Future SupplyFigure 12:Forecast electricity supplymix 2020C oal 12%uclear 8%R enew ables 12%N et Im ports 2%O ther im portsContinental Im portsLNG Im portsNorwegian Im portsUKCS ForecastDem and2 5020015010050032Untitled Document35Mind the GapThe black hole at the heart of the UK s energy supplyWhat these figures show is that while the Langeled pipeline will initially supply around 15per cent of the UK s gas requirements, as noted above, this figure is expected toincrease rapidly and imports from Norway could reach 35-40 per cent of the totalrequirement. Similarly the requirement for LNG imports has to increase from its presentnegligible rate to meet some 25-30 per cent of the total. Thus it would only need aproblem with the supply of gas from either of these sources to cause an immediateenergy crisis in the UK. While there would of course be additional capacity available viathe Zeebrugge interconnector, the recent history outlined above has shown that thiscannot be relied upon - and in any case, as also mentioned earlier, at best (i.e. evenafter the planned upgrades) this interconnector can only satisfy some 20-25 per cent ofour current requirements.E3 Generation - Construction of new gas-fired power stationsAs the previous diagram indicates, the expectation is that the construction of new gas-fired power stations will continue at a comparable rate to that which has been seenover the last ten years and more - amounting to a net increase of the order of agigawatt of new capacity each year. Indeed, if the all of the new gas-fired capacity forwhich initial applications have been registered is eventually constructed, there could beas much as 14GW of new CCGT generation available by 2012. These stations areefficient (over 50 per cent), and relatively quick and cheap to construct - a constructionprogramme of some eighteen months to two years is typical. [2]However, the main constraints on the construction of new gas-fired stations are likely tobe the availability and price of the fuel. Given the recent fluctuations in the price of gas,together with uncertainty about the reliability of supplies, there can be no guarantees ofthe availability of gas, for power generation or any other purpose. For companieslooking to invest in the construction of new CCGT plant, the combination of thesefactors may well lead to a significant reduction in the rate of new build. Under freemarket arrangements, and with no government intervention, it can by no means beguaranteed that all the further construction which is currently planned will actually takeplace - or that future projects will be forthcoming at the same rate.It will immediately be clear from this that, even given the contributions from Norwegiansupplies and from LNG, by around 2014-2015 the UK will need to import significantquantities of gas and oil from other sources, initially from Europe and then from furtherafield. Questions have already been raised about the potential political instability ofsome of the ultimate sources of these supplies. More worryingly, however, recentevents have shown that even the supplies of gas from continental Europe cannot berelied upon. In the early part of 2006, cold weather in the UK meant that gas priceshere reached unprecedented levels; but European companies nevertheless chose not tosell additional gas to the UK, in spite of the attraction of high prices. Their traditionalpublic service obligations, coupled with slow progress in market liberalization, mean thatcontinental utilities are unwilling to sell gas from their storage to the UK that they mayneed for their domestic customers, even if this would net them a handsome profit. The situation was highlighted with unprecedented clarity on 13 March 2006, when,following a fire at the Rough storage depot, and with heavy snowfall occurring inScotland, National Grid issued its first ever Gas Balancing Alert. This was to warn gasshippers and traders, as well as industrial users, that demand for gas was in danger ofexceeding supply - in which case action might have to be taken to cut off someindustrial users. As a result, the spot price of gas in the UK quadrupled, to somethingapproaching 2.50/therm - but this was still not enough to cause additional supplies ofgas to be released from continental Europe. Even at such record prices, theinterconnector continued to operate at only something like 50 per cent of capacity.Arguably the most serious implication of this is that, if urgent action is not taken toresolve the situation and guarantee future supplies (and it is by no means clear whatform such action could take in a free market), the large-scale industrial users of gaswho could be cut off in future events of this type include the operators of gas-firedpower stations. Many of these purchase their gas under long-term interruptiblecontracts, not least because the price of gas under this type of contract is lower. Andwith approximately 40 per cent of the UK s gas consumption being used to generateelectricity, and up to two-thirds of the UK s electricity potentially being generated usinggas by 2020, as discussed in the following section, a major interruption to gas suppliescould have a calamitous impact on the generation sector. Figure 