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Net Zero and the Duck Curve

21 May, 2021 | Return|

By Douglas Scott, Investment Manager, UK Equities at Aegon Asset Management

Achieving net zero globally will involve significant changes to the way we generate electricity.

The curve below is a 24 hour profile of load on the power system and what tends to happen when using solar power, this issue was first raised in California. The curve is based on a moderate load in the morning, low load during the day when solar units feed electricity into the grid, and high loads at night as people get home from work. As demand goes up the voltage on the network falls. As time goes on and we increase the amount of electricity from renewables the Duck will get a plumper belly (much like the author over the years).

duckcurve

Solar power can be more predictable than wind. Unfortunately, the diminishing power supply corresponds with the rising load in late afternoon, this means that peaking power has to be added and fast.

Most renewable energy assets are characterised by low operating costs (no fuel) but high capital costs. Electricity markets throughout the world have generally been designed with a bidding system which is focused around marginal costs. The bad stuff that has high marginal cost (coal, gas) and high emissions stepped in to keep the lights on and was paid to do so, but with the push to renewables this will not be the case.

capacityclosures

Renewable penetration will continue to grow as they are generally supported by green schemes. In the UK this has resulted in negative pricing events – YES, bidding at a negative price due to receiving policy support. Incumbent generators who see low prices will not invest and in addition this will increase the risk to security of supply.

ukbalanacing

Maintaining grid stability is a challenge as utilities (and oil companies) rush to add renewable power to their generating portfolio. Whilst the fat duck will become more unstable overtime, the National Grid in the UK will need to do more to balance the system. Its job is basically to keep the system frequency at 50HZ and keep the lights on. National Grid will be fined if the frequency is outside a 1% band, and worse still - depending on your view - the TV might go off during EastEnders!

Renewable energy sends out a volatile supply to the grid. Now this should not really be a problem as battery storage will be improving and will step up to put the fat Duck back into shape with an instantaneous Joe Wicks workout in order to flatten the curve. The issue, however, is one of time, battery storage installation typically takes 0.2 to 0.4 seconds to react. For those of you that remember your school Physics the period of 50HZ is 0.02 secs (1/50), National Grid really need their electricity faster than 0.2 secs.

Of course there are, and will be, solutions to all this; some form of new (and greener) peaking generation will be used. Battery storage will also progress. That said we will need to get a move on and review the way the system is working or else we might see “Net Zero Plus a bit”.

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