Labour's energy policies 2019 - Part 1: Proposals

This is an assessment of what the promises in Labour's manifesto would mean for our energy systems if implemented. In Part 2, we will use our Future Scenarios model, available for you to try yourself on our Energy Data sub-site, to analyses the implications of those choices in terms of our energy supplies, national carbon footprint, and costs/economic impacts. 

A major problem with modelling any of the parties' energy policies from their manifestos is how few specifics they offer. The Labour manifesto includes a few more specific items than the other parties. But all of them require a lot of blanks to be filled in by reasonable inference, based on their statements and historic data.

Stripping out the rhetoric, what are the actual proposals for energy in Labour's manifesto?

Electricity

  • 90% renewable or low-carbon by 2030
  • 100% renewable or low-carbon ASAP in 2030s
  • 7,000 new offshore wind turbines
  • 2,000 new onshore wind turbines
  • Enough solar panels to cover 22,000 football pitches
  • [Unspecified amount of] new nuclear power needed for energy security
  • Trial and expand tidal energy
    • upgrade almost all of the UK’s 27 million homes to the highest energy-efficiency standards, reducing the average household energy bill by £417 per household per year by 2030 [assume this will include electric as well as heat efficiency]
    • To balance the grid, we will expand power storage and invest in grid enhancements and interconnectors.
    • expand distributed and community energy [presumably incorporates significant element of CHP]
    • publicly owned networks will accelerate and co-ordinate investment to connect renewable and low-carbon energy
    • new UK National Energy Agency will own and maintain the national grid infrastructure and oversee the delivery of our decarbonisation targets
    • 14 new Regional Energy Agencies will replace the existing district network operators and hold statutory responsibility for decarbonising electricity and heat and reducing fuel poverty
    • supply arms of the Big Six energy companies will be brought into public ownership where they will continue to supply households with energy while helping them to reduce their energy demands
    • establish a Foundation Industries Sector Council to provide a clean and long-term future for our existing heavy industries like steel and glass and fund R&D into newer technologies like hydrogen and carbon capture and storage
    • Labour will support our steel through public procurement, taking action on industrial energy prices, exempting new capital from business rates, investing in R&D, building three new steel recycling plants and upgrading existing production sites
    • put British innovation at the heart of our procurement to support local sourcing and reshoring, so that every investment we make strengthens our manufacturing and engineering sectors and supply chains and creates hundreds of thousands of good, unionised jobs here at home

Heat

  • invest to reduce the costs of renewable and low-carbon hydrogen production
  • upgrade homes (as above) to save £417/household by 2030
  • a zero-carbon homes standard for all new homes
  • roll out technologies like heat pumps, solar hot water and hydrogen, and invest in district heat networks using waste heat.
    • distributed and community energy (as above), presumably includes district heating
    • introduce a windfall tax on oil companies, so that the companies that knowingly damaged our climate will help cover the costs [also affects gas, e.g. heat]
    • National and Regional Energy Agencies (as above) presumably also cover gas networks
    • supply arms of the Big 6 (as above) also supply most of the gas that dominates heating fuel at the moment
    • Foundation Industries Sector Council will fund R&D into newer technologies like hydrogen and carbon capture and storage [key to long-term heat decarbonisation strategies]
    • support for steel, manufacturing and engineering sectors, to create hundreds of thousands of good, unionised jobs [i.e. big increase in industrial heat and electricity]
    •  investing in a new plastics remanufacturing industry creating thousands of jobs [i.e. not EfW, so more industrial heat and electricity demand, not production]
    • introduce a new Clean Air Act, with a vehicle scrappage scheme and clean air zones, complying with World Health Organisation limits for fine particles and nitrous oxides [means abolishing domestic wood burning in urban areas, which accounts for large proportion of modest heat decarbonisation to date]

Transport

  • Increased bus use, inc. free bus travel for under-25s, and reinstating the 3,000 routes that have been cut, particularly hitting rural communities
  • Expanded, nationalised rail service, inc. regulated fares reduced by 1/3 [post-manifesto announcement]
  • implement a full, rolling programme of [rail] electrification
  • unlock capacity and extend high-speed rail networks nationwide by completing the full HS2 route to Scotland
    • promote the use of rail freight
    • increase the funding available for cycling and walking, and increase their use through planning policy
    • ensure the zones around our schools are safer, with cleaner air [presumably vehicle exclusion zones]
    • end new sales of combustion engine vehicles by 2030
    • lead the development and manufacture of ultra-low emission vehicles and support their sale
    • invest in electric vehicle charging infrastructure and in electric community car clubs
    • accelerate the transition of our public sector car fleets and our public buses to zero-emissions vehicles
    • may expand airport capacity in South East (depending on environmental impact)
    • introduce a new Clean Air Act, with a vehicle scrappage scheme and clean air zones, complying with World Health Organisation limits for fine particles and nitrous oxides [means scrapping domestic wood burning in urban areas - a large proportion of the modest heat decarbonisation accomplished to date]

What would this mean for our energy?

