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Commercial Question

The UK’s energy crisis

updated on 08 February 2022


What can we do about the energy crisis hitting the UK?  


Rising energy costs are hitting wallets across the UK, as Ofgem is due to increase the energy price cap in April 2022. News reports paint a bleak picture of people struggling to cope financially with this, together with rises in other living costs. It’s not just the UK struggling with the supply of gas, coal, and electricity, but here at home, the country has seen a long-running trend of escalating energy prices.

Longer term, de-carbonising our energy to prevent climate change is moving up the agenda, which means a shift to relying more on renewable sources and other ‘clean’ sources (eg, nuclear power).

With prices going up and a global crunch on supply, and no sign of demand going down (even outside of the current winter crisis) any time soon, this is a problem too big to ignore.

Moving to renewable energy

The UK has a relatively diversified energy supply, drawing on a significant amount of wind and solar energy in addition to fossil fuels and nuclear power. The two biggest sources of renewable energy for the UK are wind and solar. These sources are different forces of nature, but they have one thing in common: they are variable, which means they aren't always available. The sun isn't always shining, the wind isn't always blowing. They also can't be turned up or down, or off and on, according to the current needs of the electrical grid. In technical terms, they are not 'dispatchable'.

So it was in 2021, with the UK Government reporting that “unfavourable weather conditions” between July and September 2021 (quarter 3) led to the lowest generation of renewable energy in four years.

As the UK moves towards greater reliance on renewable energy sources, and total reliance on ‘clean energy sources’ by 2035, what does this mean for the future of our energy supply? For this strategy to succeed, we must be able to rely on renewables to supply the majority of our baseload power (the minimum demand of the electricity grid for any given time).

This is becoming even more important as we struggle to produce and store enough natural gas to cover for shortages of renewable energy and rely more and more on importing natural gas from other countries in competition with other gas-hungry countries.

Storing energy: charging our batteries

Fortunately, there are potential solutions to help us with this. Relying on renewable energy to an increasing extent means we need more flexibility in supply. We can’t control the weather, but we can implement solutions to help us cope with the variations. One of the main solutions to give us more flexibility is energy storage.

In sunnier parts of the world like Spain and the US, concentrated solar power (CSP), which incorporates innovative methods of storing solar energy, has been slowly building up. It works by storing solar power in a form of heat, which can be used to generate energy later, even in the middle of the night. However, CSP has struggled to gain a lot of traction, with high costs and other factors slowing its expansion.

Storage of energy in lithium-ion batteries has been the go-to for a while. The UK has deployed lithium batteries and used software to determine when and where to release energy from the wider battery storage system to meet peaks in demand, such as the half-time tea run when England played Italy at the Euros. Unfortunately, the capacity of each battery is usually limited to a few hours and, like any normal battery, it has a limited number of uses before it stops being useful.

Other kinds of battery are being worked on and invested in to develop solutions to the problem of storage. Highview Power’s mission statement to take energy storage from ‘four hours to four weeks’ introduces using a patented cryogenic system to essentially put power we have gained from the wind and the sun in the fridge until we need to get it out. While this might sound like science-fiction, this technology refrigerates energy in the form of a gas to a liquid, which can be stored at extremely low temperatures before being evaporated to drive a turbine and create electricity without any combustion.

Energy storage is viewed as an area ripe for enormous potential growth. Annual market revenue for energy storage is expected to double between 2021 and 2023, with investors showing increasing interest in solutions that show long-term potential. Investment products from major investment companies, like Gresham House plc, have started to spring up over the past few years, targeting battery energy storage systems as suitable for potential long-term, sustainable dividends. As a long-term solution to a serious international problem, energy storage is likely to present many opportunities for businesses and investors to make their mark.

Alternatives: green hydrogen

Elsewhere, the government is pushing forward with a hydrogen strategy to drive replacement of fossil fuel use across industries with ‘green hydrogen’ – hydrogen made from renewable energy and water. Green hydrogen is expected to play a major role in de-carbonising UK energy by 2030 under this strategy. To encourage movement in the private sector, the government has held public consultations on the best business model to incentivise green hydrogen and the £240 million Net Zero Hydrogen Fund, which we are still waiting to see the results of.

The capacity for green hydrogen as a means of energy storage represents a real opportunity. Green hydrogen is produced through electrolysis using renewables like wind, which can then be stored in a variety of ways before later being re-electrified. Compared to batteries, we can potentially store a vast amount more energy in hydrogen. Sheffield-based ITM Power has benefitted from a rise in demand for the electrolysers it makes, which are used to produce green hydrogen, as the costs of hydrogen production have fallen. As gas prices rise across the globe, green hydrogen becomes an increasingly attractive alternative.

In the broader scheme of things, the potential scope of energy storage gives real hope that we can build our energy supply around renewables and successfully de-carbonise. So, while we may all have to deal with higher energy bills in the meantime, the grass may well be greener on the other side.

Nick Taylor is a first-seat trainee based in Shoosmiths’ Leeds office.