UK is facing an ‘energy security crunch point’

Delays to bringing new generation such as Hinkley Point C onto the UK’s energy system will create an energy security “crunch point” in 2028, new research has found.

Analysis by Public First, commissioned by Drax Group, found that “a perfect storm” of an increase in demand, the retirement of existing assets, and delays to the delivery of Hinkley will culminate in demand exceeding secure dispatchable and baseload capacity by 7.5GW at peak times in 2028.

This figure is almost double the size of the difference in 2022 (4GW) and 2.5 times the estimated average difference for 2024-2027 (2.8GW).

The research, Mind the gap: Exploring Britain’s energy crunch, follows recent announcements that Hinkley Point C faces delays, likely pushing the start of operations to 2029 at the earliest.

It warns that policy uncertainty around existing generators risks increasing the gap in secure dispatchable capacity by as much as 40%.

“Biomass generators contribute 3GW of secure dispatchable power but require clarity on government plans for support post-2027,” the report explained.

It further warned that over the next five years the headroom between secure total supply, which includes dispatchable and baseload power, as well as power from intermittent sources such as wind, solar, and interconnectors, and peak demand is tightest in 2028.

It added: “Our research estimates that by 2028, total de-rated capacity is expected to be just 5GW higher than demand at peak times – this represents a significant reduction (c. -40%) from the average expected headroom across 2024-2027 (8.5GW).

“The 5GW headroom is reliant on a range of planned capacity coming online as modelled in the National Grid ESO’s Future Energy Scenarios (FES). This includes an increase in de-rated wind capacity of around a third (37%) from 2.5GW today to 3.5GW in 2028. It also includes a quadrupling of de-rated battery storage capacity from 1GW today to 4GW in 2028.”

Drax said that the scale of the crunch will play out when National Grid ESO runs its T-4 Capacity Market Auction to procure sufficient generating capacity in 2027-28.

“The margin between target capacity the ESO wants to secure (44GW) and how much generation has entered the auction (43.4GW) is the tightest it has ever been since the auctions started ten years ago,” it warned.

“The research underscores that energy security will be a key issue in the next Parliamentary term. Without additional action taken to make up the shortfall, the UK will be more dependent on intermittent power from international energy interconnectors and renewables like wind and solar,” it added.

The report states building additional new capacity is unlikely to have a material impact in time and that to deliver certainty the government should:

• Extend the use of existing baseload generation assets which provide secure capacity, including nuclear plants scheduled to retire, and agree transitional arrangements for biomass operators that plan to install bioenergy with carbon capture and storage (BECCS) technology.
• Work to reduce peak demand by encouraging flexibility and installing more home insulation.

As part of the research, Public First polled UK residents to better understand their perceptions of energy security following the Russian invasion of Ukraine.

Two in five (41%) expect energy shortages to become more frequent, with the vast majority (81%) saying they believe the UK should be self-sufficient in terms of energy production.

Voters prefer wind and solar as solutions to increase energy security. Around one in three voters (37% and 31% respectively) think more wind and solar farms will be the most effective way for the UK to make its energy supply more secure.

The report added: “While this should continue to be a policy aim for a secure energy system, new capacity (not already in the pipeline) from these technologies is unlikely to be online in time to bridge the crunch point in 2028 or provide dispatchable or baseload support at peak times. This could create a disconnect between policy and the public.

“Policymakers will need to take any disconnect into account when communicating potential policy decisions for existing assets, such as extending the life of nuclear power plants or clarity on the transitional arrangements for biomass. Our polling shows that a return to policies that rely upon fossil fuel production is unlikely to be popular.”

Richard Gwilliam, Drax Group’s UK BECCS programme director, said: “This research demonstrates the UK is facing a power generation crunch point, with demand set to outstrip the supply of secure dispatchable and baseload capacity – leaving the UK reliant on intermittent forms of generation. To keep the lights on, part of the solution will be extending the lives of existing generation assets. Drax Power Station and our pumped storage and hydro power sites already provide secure, renewable electricity for millions of homes and businesses – but there’s more we can do.

“Drax plans to massively expand the generation capacity of Cruachan pumped storage power station in Scotland, some of which could be available to help bridge the power gap. Additionally, providing we secure the appropriate transitional support, our project to deliver two units of BECCS at our Selby site would also support energy security and decarbonisation through the crunch and well into the future.”

Daisy Powell-Chandler, head of energy and environment at Public First, said: “Setbacks in bringing new nuclear and offshore wind online, the retirement of generation assets and increasing power demand will create an energy crunch point in 2028. But the challenge of keeping the lights on is not set in stone: policymakers have a suite of levers they can pull to ensure that we have a more secure, diverse, and sustainable energy system in the future.”

A Department for Energy Security and Net Zero spokesperson said: “The UK has one of the most reliable and diverse energy systems in the world with renewables accounting for 40% of our electricity, compared to just 7% in 2010.

“We’ve contracted 17GW of new electricity capacity since 2014 to meet periods of high demand, ensuring households and businesses continue to get the energy they need.

“Our significant investment in clean energy, with a further £100 billion expected by 2030 to support green industries of the future, will further help safeguard against potential energy shocks.”