Energy prices are soaring in the UK; we have moved from very roughly £60 per megawatt hour (MWh) to £120 per MWh since Q1 2021 according to a Guardian article. The whole of Europe is seeing rises (Strom Report July 2021) but the UK seems to have a bigger problem.
How the energy market works
Demand and generation from multiple sources has led to complexity in managing supply. The UK has a bit north of 40% renewable energy; the rest is made up from various other sources. Recently we have had days with low sun and wind putting stress on the system but systems are in place to manage this. A major part of the balancing is the European power interconnector from which we get a part of our supply.
An “interconnector” is a massive power connection that provides a two-way supply of power. This allows us to benefit from lower cost electricity and to share our excess capacity when available.
We have used interconnectors to gain access to low-price electricity since the 80’s; this over time has expanded to cover multiple countries with more interconnectors currently under construction, including a massive one with Norway (over 700km!). It is a significant part of our supply, nearly 9% last year, of which 66% was renewable.
The following is a snapshot of energy generation for Great Britain (GB) at 10:30 on 12 September 2021. It gives an idea of the need to balance our sources. Note that our imports at this time were about the same as solar and wind combined.
What went wrong?
When the UK exited the EU, it did not address the many issues identified in its own plans, where plans existed. The government ignored the EU Commission papers on the topic which identified in detail what risks existed to energy supply and balancing. It is almost as if the Government thought they could just fix issues as they ‘cropped up’ after the amateurish leaving agreement. However they did not actually have the agility or energy to do the necessary grunt work.
We elected to be outside the EU Internal Energy Market, even though we rely on key aspects of it. So now we have lost significant control over energy prices, which is being used as an excuse to use coal fired power stations to balance the grid. And yes, that has just happened in the very year of the COP26 summit.
The problem is that we do not participate in the “Day Ahead” energy auctions that these interconnectors rely on to efficiently operate. This leads to a dramatic reduction in the use of power via the interconnectors and a loss of the ability to get cheaper electricity as we then use coal power to balance demand. See this report from European Energy Consultants, EnAppSys.
It sounds completely stupid and incompetent given the move to increased electrification of the UK market, does it not? We could have left the EU and kept these life critical elements in place. And of course we have gas interconnectors as well, and (you guessed it) the same problem since much of our energy generation is from gas.
Energy prices affect the poor
It is important to remember that some obscene view that anything European is bad has led to some very odd decisions. We have a government that cuts the rope holding things together only to rely on a safety rope that they forgot to fit.
There is likely to be a new arrangement by Q1 2022 and in the meantime the poor and low paid of the UK will pay the price and the winter may be bleak for many.
Fortunately the UK is a leader in the provision of foodbanks and we have the Dunkirk spirit which helps the disadvantaged keep warm in the absence of affordable heating.