14 below throws thesituation into even sharper clarity, showing in percentage terms the contribution whichwill be required from each source in order to fully satisfy the projected demand for gas:Figure 14:Gas demand percentages0 0%80%60%40%20%0%Y   rO ther im portsContinental Im portsLNG Im portsNorwegian Im portsUKCS Forecast34Untitled Document37Mind the GapThe black hole at the heart of the UK s energy supplyE5: Generation - Adoption of new coal technologiesThe development of new Clean Coal Technology (CCT) for coal-fired stations is anotherarea which has attracted its share of publicity of late, not least because of the numberof power stations being constructed in the Far East which use these technologies. Theterm CCT embraces a range of methods for improving the efficiency of coal-firedgeneration at the same time as reducing the levels of harmful emissions, for example:"  In the latest systems, called advanced supercritical boilers, the coal is pulverised before being burnt. These systems have an efficiency level of around 42 per cent. Replacing an old-style boiler, operating at about 30 per cent efficiency, with one of the new systems can cut CO2emissions by 23 per cent;"  In an Integrated Gasification Combined Cycle (IGCC) system, the coal is turned into gas and burnt, producing electricity and steam. The steam is then used to power additional turbines and create more electricity. As a result more electricity is generated with the same amount of coal; IGCC systems are around 45 per cent efficient, comparable to pulverised fuel plants. However, uptake so far has been limited by the cost advantage of gas fired plant and the reluctance of power plant operators to invest in the new technology while the economic case is still uncertain."  Co-firing a mixture of coal and up to 20 per cent bio-mass also reduces emissions; however, anything more than 20 per cent of biomass involves the use of significant amounts of energy to transport the biomass fuel, so increases emissions in that respect.Without a clear lead from the politicians, however, it seems unlikely that CCT will makea significant contribution to Britain s energy mix by 2020, as investigations into the useof this technology are still at a very early stage. The strategy for Carbon AbatementTechnology (CAT) published by the DTI in 2005 [9] sets out a path for developing thesetechnologies up to 2020 and beyond, but is primarily concerned with research anddevelopment and the establishment of pilot projects. For example, E.On has recentlylaunched a study into the use of CCT, and is investing 540mn for Britain s first powerstation fired by CCT. An E.On spokesman said in January 2006 that the companycould not give a timeframe of when the new station could be operational, but addedthat the power station would be the first of its kind. These comments suggest thatsignificant adoption of CCT is still a number of years away. Similarly for thedevelopment of Carbon Capture and Storage (CCS), which takes the carbon (and otherpollutants) emitted during the generation process and stores it underground (e.g. indepleted gas or oil fields), the technology is at such an early stage of development thatis seems unlikely to make a significant impact before 2020.E4: Generation - Construction of new nuclear power stationsAfter a lengthy period in which there has been little or no nuclear plant constructed -over 80 per cent of the nuclear capacity currently operating is over 15 years old - alarge number of countries are either constructing new nuclear plant or consideringdoing so. India is constructing ten new nuclear power stations, and the 1600MWEuropean Pressurised Reactor plant being built in Olkiluoto in Finland will be the largestin the world.It has been widely surmised that a decision to resume building new nuclear powerstations will be one of the outcomes of the current energy review, and manycommentators have concentrated on this aspect. However, there are many risks andpotential delays to this process. The last time a new nuclear power station wasconstructed in Britain, at Sizewell B, the public inquiry alone took six years to completeand the station took ten years to build. There have been significant improvements in build time and there are majoropportunities around, for example, standardisation and pre-approval of designs, butthere are still major risks to nuclear that lead us to question its capacity to fill themedium gap. These include:"  Government consensus: Will there be consensus within the government, recognising the probability of leadership change, and between parties that will ensure commitment to nuclear?"  Will the energy review give unequivocal support to nuclear, or will a further lengthy stage of consultation be required?"  Will there be a clear answer on the issue of waste? Is waste included in the economics for nuclear? "  Will it be possible to achieve planning permission for nuclear. It has been suggested that this could be overcome by using existing sites, but will these be decommissioned and prepared in time?"  