The UK's energy systems in 2030 under Labour

We will take 2030 as the target date. We really shouldn't take any date further than 2024, as promises in a manifesto for delivery beyond the forthcoming parliament are meaningless. But all the parties have set their sights on 2030 in the medium term and 2050 in the long term, precisely to give themselves the wiggle-room to excuse any failure to deliver by the end of the next parliament. 2050 is absurdly far in the future to give any credence to current political ambitions, so 2030 will have to do.

Heat

Let's start with heat, because it has ramifications for electricity. The over-arching Labour target is 50% renewable or low-carbon heat by 2030.

Demand

Adjusting for annual average weather conditions (primarily temperature), demand for heat and hot water has not changed much over the years, even though there have been subsidy programs for decades to improve building efficiency and as a result, most properties are already insulated to the necessary standard. In all likelihood, the improvements have been used as much for improving comfort as reducing demand (known to economists as the Rebound Effect, which is a major problem where efficiency is promoted by supply-push rather than demand-pull). There are also strong reasons not to expect big improvements, partly because the claimed improvements are not as big as people might imagine, and partly because the incentives of these subsidy mechanisms were to be no more efficient than necessary. And we certainly shouldn't expect too much in the future, given that most of this has already been deployed, unless we rapidly rebuild our housing stock, which is not envisaged in the manifesto. Around 1/3 - 1/4 of domestic demand is hot water, which will not be significantly affected by improvements in the building efficiency. We looked into these factors in our article, Building or energy conservation?

A major renaissance in UK manufacturing is envisaged in Labour's manifesto. Industrial process heat and drying are a substantial minority of total heat demand.

Given that Labour have not provided any numbers, expecting heat demand to continue roughly at its current level (a bit more industrial heat, a bit less domestic heat) is as good an assumption as any. That amount (around 692 TWh p.a.) is what we assume in the model.

Supply

Hydrogen

The current UK strategy is to carry out research and development during the 2020s, with a view to commercial roll-out during the 2030s and 2040s. There are practical reasons for this, which politics cannot change. It is reasonable to assume that hydrogen will not play a large part in heat supplies in 2030 under Labour (or anyone else). Labour's phrasing ("invest to reduce the costs of renewable and low-carbon hydrogen production") hints at recognition of this.

Biomass

Biomass dominates the decarbonisation of heat on the continent and almost anywhere that has made any significant progress on the matter. But it is notable by its absence from the UK 2019 manifestos, including Labour's, except as collateral damage from other policies.

Solid biomass (e.g. wood)

Most of the UK's heat decarbonisation to date is based on a paper exercise to estimate the amount of domestic wood burning that occurs. It is probably a gross over-estimate for the purpose of being able to claim any significant progress on heat decarbonisation. But in any case, to the extent it exists, the Labour (and probably other parties') policies would significantly reduce it, not increase it.

Labour propose to improve urban air quality through the introduction of "a new Clean Air Act, with a vehicle scrappage scheme and clean air zones, complying with World Health Organisation limits for fine particles and nitrous oxides". Recent research and publicity has emphasised that domestic wood burning (of poor quality fuel and/or under poor combustion conditions) is the second most important controllable factor (after vehicle emissions) in many of the target airborne pollutants. Some even claim it is the most important, though the research does not support it.

More than half the wood-burning appliances, and two-thirds of the worst installations (open fires) are in urban locations. Measures to improve urban air quality would radically reduce the amount of wood burning for heat in the UK, which in turn would significantly reduce the amount of renewable heat being produced in the UK. Bioenergy as a whole constitutes 80% of renewable heat, and the combustion of solid biomass (mostly wood) constitutes 86% of the bioenergy.

As Labour say nothing about any intention to promote bioenergy for heat, we can only assume from the manifesto that biomass would be contributing less renewable heat in 2030 than it is now.

One other eye-catching post-manifesto announcement might seem relevant: the plan to plant 2 billion trees by 2040. But (a) this is supposed to be a sequestration measure, so it is not clear to what extent the fibre from the trees could be used for energy if they are harvested at all, and (b) in any case, the trees would not mature for use within the timescale under consideration.

Biomethane

Biomethane is also notable by its absence from the Labour manifesto, as it is one of the technologies favoured in the current heat decarbonisation strategy. It consists of two types of technology:

1. Anaerobic digestion (AD)

2. Advanced conversion technologies (ACT, e.g. gasification and pyrolysis)

Increasing AD would depend on increasing the amount of putrescible material available. The existing capacity of AD plants exceeds the material available to feed it. A further expansion would rely in particular on increased collection of food waste. But Labour do not propose to increase the collection of food waste. In fact, they propose to minimise the production of food waste. On the basis of their policy, one could only assume that AD will decline, unless it is on the basis of energy crops (not proposed).

