Great Britain is currently highly dependent on fossil gas. This presents a major risk for households and national finances, leaving us exposed to expensive gas price spikes. A renewables-based electricity system could lower bills and shield us from future hikes.
Going full pelt on renewables is a key part of the solution. The new government has already acted quickly to supercharge renewables – setting up a solar taskforce, removing the effective ban on onshore wind, and supporting a bumper renewables auction round.
Beyond investments in renewables, there are other technologies needed to squeeze fossil gas out the power system. These include storage, flexible demand and hydrogen power stations. These assets are often less talked about than solar panels and wind farms, but are equally essential for ensuring the UK can meet its energy needs without gas. Rolling these out needs to be coupled with a plan for phasing out and evolving the existing fleet of gas power stations.
Balancing and backing-up the system with low carbon assets
Balancing the energy system means ensuring that there’s enough supply to meet demand at any given time. This means turning on assets when more electricity is needed, and turning them off when there is more being produced than is being used. Great Britain mainly uses expensive gas power stations to balance the electricity system.
Storage and flexible demand can start to take this role instead. They can reduce bills for consumers by billions of pounds per year – providing wide-ranging benefits. These need to be joined with longer term technologies like hydrogen power stations and hydrogen storage for the UK to fully move away from gas.
With the right interventions, these industries will be able to grow rapidly. Flexible demand needs a wide range of interventions to ensure every EV and heat pump owner in the UK can lower their bills in this way (a list of actions is available here). The support mechanisms for hydrogen power stations, hydrogen storage and large-scale electricity storage need to be funded in the Autumn Budget.
These support mechanisms should be coordinated through an Investment Efficiency Mechanism, to ensure that money goes to the lowest cost mix of assets. It would ensure that the government does not fund new gas power stations simply because of poor coordination (for more information see Recommendation 5).
Getting gas out the system
The future of gas power stations is complex. Some might use carbon capture and storage to clean up their act. Others will convert to green hydrogen. Many will be completely decommissioned. A plan is needed to guide each asset to take the best pathway, giving them as much forward certainty as possible for transition planning.
The government needs to minimise the ongoing cost of gas power stations by preventing companies from pushing up prices. This could be done in a few ways. One option is to maintain them as a Strategic Reserve where the government owns the assets; or a Strategic Reserve where the assets are given a low regulated rate of return. Other options include Capacity Market reforms to give a separate price for high carbon and low carbon assets, or through targeted interventions by Ofgem.
The plan must also extend to new gas power stations, ensuring these are built ready to decarbonise and with the right incentives to do so. This is set to be driven by ‘Decarbonisation Ready’ requirements funded through the Capacity Market. A cost–benefit analysis should be introduced at the point of the Capacity Market qualification to ensure that assets are being built to decarbonise by the lowest cost route.
To build this plan, the government should appoint a Gas Power Station Commissioner. This new appointment would mirror the work of the Networks Commissioner, Nick Winser, which rapidly resolved long standing challenges with network policy. The new Gas Power Station Commissioner should work with the new Mission Control and the relevant teams in the civil service. They would have the authority to look across different silos and rapidly build a comprehensive set of proposals for phasing out gas from the electricity system.
A joined-up clean power plan
E3G has recently published a major new report setting out a full suite of recommendations to the new Labour government to meet the 2030 clean power target, choosing the lowest cost pathways to help reduce bills. Taken together, these recommendations can help ensure that the UK’s journey away from fossil gas is one designed to maximise benefits to households.