Will rapid build times be achieved - the Finnish reactor has already announced a one year slippage.We believe these issues can be overcome - this paper is not anti-nuclear, but it isimportant to question the extent to which nuclear may be able to fulfil the 2015 gap.36Untitled Document39Mind the GapThe black hole at the heart of the UK s energy supplySeven Year Statement predicts a net increase in CHP capacity of just 560 MW by 2012.Similarly the growth in embedded generation of all types - not just CHP - which ispredicted in the Seven Year Statement is negligible; remaining at around its present levelof approximately 3.5 GW for the period of the forecast.A recent report from the Carbon Trust [12], urges the government for more support forthe development of new renewable technologies. If support is forthcoming, the Trustpredicts that wave and tidal technologies, for example, could be providing 3 per cent ofUK electricity supply, or a sixth of the government s 20 per cent renewables aspiration,by the year 2020. Beyond 2020, the industry could develop considerably further , thereport notes. But the economics of the technologies need to fall considerably beforethese are competitive, as estimates for tidal generation currently sit at between 10-15p.kWh, while wave energy is between 20-25p/kWh.Another problem with major growth in the renewables sector is that as many types ofrenewable generation - and particularly wind generation - are intermittent, as discussedabove, much larger proportions of renewables in the generating mix could in the longerterm increase the amount of flexible back-up capacity required for the electricitynetwork. With large proportions of renewables on the system, additional back-up (likelyfrom coal, oil or gas) would tend to add to the cost and technical complexity of systemmanagement. This situation is already causing problems for renewables under thecurrent electricity trading arrangements, and has been the subject of trenchant criticismby Professor David Bellamy amongst others. It is entirely conceivable that in order forthe governments targets for renewable generation to be met, a further majorrestructuring of the electricity trading arrangements4will be necessary.3More properly referred to as below the Grid SupplyPoint .4The original trading arrangements, known as theElectricity Pool, which were introduced when theelectricity industry was privatised in 1990, werereplaced in 2001 by the New Electricity TradingArrangements (NETA). The NETA arrangements forEngland and Wales were extended to include Scotlandin 2005, but without significantly changing thearrangements themselves.E6: - Generation - Developments in CHP and renewable energyOne of the governments key targets in the Energy White Paper of 2003 [10] was thatthe use of renewable generation sources should grow from its present level of around 2per cent, to 10 per cent of total demand by 2010 and 20 per cent by 2020. However,achievement of this is dependent on a number of assumptions - the timeline in theWhite Paper suggests that biomass generation may be economically viable in the mid-2010s, and wave and tidal technologies some time between 2010 and 2015 - or evenlater.The major success story in the renewables sector, of course, is wind energy.Approximately 1.3 GW of wind generation capacity is currently recorded by NationalGrid in the Seven Year Statement [2], and this is forecast to grow to 6.8 GW by 2012 -by far the largest percentage increase of any generation sector. The 2006 SYS, indeed,updates this figure still further, to a total of 8.2 GW. And there are many more smaller-scale projects in operation and under construction which do not appear in the SYS,being classified as embedded generation (i.e. generation connected at the 132 kV leveland below, the effect of which is netted off within the local supply area3).It is clear that the current growth in wind generation will continue for some time tocome. At a recent conference a speaker from National Grid identified the potential forthe construction of a total of some 16 GW of onshore wind generation (including thatwhich appears in the SYS) in Scotland alone - plus a further 8GW offshore (2GW inScotland and 6 GW in England and Wales). At first sight, therefore, all of our electricity needs could apparently be met by theconstruction of yet more wind farms - Britain being the most windswept country inEurope. However, a word of caution is needed here, owing to the intermittent nature ofwind generation (a characteristic which is shared by other types of renewablegeneration as well). Not only do wind turbines not work when the wind doesn t blow;they also cut out when it blows too hard (above wind speeds of around 25 m/s). It isgenerally reckoned that the percentage of the registered capacity of this type of plantwhich will be available at any one time is around 25 per cent, and this is the figurewhich we have used later in our scenario analysis. Supporters of wind generation arguethat this intermittency can be dealt with simply by building more wind farms; and atleast one campaigner [11] takes this to the extreme of claiming that in order toguarantee a certain level of capacity from wind generation, all that is necessary is toinstall capacity capable of ten times the required level. In other words, in order toguarantee availability of (say) 5 GW of wind generation, it is