ACT depends on improvements in its economics and the availability of feedstock. It can convert a wider volume of feedstocks (e.g. woody material). But there are no proposals to promote these technologies, nor explanations of where the necessary feedstocks would come from. The implication of the manifesto is that Labour would jump straight to hydrogen without an intermediate biomethane stage.

District Heating

The manifesto promises to "invest in district heat networks using waste heat".

District heat networks are not a source of heat. They are an energy transmission mechanism. They are as carbon-intensive as the fuels used to produce the heat that they transmit, except for an intensification of the carbon per unit of delivered energy because of transmission losses, which can be quite significant.

Without an explanation of where these low-carbon sources of waste heat will come from, it is not clear how district heating will make a significant contribution to decarbonising heat. Waste heat is typically available as a by-product of electricity generation, although the source might alternatively be an industrial process. But most large-scale generators are not located near to large concentrations of heat demand (typically domestic or commercial premises). Small-scale generators may be closer to heat demand, but most of the small-scale generation is standby capacity for balancing the output of intermittent generators. The heat from these units would not be produced to a pattern that was correlated with heat demand. And the frequency of utilisation would be low enough to make the addition of heat-recovery uneconomic even if demand were matched to production.

So all that is left in reality are however many Combined Heat and Power systems might be installed for the purpose of supplying district heating. That is hardly waste heat as the supply of heat is a core part of the economics. The CHP units are most likely to be gas or oil, i.e. not low-carbon.

There is not enough information in the Labour manifesto about how the District Heating promise would translate into real projects to count this as a significant contributor to the decarbonisation of heat in 2030 under Labour's model.

Solar Heat

Labour list solar hot water as one of the technologies they will roll out (alongside heat pumps, hydrogen and district heating) to decarbonise heat. Solar thermal has been a flop under the RHI for two related reasons:

1. It is not economic. It seems surprising for such a basic technology, but even with the tariff raised to the highest level considered acceptable (where it equates to the support of the "marginal cost" technology, offshore wind), very little capacity was delivered.

2. Most heat demand is in winter, and solar output is very low in winter. There is an inverse correlation between heat demand and solar-thermal production. It is effectively a technology to displace the production of hot water in summer. But that rarely justifies the cost, as a primary heat source is still required.

Without an explanation of how this situation would be changed, one cannot assume a substantial contribution from solar thermal to our heat requirements.

Electric heating

"When you have eliminated the impossible, whatever remains, however improbable, must be the truth."

That leaves electric heating. By elimination, this must be the main plank of Labour's plan to decarbonise 50% of our heat by 2030. We will put it down for 45% of our heat demand, on the assumption that the other technologies will pick up the other 5%.

Labour, like all the parties, assume that electric heating will be heat pumps, to maximise the efficiency. In reality, most of our existing buildings are sub-optimal for heat pumps, which work most efficiently with very efficient buildings and certain styles of heat distribution (preferably under-floor heating, or failing that, low-temperature radiators, or blown air, none of which is common). And no party, including Labour, is proposing a significant replacement of our building stock to change this sufficiently to make a difference. But studies commissioned by the recent government suggested that most homes were suitable for heat pumps, so we will assume that that is the assumption, realistic or not. There is a modest amount of conventional resistive electric heating installed, but we will assume that all new electric heating will be heat pumps.

Labour are not specific whether those heat pumps would be ground-source or air-source. The result of the efforts to stimulate this market since 2011 has been the dominance of air-source heat pumps, which (a) are the massive majority of the deployed heat pumps and (b) require significantly less support than ground-source. We will assume a similar split on an ongoing basis - around 10:1, air-source:ground-source.

Transport

Transport also has ramifications for electricity demand, because of the push (in all manifestos) to electrify transport. Unlike heat and electricity, there is no over-arching target/commitment for transport.

Demand

Labour are keen to promote walking and cycling as transport options. Being realistic, though, neither of these is likely to displace much commercial and industrial traffic (by any mode), nor long-distance traffic, nor existing personal traffic where arrangements remain roughly as they are now. This goes back to the lack of any ambitious plan in Labour's (or anyone else's) manifesto to replace our built infrastructure. Journeys that are currently most practical by car, bus, train or plane are likely to remain so.

