Six months since lockdown: What has the pandemic done to Britain’s electricity market?
25th September 2020
It’s now been over 6 months since the coronavirus lockdown began at the end of March 2020. With lockdown came unprecedented change, which we’re still experiencing today as further restrictions and local lockdowns arise.
We’ve taken a look at some of the most significant and surprising changes to the British electricity market that we’ve seen in the last 6 months - including the changes our own office saw as we all moved to working from home…
The first part of lockdown had a huge impact on electricity demand. Overall, total daily demand is estimated to have fallen by around 16% at its lowest point.
With huge numbers of people working from home or furloughed, and almost all offices, factories, restaurants, and leisure facilities closed, electricity consumption on weekdays was at its lowest levels since 1982 – a time when there were 10 million fewer people in the country, and GDP was a third lower than today.
At one point during the six-month period, demand for electricity fell to the lowest level this century – 17GW on 28th June. For a time, weekday morning and evening peaks almost disappeared. Differences between weekdays and weekends also largely vanished.
Yet demand has revived remarkably quickly as many businesses reopened, some people have gone back to work, schools and universities, and the economy received boosts in the form of support schemes like Eat Out to Help Out.
During August and early September, the demand for electricity (taking account of temperature differences between the two years) was only 3% lower that the same period in 2019 – a significant bounce-back from the lowest points.
At Haven Power, our own electricity consumption fell by 35% during the period from April to August 2020. And thanks to our own renewable generation our total imported electricity from the grid fell by 50% as our colleagues worked from home and our offices ran almost on a ‘weekend’ basis. As more people return to the workplace – when it’s safe to do so – we anticipate that our power use will increase.
However, it remains difficult to predict whether this bounce-back will continue on its current trajectory, or how long it might last. Cases are on the rises again, and new lockdown measures were implemented to introduce ‘circuit break’ measures to slow the spread without hampering the economy.; The uncertainty around the economic effects of Brexit also adds to the difficulty of making accurate predictions in more than the very short term.
Rising renewable generation
During Q2 2020, wind, solar and biomass generation was up 32% year-on-year, and all three set new generation records. This increased generation coupled with lower demand resulted in the proportion of our generation coming from renewables increasing dramatically. At one point, renewables provided a huge proportion – 69.5% – of Britain’s electricity.
Falling carbon intensity
This increase in renewable generation led to the cleanest-ever quarter as carbon emissions fell by a third compared to Q2 2019.
Carbon intensity fell to 153g/kWh on average over Q2 2020 – the lowest average quarter on record. And the carbon intensity of electricity fell to an all-time low of 21g/kWh over the Spring Bank Holiday.
This was enabled by the rise in renewable generation – partially owing to the sunny and windy weather at the beginning of lockdown – and by running reduced amounts of carbon-emitting plant.
The grid ran without coal-fired generation for the whole of May – the first coal-free month since the industrial revolution – as the country went for a record 67 days without any coal being used at all. Gas-fired generation was also down.
Rising costs to run the network
Perhaps the most noticeable change in the electricity landscape since lockdown began has been the rise in the costs of running the network – and particularly in keeping the grid stable at 50Hz.
Renewable power sources such as solar and wind turbines don’t provide inertia to keep the frequency of the electricity on the grid balanced. This means the system operator National Grid ESO had to spend more money on services to ensure stability was maintained.
It’s not only stability costs that are contributing to the rising price of running the electricity. Curtailment costs have also increased. With low demand and high renewable generation, National Grid is having to order more wind farms to reduce their output. Increasing actions have also been required to ensure there's enough dispatchable generation (or demand turn down) in reserve in case of sudden changes in supply or demand.
During lockdown, balancing costs of running the network rose from a typical average of 5% of wholesale price of electricity to 20%. System stability costs average £100m a month during the first half of 2020.
Because less power is being used, these increased costs are being divided between a shrinking base. To keep them to a reasonable level, Ofgem has capped the balancing service charges at a maximum of £10/MWh until late October 2020. Their COVID-19 support scheme will defer up to £100 million of charges until the following year.
These increased costs are likely to be passed on to customers eventually in the form of higher Third Party Costs.
This trend is a taste of what the future may be like with a decarbonised grid. There will be a greater need than ever for renewable or carbon neutral sources of energy that can also help balance the system and maintain stability – such as renewable, sustainably-sourced biomass.
If you want to read more about how your business can manage its energy through disruption, click below to download our report - “Helping you through uncertain times: COVID-19, the energy market and your business”.Download your free report
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