necessary to install 50GWof capacity - because at least 10 per cent of the installed capacity will always beavailable.A further government objective, of having at least 10GW of CHP capacity installed by2010, was set as part of the Climate Change Programme. At the end of 2003,installed CHP capacity, as recorded by National Grid in the Seven Year Statement, hadreached 4.9GW, about 4GW of which was accounted for by embedded generation.With total installed CHP capacity having risen by only 200MW since 2000, the 10GWtarget looks increasingly ambitious, requiring as it does the development of newcapacity at a rate in excess of 700MW per annum. By contrast, the National Grid38Untitled Document41Mind the GapThe black hole at the heart of the UK s energy supplyA recent study by the transmission operators identified a range of possible networkreinforcements, requiring investment ranging from 500- 1500 million, as shown inFigure 15 below. [24]In addition to this, further estimates, in the range 275- 615 million, have been drawnup for the cost of accommodating the offshore wind farms to be developed around thecoasts of England and Wales.Because of their monopoly position in their respective areas, and the fact that the costsof these investments are ultimately recovered from consumers, the transmissionoperators cannot simply press ahead with these projects; they first have to be agreedwith Ofgem. And a key concern in the approval process is the establishment ofconfidence that the new projects will actually be built; otherwise the expense of thereinforcements would be incurred to no purpose. For the time being, Ofgem has givenapproval for a limited number of the above reinforcements to go ahead, as shown inFigure 16 below, at a total cost of some 560 million. A consultation will be held as tohow the cost of reinforcements for offshore projects will be funded. It should be noted, however, that approval from Ofgem for the reinforcement work onthe old Scottish interconnectors is conditional upon planning permission being grantedfor the central Beauly Denny reinforcement. Given that past experience, for example innorth Yorkshire, has shown that the planning process can take a number of years tonegotiate, there is a risk that the network reinforcements to accommodate some of thenew Scottish wind farms may not be completed before the wind farms themselves areready. However, the arrangements for transmission charging which will pay for thereinforcements should ensure that financing will not be a problem, once the necessaryapprovals are in place.Developments in microgenerationThe Government s Energy White Paper of 2003 looks forward to a very significantincrease in the level of generation to be provided from distributed sources, includingmicrogeneration - that is to say, generation units which can be installed at the domesticlevel, not just in industrial or commercial premises. The strategy for Combined Heatand Power (CHP) published by Defra the following year sets a target for 400 MW ofCHP to be provided by microgeneration units by 2010. At a typical size of 1 kW perunit, that will require the installation of some 400,000 of these units (the current installedbaseline being negligible) in the next five years.Following on from this, the Government s strategy for microgeneration has just beenpublished by the DTI [13]. The strategy does not set any specific targets for thedevelopment or implementation of microgeneration, restricting itself instead to moregeneral objectives. However, a report recently published for the DTI by the EnergySaving Trust and others [18] suggests that there could be up to 8 million units ofmicrogeneration installed by 2050, and this has been interpreted as meaning thatmicrogeneration could supply some 35-40 per cent of our domestic electricity needs bythat date. On the other hand, the report also concludes that at the present rate itcould take another 10-15 years before a significant proportion of domestic energy isgenerated by this technology . The predictions for the years to 2020 show onlyrelatively minor market penetration (c. 300,000 units installed) in all scenarios exceptone - this being where government regulations require all new domestic build to installmicroCHP units, in which case the 2020 figure could be 22.5 GW, or over 25 per centof the UK s required capacity. Failing such government intervention, the rate of uptakeis likely to be relatively slow.A key question for the development of microgeneration technologies is the financialbreak-even point for each. The DTI study [14] on suggests that several technologies -notably micro-wind and micro-CHP - could become cost-effective by 2020. However,the majority of these scenarios require the principle of Energy Export Equivalence (EEE)to be adopted - i.e. that the price paid for electricity exports is equivalent to that forimports. At the moment there is a significant price differential - around 2.5 - 3 p/kWhbeing paid for exports as opposed to c. 7.5 p/kWh for imports. In order to overcomethis and other obstacles to the expansion of microgeneration, such as the meteringarrangements and the cost of metering, the DTI s strategy paper suggests that hereagain changes to the electricity