The manifesto is keen to move road traffic (personal and freight) onto the railways. Rail currently accounts for 12% of freight. It is restricted in its suitability by geography (it only works to/from a limited number of railheads, unlike road which is from A to B anywhere in the country) and type (it is more practical where multiple container/wagon-loads can be used than for smaller units, which make up the majority of pallet haulage traffic). A 2016 study into the potential to increase rail freight identified a number of areas where modest increases could be achieved if restrictions were removed, one product (coal) that had been dominant but was in serious decline and one product (biomass) that might grow to the extent of taking up the coal slack and more. That has since transpired, with Drax and other biomass power stations requiring millions of tonnes of biomass shipped by rail from Immingham, Tyne and Liverpool. The scope for further increases should therefore not be overstated. In the absence of their own numbers, it would probably be a reasonable interpretation of Labour's ambitions in this area to assume rail freight increasing to 15% of all freight.

A similar calculation applies to personal transport. Labour hope to switch people from the roads to rail and buses. But they are limited by their relative inconvenience compared to road travel, in terms of flexibility of timing, and route adaptability (travelling from where you are to where you need to go). Rail currently accounts for 11% of passenger-kilometres (-km), and buses 5%.

Labour would expand rail capacity by (a) completing HS2 all the way to Scotland, and (b) building a CrossRail for the North. They would expand bus capacity by reinstating 3,000 routes that have been cut. The former would be more significant than the latter, if completed by 2030. The cut bus-routes will have been the marginal routes, i.e. the ones where passenger numbers did not justify the journeys. Two large rail schemes, whatever their economic merits, would undoubtedly increase capacity, though the scale is a fraction of current capacity, not an order of magnitude.

Again in the absence of their own numbers, one might allow for rail taking 15% of passenger-km by 2030 under Labour if the two major projects were finished by then. Buses might optimistically carry 7% of passenger-kilometres. Given the historic rate of increase in total passenger-km, partly related to population, which could increase even more strongly under Labour's open-door policy, these increases for bus and rail might merely be sufficient to hold road passenger-km (and therefore energy demand) around their current level. We model the energy requirements for rail (36% increase) and road (2.5% increase, consisting of 40% increase for buses and 0% for cars/vans/taxis) accordingly.

Most projections assume ongoing increases in demand for air travel. Labour are vague about the extent to which they will enable additional capacity, and place a strong emphasis on the environmental impacts of all choices. An assumption that the use of air travel will remain roughly constant (i.e. not increase as normally projected) is as good as any other in the absence of specific figures and measures.

The plans for an industrial renaissance imply some increase in the use of sea transport. There is no mention of it in Labour's manifesto (although sea transport is particularly good from the perspective of kgCO2e/tonne-mile). We assume a modest increase in the energy demand for sea transport under a Labour government.

Supply

Electrification dominates how transport demand translates into energy impacts. Under the Labour manifesto, rail would be fully electrified, and new sales of combustion-engine vehicles would be banned by 2030. There would remain a substantial stock of combustion engines within the fleet, but given the impact of the ban on secondhand values, it is reasonable to assume that the prospect of the ban combined with other policies aiming to encourage electrification would see a very substantial transition to electric road vehicles by 2030.

In our model, we assume rail is 100% electric by 2030, and road is 50% electric, as a reasonable reflection of the ambitions expressed in Labour's manifesto.

It is important to note that this does not assume a 1:1 swap of fossil-fuel demand for electricity demand. The in-vehicle efficiency of electric vehicles is much higher than for combustion engines, i.e. you need only a fraction of a kWh of electricity to carry you as far as a kWh of oil will carry you, using current mainstream technologies. We allow for this efficiency improvement in our model.

We also make the positive but hopefully realistic assumption that electric road vehicles are charged disproportionately (but not entirely) during off-peak hours, and thereby provide an important, secondary, system-balancing function.

We assume no significant electrification of air or sea transport by 2030, nor a significant switch to any other low-carbon fuel source.

Electricity

Labour's over-arching commitments for electricity are to switch 90% of generation to renewable or low-carbon (presumably nuclear?) electricity by 2030, and 100% ASAP in the 2030s.

Demand

Heat

The effect of having a policy to decarbonise 50% of our heat by 2030 without any credible strategy other than electrification (if we stretch the definition of "credible" to breaking point), is to significantly increase the level of electricity demand of which 90% will have to be renewable or low-carbon by 2030 according to the Labour manifesto.

The profile of this extra demand will be that of the demand for heat, not the traditional profile of electricity demand, which is less seasonal. Our model estimates the hourly heat demand and how that translates into demand for electricity according to the Coefficients of Performance of heat pumps at the average external temperatures applying at that time.

Transport

Electrification of transport in accordance with Labour's manifesto adds over 100 TWh to the total electricity demand (see above). The profile of this demand in the model is based on typical transport activity, not the historic profile of conventional electricity demand.

Conventional electric demand (lighting, appliances, etc)

Electricity demand, containing small components of heat and transport, but largely for appliances and lighting, was on a steady uphill curve until the mid 2000s, after which it declined somewhat to 2014, since when it has been fairly static at around 315 TWh p.a.

