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DTI Review of Energy Sources
DTI Review of Energy Sources
The press notice of 22.12.97 suggests the review is concerned firstly with secure, diverse and sustainable supplies of energy at competitive prices, but also with environmental targets and other obligations, the effect on the electricity grid, and geographical and locational factors.
This submission is about geographical and locational factors and their effect principally on cost and energy wastage, and secondarily their effect on the grid. It will suggest reasons for Secretary of State to use her powers of Section 36 consent to restrain new generation which would be badly located.
1. Geographic imbalance of electricity generation and demand
There is 100% overcapacity of generation in the north of England against winter peak demand , . In the north east, capacity is 4,152 MW and peak demand about 2,000 MW. In NGCs Far North, which includes Cumbria, capacity is 6,692 MW against peak demand of 3,120 MW. Scotland has a similar overcapacity. Net bulk power of over 8,000 MW flows through England from north to south. The whole of England and Wales has a winter peak demand from the grid of almost 50,000 MW (50GW) and an average demand of 30,000 MW (30 GW).
2. Wastage of energy and money
The largest wastage in the electricity chain is at generation , where typically 65% of primary energy of coal, or 50% of gas, is wasted as dumped heat, evident in cooling tower plumes. Power stations may do marginally better at optimum conditions; these are representative average figures. Further losses are typically 2%in transmission  and 7% in distribution . There is in addition a potential saving of 20% at consumption , though I ignore that here since it is common to all the alternatives. Electricity delivered to the consumer is therefore on average about 0.4 x .98 x .93, i.e. 36 %, of the primary fuel energy. The combined loss in generation, transmission and distribution is on average some 64%. Therefore to deliver an average 30 GW, some 83 GW of primary fuel power are needed, of which some 53 GW is wasted. The value of that waste at a grid (wholesale) price of 2.5 p/kWh is 53x24x365x2.5 million p/year, or £11.60 billion per year. At retail electricity prices it would be three times as much.
3. Recovery through CHP
Not all of the above large loss can be recovered, since some centralised generation, with transmission and distribution, is inevitable for security and continuity. However, distributed CHP can avoid most of these losses at least for the base load it delivers. While CHP capacity was below 2 GW, John Gummer raised the target to 5 GW by 2000, and this year the government has indicated 10 GW by 2010, with expectations of more  and economic potential for up to 17 GW . This is over a half of average demand in England and Wales, and its establishment would displace a similar amount of power station capacity. If the CHP targets are to be taken seriously, there is very little room for any new traditional power stations, whatever their fuel.
CHP depends on a local market for heat and power, and it is available in very small units down to 50 kW. It is essentially small and distributed in areas of demand, in contrast to the centralisation of large power stations remote from net demand and now outdated . It is well suited for energy distribution by the gas grid (with negligible losses ), but also available with coal and oil.
Note that the TPL power station on Teesside, described as Europes largest gas-fired power station with a capacity of 1,845 MW, was claimed to be "partial CHP" since its steam was initially partly earmarked for use by ICI, but in the event none of the steam found a market and the plant is not properly CHP at all. It is important that such cases are not counted in the government CHP targets.
4. Comparison for 2 GW at the margin: energy costs
Compare the introduction of 2 GW of new generation using North Sea gas in two forms:
OPTION A: large power stations in the north, remote from net demand and without CHP;
OPTION B: distributed CHP in areas of net demand using the gas grid.
Option A is commensurate with the mooted Neptune and Flotilla power stations on Teesside, and with the powerflow envisaged for the proposed second Yorkshire grid line, which has a thermal capacity of over 4 GVA (roughly equivalent to 4 GW) but is designed to operate at about half thermal capacity. At such load levels the transmission loss is 3% per 100 km , . The absolute loss varies mainly as the square of the load, so the % loss is proportional to load. Transmission loads on the whole grid from north to south will vary, but with increased imbalance the loading will tend to be heavier. I have used a typical figure of 2.5 % per 100 km  which is also consistent with NGCs loss data [1: Table 8.1] showing a relative loss of 15% for new generation in the north compared with that in the importing areas of the south. The transmission loss for Option A is therefore approximately 15%.
Option A requires 4 GW of primary power in gas, wastes 2 GW in generation and delivers 2 GW to the grid which wastes 0.3 GW in transmission, delivering 1.7 GW to the distribution system which wastes a further 0.12 GW leaving 1.58 GW for the consumer. Leaving aside the 0.3 GW which the consumer then wastes, the waste from gas source to the consumer is 2.42 GW worth £530 million per year at grid prices of 2.5 p/kWh
Option B pipes 4 GW of gas at negligible loss in transmission and distribution, and delivers say 90% of the energy through CHP as 1.6 GW electricity plus 2.0 GW heat, wasting 0.4 GW. Both options deliver a similar electricity output but option B also delivers heat, with losses of value £88 million per year. The net benefit of Option B in energy losses is £442 million per year at grid prices.