trading arrangements may be necessary, and urges thevarious interested parties to work together to achieve this.E6: - Reinforcement of the transmission networkAs a final consideration in this section, if large quantities of new generation are to beconstructed in new locations, the ability of the transmission network to accommodatethe resultant power flows becomes a significant consideration. In particular the need toenable the connection of large quantities of new wind generation, both in Scotland andoffshore, poses significant problems for the transmission network operators (NationalGrid in England and Wales, ScottishPower and Scottish and Southern in Scotland).B  e a u l y - K  e i t hu p  g  r a d  eE  a s t e r ni n t e r - c o  n n e c t o  rK  e n d  o  o  nS  c h e m  eW  e s t e r n I s l e sc o  n n e c t i o  nO  r k n e y &   S  h e t l a n dc o  n n e c t i o  n sW  e s t e r ni n t e r - c o  n n e c t o  rH  e y s h a mr i n gN  E   r i n gB  e a u l y D  e n n yL i n eS  l o  yc h e m  eB  e a u l y D  e n n yr e i n f o  r c e m  e n tI n t e r c o  n n e c t o  rr e i n f o  r c e m  e n t sK  e n d  o  o  nS  c h e m  el o  yc h e m  eFigure 16Approved network reinforcementsFigure 15Proposed network reinforcements40Untitled Document43Mind the GapThe black hole at the heart of the UK s energy supplyAverage Demand ScenariosConsideration of peak demand alone gives rise to a potentially misleading picture, sinceconsiderable efforts are made to maximise the amount of plant which is available at thelikely peak times each year. So in addition to this, we have considered a second set ofscenarios based on the average levels of demand and availability of the various planttypes. This has involved making a number of assumptions and approximations, whichare justified below.In order to establish an average figure for demand, we have analysed the informationavailable on the Balancing Mechanism Reports web site, www.bmreports.com, [23]which is managed by LogicaCMG on behalf of ELEXON. This site records (amongstmuch other information) the half hourly data produced by National Grid from theiroperational metering, and published as Initial National Demand Out-turn (INDO).Analysis of this data (which is published for each half hour, and represents the averageMW value in the half hour), indicates that a typical average value for demand in a day isapproximately 60 per cent of the annual peak demand value. We have accordinglyused this percentage of the peak demand in constructing our average demand scenarios.Our estimates of the average quantity of generation available are based on the actualavailability of plant as published in the DTI Digest of UK Energy Statistics (DUKES), [15]and specifically Table 5.10 - Plant loads, demand and efficiency. We have used theavailability figures (where available) averaged over the four years since 2001, when theNew Electricity Trading Arrangements (NETA) came into operation; as this changeresulted in significant alterations in the way in which coal plant in particular is operated.The average availability figures which result are as follows:"Nuclear - 75 per cent, which corresponds exactly with the published figures available from the operators web sites;"Gas - where the figure published is for CCGT plant, which is the type of gas-fired plant which can be expected to most available, 65 per cent;"Interconnectors - for which the data is not published in DUKES, so we have used theoverall industry average of 54 per cent;"Coal and oil - where we have used the figure published for coal-fired plant, which is typically available more frequently than oil-fired plant, of 60 per cent "CHP and renewables - the figures published are only for natural flow and pumped storage hydro, at 30 per cent and 10 per cent respectively. The figure we have used as an average for this sector is therefore based on these figures and data available from web sites such as www.your-energy.co.uk, [25] which indicate that the typical availability to be expected from a wind farm is of the order of 25 per cent. As this is consistent with the figures published in DUKES for hydro-electric generation we have used this figure as the average for the sector.Scenario AssumptionsThe most comprehensive and reliable source of data for the scenarios is the National GridSeven Year Statement (SYS) [2] and we have used this data as our starting point. Thisgives projections of the peak demand in each year against the expected growth incapacity.In all the scenarios we have grouped the generation which is listed in the SYS into fivecategories, as follows:"Nuclear"Coal and oil - predominantly the former"CHP and renewables - increasingly dominated by wind generation, but also including hydro, both traditional and pumped storage, and CHP"Interconnectors - a relatively small category but not one which can readily be incorporated with any of the others"Gas - predominantly CCGT, but also including open cycle plant. Because of the importance of the sourcing of the gas, we have shown UK and foreign derived gas separately, with the assumption that these will be in the same proportions as gas consumption generallyIn all the graphical depictions of the scenarios the