Lighting and appliances (domestic, commercial, industrial and third-sector) constitute around 250 TWh of that 315 total. We will assume in this model that further efficiency improvements (e.g. LED lighting) will reduce that to 220 TWh. On recent performance, this is an optimistic assumption, but should be achievable. Although improvements in housing efficiency refer most significantly to insulation, glazing etc, it should also contain a component of electrical efficiency. The Labour manifesto envisages another big push on energy efficiency.

Cooling (air conditioning)

In many countries around the world, cooling is a major component of total demand, to the extent that the annual peaks in demand occur in summer. In the UK, cooling is so far a niche demand (around 11.5 TWh) and electricity demand is materially higher in winter than summer. With rising temperatures and an ageing population whose mortality rates can be significantly affected by room temperatures, it is reasonable to assume a material increase in demand for cooling. We will assume that cooling demand rises to 17 TWh p.a. The model apportions this on an hourly basis according to external temperatures. It is a relatively small component of total demand, but a significant component of hourly demand when external temperatures are high.

Supply

How will that be supplied? On this, Labour have been somewhat more specific.

Offshore wind

The manifesto promises "7,000 new offshore wind turbines". The recent radical reductions in the Contract-for-Difference (CfD) bid prices for offshore wind projects are said to be based primarily on the larger units that are coming through. That is not just about economies of scale, but also about the more consistent wind at the higher altitudes reached by the tips of the blades of the larger turbines. The current best available technology is (approx.) 8 MW units, but 12 MW units are forthcoming and probably the basis for the optimistic bids.

The more reliable wind at higher altitudes cannot, though, on its own account for the radically more optimistic assumptions about load factors incorporated into these optimistic bids. Only a small proportion of the larger sweep is in cleaner air than the previous units. Yet the load factor has been assumed to increase from the high 30s percent to 60+ percent.

The other way that wind turbines can increase their load factor is by under-sizing the generator relative to the blades. That appears to be a major part of the new load-factor assumptions. But if so, one has to downgrade the notional capacity of these units. They might be capable of 12 MW with a full-sized generator, but then probably achieving only mid-40s load factor. To achieve higher load factors (say mid-50s), we must assume that their capacity is reduced accordingly, say 12 -> 10 MW, and 8 -> 6 MW. We will model both assumptions - high capacity/modest load factor and reduced capcity/higher load factor.

Not every turbine of the 7,000 will be the new 12 MW units, but it's reasonable to assume they should be at least 8 MW, because otherwise we must assume the scale of costs associated with the smaller units of the past. Let's say, at full capacity (i.e. generator not under-sized), the turbines will average 10 MW (mix of 8 and 12), and at reduced capacity (under-sized generator), the turbines will average 8 MW (mix of 6 and 10). That gives us around 70 GW at 45% load factor, or 56 GW at 55% load factor. Some simple maths shows that the total output is slightly higher in the first than the second scenario. But the value of the output may be higher in the second scenario, because it is more reliable and more likely to be available when we need it.

These are the additional units promised by Labour. There is also an existing installed base. As the fleet has been expanding rapidly, it can be hard to put a firm figure on it. We use around 5 GW installed by around mid-2019, with an average load factor of 39%.

These load factors (new/existing, full-sized/under-sized) are theoretical, unconstrained load factors, e.g. target performance if all the turbines can run to their maximum whenever the wind is available, barring engineering downtime. In practice, when capacity is as high as this, there will be periods when the total output from just this technology (let alone all the generating technologies on the network) exceeds total demand and output therefore has to be constrained. We refer to the theoretical load factor without curtailment as the "availability factor", and the actual, curtailed load factor as the "capacity factor".

Our model calculates how much output will have to be constrained in each hourly period according to the anticipated demand and production (based on historic weather and performance data), with the merit order defined by technology.

That is of course not exactly how curtailment would happen in practice, but it is a reasonable approximation, with the least-flexible, lowest-marginal-cost technologies (e.g. wind, solar and nuclear) at one end of the merit order, and the most-flexible, highest-marginal-cost technologies (the fossil fuels) at the other end. Our order is: solar, biogas, nuclear, onshore wind, offshore wind, biomass, hydro, gas, coal, oil. This does not mean that all these technologies are necessarily used. They can be modelled out of the equation.

Onshore wind

The manifesto promises "2,000 new onshore wind turbines". The same logic applies to sizes and load factors, except both are likely to be lower onshore. We will assume that the average size of the new turbines will be 7 MW at a load factor of 35% if the generator is full-sized, or 5.5 MW at a load factor of 42% if the generator is under-sized. That gives us a range of 11 - 14 GW of new onshore wind according to the Labour manifesto.

Approximately 8 GW of onshore wind was already installed as of mid-2019. Its average load factor was around 28%.

