Page 30 - October 2019

when the lights go out

with other European countries have/are
introducing capacity payments that pay
conventional generation an availability
fee to act as a reserve in times of supply
shortage (i.e., for their insurance value).
The argument of regulators and system
operators is that they feel the market
should by itself deliver this value to
storage, but ultimately it would appear
that they see the diversification of
supply options brought about by the
growth of LNG import facilities and new
pipelines as providing the required
security of supply. The issue with this
reliance is that energy can become very
politicised and the operation of these
pipelines and LNG supply can become
points of leverage.
Another interesting contrast
between power interruption events
and gas interruption is the impact
on market prices. For the gas event, THE PACE OF DECARBONISATION IS AT RISK OF RUNNING AHEAD
gas prices increased to a multiple of OF SYSTEM OPERATORS’ ABILITY TO MANAGE THE CHANGE
the normal market price reaching £2/
therm versus a normal market price look to decarbonise. The pace of the fuel mix whilst also maintaining
of a quarter of this. In the 2019 event, this decarbonisation is at risk of an on-demand reserve to balance
the GB electricity market price stayed running ahead of system operators’ renewable generation. This transition
within its normal limits. This indicates ability to manage the change, given is largely complete in GB. As this grows
that gas interruption events occur that infrastructure has a lot of across Europe, the risk of interrelated
largely as a result of sustained periods legacy systems and procedures. The events on the gas network leading
of supply/demand imbalance, while mechanism to revise these requires to power outages grows. In extreme
the ‘capacity payments’ and margin wide consultation, regulatory oversight, weather events, where very cold
and reserves held by system operators negotiation on network operators’ weather occurs with low wind, then
for electricity generation result in incentives and license conditions. we will see high gas use as demand
transient interruptions that do not One of the contributory factors to the for heating and electricity generation
impact market price (and hence drive GB disruption is how the network is ramps up to replace lost renewable
market behaviour). configured for frequency disruption. generation, at the same time putting
Overall, the recent interruptions to There are ongoing discussions and a supplies under pressure. If, due to
supply illustrate that the systems that process to revise settings in the GB infrastructure or supply issues, the
provide our utilities are not 100 per network to give it more resilience network cannot respond, a trade-off
cent guaranteed and there is a trade-off between interrupting heating supplies
between security of supply and cost to or supplies to generation will have to
the consumer. System operators will Another interesting contrast be made, ensuring vulnerable people
point out that critical infrastructure has between power interruption and critical services are not impacted.
a responsibility to maintain equipment events and gas interruption is In the past, with more diversity in fuel
and procedures that mitigate utility supplies, this issue has not arisen.
interruptions and that overall they are the impact on market prices. There is a very significant challenge
rare. The balance to that argument is For the gas event, gas prices ahead in adapting how our systems
that, in hindsight, the cause of these increased to a multiple of the operate to ensure security of supply in a
interruptions could have been avoided changing energy landscape. In addition
and often actions are taken following normal market price reaching to this, it has to be done against a
these events to prevent them from £2/therm versus a normal backdrop of local and global political
happening again. The debate on what market price of a quarter of considerations. Public discussion
consumers are prepared to pay for this. In the 2019 event, the GB and debate only really surfaces after
security of supply is rarely made. When interruptions intrude on people’s lives.
the costs to prevent the disruption are electricity market price stayed Stakeholders and the industry have to
estimated following the occurrence of within its normal limits ensure that, following the headlines,
events, most consumers would probably lessons are learnt, the market
agree to pay this money to avoid the incentivises correct behaviour and
problems they have just endured. in frequency events and to enable change is achieved.
Looking forward, the recent decentralised generation to contribute
events highlight that the challenges more, but this change is taking time. EnAppSys provides energy data and
to maintain security of supply are As part of decarbonisation, Europe insight systems to the market and advises
increasing. Approaches and past is seeing a displacement from coal developers and their funders on new build
reliances may not work in the future generation to gas-fired generation and the purchase of power assets. For
as our fuel mix changes and as we to reduce the carbon intensity of more information visit www.enappsys.com

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