generation capacity is shown in thisorder, reading from nuclear at the bottom to imported gas at the top.Peak Demand ScenariosNational Grid consider three different scenarios for the growth in demand at the annual,corresponding to different rates of economic growth. In order to avoid over-complicationwe have taken their base scenario as the basis for our scenarios. We have also usedtheir high demand scenario as part of our conservative case scenario.The National Grid base case scenario is predicated on 2.7 per cent per annum growth inthe economy, whereas in his 2006 Budget, the Chancellor of the Exchequer predicted agrowth rate of 2.75 per cent per annum for 2007-2008. We have adjusted the NationalGrid forecast figure in line with the Chancellor s, but the effect of this is only to makedemand for electricity grow by 1.375 per cent per annum instead of 1.3 per cent.Similarly their high demand case is based on 3.1 per cent growth per annum, whereasthe Chancellor predicts 3.25 per cent - which instead of 2.2 per cent growth per annum inelectricity demand gives a figure of 2.4 per cent. The assumption we have used for capacity is that at times of peak demand, all generationwill be available at 100 per cent availability unless otherwise stated for a particularscenario. This is broadly in line with experience, but will, however, overstate the amount ofcapacity available from the CHP and renewables sector. For this sector we have assumedthat 50 per cent of the registered capacity, or twice the normal level, will be available.Appendix F42Untitled DocumentThe paper uses outages across areas of the UK for illustrative purposes. Theseare based on statistics from:http://www.statistics.gov.uk/regionalsnapshot/It should be noted that these are used for illustrative purposes only to indicate thescale of the potential problem. Power cuts and supply problems would manifestthemselves in a whole range of ways across the country depending on the specificproblem, the configuration of the network and how energy companies sought tomanage the problem in order to manage disruption.1 Our Energy Challenge - Securing, clean, affordable energy for the long term, DTI, January 20062 National Grid UK Electricity Seven Year Statements, May 2005 and 20063 Energising Future Generations, Economic Report 2005, UK Offshore Operators Association, 20054 National Grid UK Gas Ten Year Statement, December 20055 Energy Paper 68 - Energy Projections for the UK, Department of Trade and Industry, December 20006 Climate Change - The UK Programme 2006, Department of the Environment, Food and Rural Affairs, March 20067 Consultation on the EU Emissions Trading Scheme Phase II (2008-2012) - UK DraftNational Allocation Plan, Department of the Environment, Food and Rural Affairs, March 20068 Energy Spectrum, Cornwall Energy Associates, March 20069 Strategy for developing Carbon Abatement Technologies for fossil fuel use, Department of trade and Industry, 200510 Our Energy Future - creating a low carbon economy, Department of Trade and Industry white paper, February 200311 Arguments against wind power by the anti-wind movement, www.futureenergy.org,September 200412 The marine energy challenge, looking at the use of wave and tidal technologies, Carbon Trust, January 200613 Our Energy Challenge - Power from the People, DTI microgeneration strategy, March 200614 Potential for Microgeneration - Study and Analysis, report for the DTI by the EnergySaving Trust et al., November 200515 Digest of UK Energy Statistics, Department of Trade and Industry, July 200516 Keeping the lights on: Nuclear, Renewables and Climate Change, Environmental Audit Committee March 200617 The Economics of Nuclear Power: An analysis of recent studies, Steve Thomas, July 200518 Winter 2006/07 Consultation Document, NGT May 200519 Winter 2006/07 Consultation Document, NGT May 200620 www.dti.gov.uk/sources21 BRE Domestic Energy Factfile, 200322 CBI response to Government Energy Review, quoting Oxera Feb 2006, Staying switched on: the cost of energy security.23 Derived from www.bmreports.com24 Electricity Network Security - A wind of change, NGT presentation, June 200525 www.your-energy.co.uk,Note all pictures/graphs sourced from National Grid documents are ' National Grid plc,all rights reserved. Appendix G - References44Appendix H - PopulationStatisticsAreaScotlandNorth WestNorth EastYorkshire & HumbersideWest MidlandsEast MidlandsWalesEastern EnglandSouth EastSouth WestLondonPopulation (m)56.82.555.34.335.5857.5Untitled DocumentTo discuss IT in your business,please contact:LogicaCMGStephenson House75 Hampstead RoadLondon, NW1 2PLt: +44(0)20 7637 9111About LogicaCMGLogicaCMG is a major international force in IT services. It employs 30,000 people across 36countries. LogicaCMG s focus is on enabling its customers to build and maintain leadership positionsusing LogicaCMGs deep industry knowledge and its track record for successful delivery. Thecompany provides business consulting, systems integration and IT and business process outsourcingacross diverse markets including telecoms, financial services, energy and utilities, industry, distributionand transport and the public sector. 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