Solar

The manifesto promises "enough solar panels to cover 22,000 football pitches". Football pitches are a mid-range colloquial unit of measurement, between double-decker buses and Wales. They may convert to more standard units at around 7,000 m2 per pitch. So this works out to an area of 154 million m2. It is not an equivalent area of solar panels, because (a) the panels are at an angle, so theoretically a larger area of panels could be stood on that area of land, but (b) gaps are required between rows of panels for maintenance etc. Let's say around 100m m2 of panels. At around 0.2kW/m2, that makes around 20 GW of additional solar capacity.

Load factors are largely determined by insolation, which is not likely to change much, so we assume no change to current load factors for the new panels in our model.

The existing capacity of solar is particularly hard to estimate, because so much of it is embedded and not half-hourly metered or visible otherwise in the statistics, other than as a reason for reduced demand. But solar panels have a similar implication for the system, in terms of impact on demand and flows depending on time of year and time of day, whether they are embedded or part of a massive solar farm. We have therefore tried to adopt a best estimate of total installed solar, not just grid-connected solar, for our estimate of current installed capacity. The best figures we have seen suggest around 13 GW installed by mid-2019.

Nuclear

Labour's "new nuclear power needed for energy security" does not tell us much about the planned scale and timing. Fortunately, we can make reasonably precise assumptions for nuclear. The only one of the existing nuclear power stations that is expected still to be running in 2030 is Sizewell B, at a capacity of around 1.2 GW. The only new nuclear project that might be running in 2030 is Hinkley Point C, at a capacity of around 3.2 GW. We take these as our figures for existing and new nuclear capacity in 2030 in our model of Labour's energy plans.

They may prove to be over-optimistic (Sizewell could experience problems and close early, or Hinkley may over-run further). It is unlikely that this under-estimates the nuclear contribution in 2030, unless the dangerous decision is made to further extend the life of the current systems. Given the operational problems being experienced, that is not a scenario worth modelling for a central projection.

We assume that nuclear capacity will continue to run baseload (i.e. high load factor), other than in the unusual circumstances where the output from solar and biogas generators exceeds total demand.

Biogas

Biogas includes three sources of fuel, which are treated separately in national statistics: landfill gas, sewage gas, and anaerobic digestion (AD, effectively biogas from all other types of feedstock, typically food waste).

Landfill gas

Landfill gas has historically dominated the biogas figures. But after years of effort to divert putrescible wastes from landfill, driven by the Landfill Directive, landfill gas is now starting its decline in gas production. By 2030, one would expect it to be a shadow of its former self. It is currently the best part of 1 GW of capacity and 4 TWh p.a. of output, but outputs and load factors have fallen in recent years, and this will continue. By 2030, it will probably supply 1-2 TWh.

Sewage gas

Sewage gas capacity has grown more slowly. Still only a minority of sewage works produce electricity, but that is because the majority are too small to be practical. There may be modest potential for further growth in this technology, but it will not signify at the scale of a UK-wide energy model. We may assume it will continue to provide around 1 TWh p.a. from around 250 MW.

Anaerobic digestion

Given the absence of any mention of this technology in the manifesto, the greater priority currently given to biomethane than to biogas-fired generation, and the excess capacity of AD plants relative to currently-available feedstock, we assume no increase in biogas generation in our model. We assume the (roughly) 500 MW currently installed continues to operate at historic average load factors, producing around 2.7 TWh p.a. That could be optimistic, if the ambition in the manifesto to minimise food waste is realised.

Energy from Waste (EfW)

EfW is not currently incorporated into our model. It produces around 3.6 TWh p.a. (of which 2.6 TWh is renewable) from 850 MW.  It has been increasing strongly in recent years, and we might expect it to continue to increase somewhat, although the opportunities and potential growth are reducing. It is not significant enough for its omission from our model to have a material impact. We will probably incorporate it in the future.

Hydro-electricity

The UK has limited potential for hydro-electricity and pumped storage. The Labour manifesto makes no mention of it. We assume that there are no further major projects by 2030.

Coal

Coal is being killed by the carbon price, displacement by intermittents, and environmental legislation (e.g. the Large Combustion Plant Directive and the Industrial Emissions Directive). Labour's strong ambitions on decarbonisation would ensure that this continues to the point that coal is neither economic nor permitted. We therefore assume that there will be no coal-fired generation in 2030 under Labour.

Natural Gas

Labour has no specific policies on gas (and oil), other than to tax their production in the UK, exacerbating the decline in Continental Shelf production.

Very heavy investment in intermittents like wind and solar make the operational and economic characteristics of any gas (and oil) generators unsuitable for high-efficiency CCGTs. We assume that Labour would not literally let the lights go out when the wind is not blowing, and that they would therefore support the availability of standby gas and oil generation, whilst aiming to minimise its use through displacement by intermittents, storage and perhaps some demand-side management. But for these purposes, any new gas generating capacity would be lower-efficiency, lower-cost OCGTs or reciprocating engines. To balance supply and demand, we assume 14 GW of gas-fired capacity is added to the existing 34 GW.