5. Comparison for 2GW at the margin: capital and other costs
The economic case for CHP generation is assessed in . A cursory comparison of transmission costs was made by the Energy Minister in . However the latter under-estimated transmission losses as 1.5% per 100 km instead of 3 % as shown in . He used capital figures of £0.5m per km of transmission lines for 2GW and £1m per km of pipeline for 4GW of gas. The former figure ignores associated works and infrastructure which, in the case of the Yorkshire grid line, multiplies that cost by more than 5 since the 75 km line project was costed at £200m, i.e. £2.7m per km. Further, security against double-circuit outage requires spare lines to be built beyond basic capacity, so the cost of transmission is even higher.
The then Energy Minister annualised the capital costs based on 10% real discount rate over a 20 year life to obtain equivalent costs of £6m and £12m respectively per km for electricity and gas, and valued his 1.5% losses at 2 p/kWh as £5m per 100 km, so nearly equating the two options when capital and losses are combined. More correctly his electrical loss figures should be doubled, and infrastructural and security costs included, which all reinforce the advantages of Option B. In any event, north-south dislocation is straining the electricity grid, whereas there is unused capacity on the gas grid. Other aspects of costs are considered in .
6. Market forces
The previous government regarded energy policy and economic aspects of Section 36 and 37 consents as commercial matters to be left to the market. While there is competition in generation, there is a monopoly in transmission, and a peculiar pool system, with a resulting distorted market. There is no incentive to avoid losses in transmission, and a positive incentive to acquire grid developments which are charged to consumers not to NGC who gain them as assets, and incentives on generators to locate at the fuel source, all of which conspire to obstruct CHP. In  the Energy Minister said "It is important that prices for the use of electricity and gas transportation systems should reflect the costs of locating at different points on the system and it is a matter for OFFER and OFGAS to ensure that this is so." However few and only small partial steps were taken towards cost-reflectivity in OFFERs Transmission Price Control Review . Without government influence through Section 36 and 37 consents, the tendency to large remote gas-fired power stations in Scotland and the north of England will continue, because the artificial market incentivises it, exacerbating the costs of dislocation and bulk transmission, and frustrating the new CHP targets.
7. Power lines, windfarms and environmental impact
While this submission has been on energy and economic considerations, there is also the question of environmental impact. Power lines are acknowledged to have a severe impact, yet the present trend of market distortion is promoting their excessive development. The consequences of the second Yorkshire line would be greater imbalance of generation with new bottlenecks and yet more grid developments throughout England, not for good economic reasons but because of distortion. Likewise the promotion of large windfarms in areas of high landscape value, particularly in the north Pennines, is driven by artificial incentives. While windfarms are at first thought benign, in remote locations they need infrastructure and powerlines and concrete construction which have not been assessed for energy cost. Their output is unreliable and insignificant on a national scale, so they cannot make a significant contribution to national energy policy. Small distributed windpower units for the south would be a more worthwhile prospect .
There is a serious present and growing imbalance in location of generation and demand, which wastes energy worth billions of pounds per year at wholesale prices. There is an immediate prospect of adding 2 GW of generation in the mooted Neptune and Flotilla gas-fired power stations on Teesside prompted by the proposed second Yorkshire transmission line, to serve net demand in the south, at a cost of over £0.5 billion per year in wasted energy, with worse to come from increased Scottish imports. CHP targets will be obstructed and are unlikely to be achieved without firstly government restriction of Section 36 consents and secondly radically improved regulation to make the market much more cost-reflective. A complete moratorium on new large power stations in the north, and on windfarms in northern areas of high landscape value, would be consistent with government energy policy and targets.
Professor M J OCarroll 14 April 1998
 NGC 1994 Seven Year Statement
 M J OCarroll, submission to Newcastle upon Tyne City Council on proposed CCGT Power Station at Newburn Industrial Estate.
 J H Horlock, Combined Power Plants, Pergamon 1992
 OFFER, Transmission Price Control Review, vol.4, page 40, para 9.16, August 1996
 OFFER, Distribution Price Control Proposals, page 36, para 4.12, August 1994
 Conservative Party Manifesto 1992, and elsewhere.
 CHPA Bulletin "GoGen" Issue 18, March 1998
 ETSU, Assessment of CHP potential, 1998
 Energy Minister Tim Eggar, letter to William Hague 2 February 1993.
 M J OCarroll, paper REV 301.23 to the Lackenby-Picton-Shipton transmission line Public Inquiries, April 1995
 NGC, paper NGC 64 to the same Public Inquiries
 M J OCarroll, The folly of remote generation, vol. 228 no. 7 p. 62, March-April 1995
 M J OCarroll, Response to House of Commons Adjournment Debate 24 July 1997
 OFFER, Transmission Price Control Proposals, October 1996.
 The Economist, "Power to the People" pp 91-97, 28 March 1998
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