The model does not yet allow us to estimate the impact of reduced utilisation on the system costs of the gas network. If gas were almost completely eliminated from electricity generation and 50% displaced from heat production (with the rest to go during the 2030s), there would be serious issues of economic sustainability for the network operator, until/if the network is switched to hydrogen (under the Labour model). The network would be used much less intensively even after that, as the generation demand and a large chunk of the heat demand would have gone.

Oil

The same logic applies to oil as to gas. They will be the standby generating technologies, split between lower-operating-cost gas for regular peak lopping and lower-capital-cost oil, for the least frequent peaks. We assume 14 GW of oil-fired standby generation is added to the small amount of oil-fired capacity currently available.

Other

Our model does not currently accommodate other generating technologies. No technologies besides those listed above are making significant contributions. The Labour manifesto promises to "trial and expand tidal energy".

Tidal barrier generation has potential in terms of cost and scale, but faces significant environmental objections, which have so far prevented the development of any major projects in the UK.

Tidal flow generation is the focus of most Research & Development, and government support, as it has been for decades without reaching commerciality. One of the most prominent projects has recently been decommissioned. In the absence of specifics, it is reasonable to assume that Labour's promise refers to R&D-scale activities, not mass rollout. Its omission from our model is unlikely to be significant.

Labour make no mention of wave power or other niche forms of generation.

Storage

The Labour manifesto commits to "expand power storage" "to balance the grid". It is not more specific on technology, scale or cost. Our model currently allows for three types of electricity storage: pumped(-hydro) storage, batteries and compressed air.

Pumped storage

The UK has a modest amount of pumped storage capacity. This is the only electricity storage technology that has so far been deployed at large scale and reasonable cost around the globe. We assume that the existing capacity will be retained and operate at historic levels of performance, but no significant capacity will be added.

Batteries

Batteries at the early commercialisation stage as an electricity system storage technology. They (and other forms of storage) provide additional capabilities besides storage, such as frequency response, which are valuable in a world of increasing wind and solar capacity. However, at current carbon prices, they are still relatively expensive compared to standby fossil-fired generation as a tool to balance intermittent generation with inflexible demand. And their economics (like most storage technologies) depend fundamentally on the number of charge/discharge cycles per year, which makes them less economic as long-term (e.g. seasonal) storage than for short-term (e.g. daily) balancing.

Because of the scale of Labour's ambition on intermittent (e.g. wind and solar) electricity, and the vague promise to expand storage, we allow for a substantial increase in this technology: 8 GW and 50 GWh. This ratio (GW:GWh) reflects the expectation that batteries would mostly be used for short-term balancing and system services.

The model also includes the modest capacity of batteries installed by mid-2019: approx. 700 MW and 1300 MWh (illustrating how short-term is the use of batteries at the moment).

A key factor in the economics of storage is the round-trip efficiency. We are quite generous in our assumptions, naively accepting the promises of proponents that batteries will achieve very high round-trip efficiencies in future. We assume the existing batteries are running at 80% round-trip efficiency, but new batteries will operate at 90% round-trip efficiency. These round-trip figures include all aspect of parasitic loss within the storage systems, not just the charge in and out of the battery itself. We suspect that these figures will prove to be optimistic, but we wanted to err on the side of generosity to minimise the scope for quibbling over assumptions. Because of the envisioned scale of intermittents on the system, small differences in figures like this could have significant impacts on the viability of the plan.

Compressed air

This technology is currently immature, but is being heavily promoted by its manufacturers and some influencers and journalists (e.g. Ambrose Evans-Pritchard) who see in it an answer to the problems of long-term storage that are a practical barrier to much more intermittent generation.

The key claim for this technology by its proponents is that the marginal cost of additional MWh is very low compared to the cost per MW. This is the key characteristic of technology that will be competitive for long-term storage. In our model, we have naively accepted the claims for future cost savings and scalability. Our model allows for four cost components for storage: a capital cost per MW of generating capacity, a capital cost per MWh of storage capacity, a fixed annual operating cost per MW of generating capacity, and a variable cost per MWh charged/discharged. Converting the public cost claims plus some reasonable assumptions (e.g. there are bound to be some fixed costs for site and personnel, and variable costs of maintenance, outside the basic costs for the technology) into these components gives us much more competitive figures for long-term storage than the more mature technologies above. We have used:

  • £25/kW for the capital cost of generating capacity
  • £5/kWh for the capital cost of storage capacity
  • £1/kW for the fixed annual cost
  • 5p per MWh charged or discharged

As the technology is unproven and these costs have not yet been delivered, this may well prove too optimistic. But we take the same naive approach (roughly accepting its proponents' claims) as for batteries for the same reason. Things could (and may well) be significantly worse.

One aspect that the industry has been frank about, and is a well-known constraint in the literature (but which its cheerleaders have sometimes glossed over) is that the trade-off for these potentially much better costs is a lower round-trip efficiency. Highview are clear on their site, for instance, that a current efficiency of around 60% may improve somewhat in the range 60-70%. We have taken 65% as the average efficiency for future projects.

The thinking is that this is less significant where it is used with generating technologies like wind and solar with very low marginal costs of production. If the alternative is for the output to be constrained, and carbon valuation means that each unit effectively has a negative marginal cost, then losing one-third of very-low-cost electricity in the storage process is not as important as if one lost that proportion of high-marginal-cost electricity. However, this characteristic may have operational and economic impacts when used for long-term storage. This is an area where our model may need to be refined in the light of operating practices and technological developments that are not well-established.

In order to serve Labour's purpose, we have assumed not only that this technology achieves the kinds of economics that its proponents predict, but also that it does it on a timescale that allows it to be deployed substantially by 2030. Our model assumes 5,000,000 MWh of storage capacity and 25,000 MW of charging/discharging capacity by 2030.

Interconnectors

Labour promise to "invest in grid enhancements and interconnectors" "to balance the grid". We assume that all the currently planned interconnector projects materialise, to substantially increase the capacity of interconnectors to/from the UK, from around 6 GW to nearly 13 GW.

The existence of interconnectors does not mean that the UK can simply pull or push whatever power it wants to/from our neighbours. That depends on their system balances as well as our own. In our model, we use historic flows as the best available indicator of the hourly interaction in the balances (and standby availability) of the UK and the heighbours at the other end of the interconnectors.

For example, the UK sometimes pulls in power (primarily nuclear) from France when the UK's demand is high and France has some spare capacity. But the UK also takes material amounts of power from France at times when UK demand is low and could easily be satisfied by its own generation. At these times, the electricity flows into the UK because France needs to dump its excess of nuclear power, not because the UK wants it. Assuming that these types of trade-offs will continue on the same basis (depending largely on demand variations dominated by exogenous factors like working hours, daylight and temperatures, and supply variations dominated by unpredictable operating factors and some element of weather etc) is in our view the most reasonable way to model the impact of interconnectors on the system. They may well deteriorate, as all countries put more intermittents on their networks, particularly as the output from those intermittents is quite highly correlated between neighbouring countries in Western Europe.

Costs

The key cost assumptions are visible and adjustable in the Future Scenarios model.

Two over-arching costs apply to all technologies:

1. We assume a Weighted-Average Cost of Capital (WACC) of 7%. This is slightly lower than the historical level allowed by the regulator, reflecting our intention to be reasonably generous in our assumptions and the downwards pressure on yields from the easy-money monetary regime of the past decade.

Some will argue that it should be as low as 2%, as a rate that the UK government may be able to borrow at at the moment. Such a rate, however, reflects a permanent pessimistic outlook for the economy, which no political party will wish to concede as the likely effect of its policies. It is below any rational reflection of the cost of risking money to invest in these projects. 2% does not reflect the degree to which government investment reduces risk and the time-value of money. It reflects the fact that the government has shouldered (not reduced) the risk, and central banks have obscured the time-value of money. Both these factors remain, but are internalised to the government. Their external rate may be 2%, but 7% remains a reasonable estimate of the true cost of the risk to taxpayers and the opportunity cost of taxpayers' funds.

However, you can change the WACC in the model to whatever figure you like if you wish to experiment with an MMT (or other) view of central banking and public spending.

2. We assume the cost of carbon is £50/tCO2e. This is a reasonable, central estimate, and fairly consistent with current government assumptions outside the "traded" sector (i.e. if you ignore the price of EUAs under the EU-ETS as a misleading and gamed valuation of carbon).

We treat the carbon cost in the model in a similar way to the shadow-pricing approach used by Treasury for Impact Assessments. All other costs and values (except subsidies/incentives/obligations) are estimated for a conventional economic assessment, and then the notional carbon cost is added to the mix to see how "internalising the externality" affects the comparisons and total costs (including the social cost of carbon). This cost can also be varied within the model.

We exclude subsidies/incentives/obligations from the cost calculations because they mostly exist as pseudo-internalisation of the carbon externality. To include them would double-count the carbon and skew the comparisons away from the calculation of core (un-subsidised) values, plus the carbon-cost internalised through a carbon price applied equally to all options. 

 

References

BEIS, Summary results of the wood use survey (2016) https://www.gov.uk/government/publications/summary-results-of-the-domestic-wood-use-survey

BEIS, Digest of UK Energy Statistics 2019, Table 6.6 https://www.gov.uk/government/statistics/renewable-sources-of-energy-chapter-6-digest-of-united-kingdom-energy-statistics-dukes

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