Insights: The electricity industry – ten years of change
The 2010s were a period of significant change for both Elexon and the wider industry. The shifts seen during the span of ten years were both unprecedented and unpredicted. Elexon provides a wealth of data to industry via the Balancing Mechanism Reporting Service (BMRS), Elexon Portal and through data flows. Using some of this data we have created four graphs that reflect on significant changes to generation, demand and balancing between 2010 and 2019.
Changes to how electricity is generated
The first graph shows the rise of low CO2 fuels as a proportion of Great Britain’s fuel mix. In the span of ten years, Great Britain’s fuel mix has gone from 76.3% of generation using fossil fuels to 41.3% from fossil fuels. This has coincided with increases in the proportion of the fuel mix generated from low CO2 fuels, which was 21.6% in 2010 and 49.8% in 2019.
Electricity fuel mix proportions: 2010 – 2019
Generation from coal and gas fuelled power stations form the fossil fuel generation type. The low CO2 fuels include generation from: wind, solar, nuclear, hydro, and biomass. Biomass has been classified as a low CO2 fuel despite its emissions as Drax, the largest generator using biomass in Great Britain, has a carbon neutral process. The CO2 absorbed by the trees planted to produce the wood for the biomass pellets counteract the CO2 produced in combustion.
The ‘other’ fuel type shown as the pink line on the graph, includes:
- Generation in Great Britain where we don’t record the fuel type.
- Generation from outside of Great Britain transferred over interconnectors to meet Great Britain’s electricity demand.
Electricity imports over interconnectors should be considered as part of Great Britain’s fuel mix as it forms the majority of the ‘other’ fuel type. The percentage of Great Britain’s electricity demand met by imports has increased from 2.1% in 2010 to 8.6% in 2019.
Graph number two compares the volume of electricity produced in 2010 to 2019.
Electricity generation: 2010 to 2019
This graph is interactive and you can use the year and fuel type filters to the right of the graph to look at the changes in generation from a fuel type more closely, or compare two years.
The biggest changes in volume of electricity produced relate to coal, which was generating 137 TWh in 2012 at its peak. Coal-fired generation was the second largest producer of electricity in 2010 and 2011, and the largest overall from 2012 to 2014. Since 2015 the decline in coal generation has been rapid and in 2019 it was the sixth greatest generator contributing just 6 TWh.
We are also able to view the significant increase in generation from wind, interconnectors, biomass and solar. These four sources produced 112 TWh of electricity in 2019, compared to 17 TWh in 2010. These fuels have replaced the majority of coal fired generators.
Gas generation still plays a big role as shown in the graph and it is unlikely that our electricity system will ever be run completely without gas power stations. Greater use of carbon capture and storage and alternatives to gas are required in order to achieve Net Zero.
Looking at electricity generation overall, and excluding imports, the total electricity generation per year in Great Britain has decreased from 334TWh in 2010 to 266TWh 2019.
Changes to demand
The third graph shows that annual demand for electricity decreased by 54TWh (16.2%) over the last ten years.
You can use the day and night filters to see how the annual day time and night time demand has decreased. Annual day time demand has decreased by 38TWh (15.6%) and night time demand has decreased by 16TWh (17.3%).
Demand is calculated as the sum of metered volume from Balancing Mechanism Units where there is net demand. A Balancing Mechanism Unit represents a group of customers’ metering systems used by Elexon in Settlement.
Small scale generation embedded in a Balancing Mechanism Unit that has overall net demand has some of its demand netted out by solar generation. Embedded generation from wind and solar has increased from 6.4TWh in 2010 to 23.5TWh and is responsible for 31.7% of the total decrease in electricity demand.
As solar can only generate during the day we can also conclude that the 11.6TWh increase in embedded solar generation is responsible for 30.5% of the 38TWh decrease in day time demand.
It is difficult to attribute the rest of the decrease in day and night time demand to a particular source. Part of the decrease in day time demand will be due to a decrease in large scale manufacturing taking place in Great Britain with many companies moving factories overseas to avoid increasing costs. Both day and night time demand will have decreased due to an increase in uptake of energy efficient technology and appliances.
Nonetheless, if the decrease in demand for electricity continues in the next ten years, achieving Net Zero may become easier.
Rising costs for managing the system
The final graph shows the increase in the costs to manage the system through the Balancing Mechanism. Elexon calculates the cashflows for the Balancing Mechanism as part of electricity Settlement. The annual cost to National Grid ESO of managing the system has increased threefold from £215 million per year in 2010 to £672 million in 2019.
National Grid ESO use the Balancing Mechanism to pay for flexible generation and demand side response providers to increase or decrease their generation or demand. This helps the ESO to manage supply and demand on the electricity system and relieve constraints (for example, when there isn’t enough network capacity to transport electricity that is being produced).
Balancing Mechanism Cashflow in the 2010s
This graph can be filtered to show the annual Balancing Mechanism cashflow during the day and overnight. The cost of managing the system during the day has increased from £171 million in 2010 to £386 million in 2019, while the overnight cost has increased from £43 million in 2010 to £286 million in 2019.
In 2010 the ratio of overnight costs to day was 20:80, in 2019 that ratio was 43:57. The increase in the cost of balancing the system overnight has meant that it has become nearly as expensive to balance the system overnight as during the day.
The costs for balancing the electricity system have increased, partly due to the natural unpredictability of when renewable generators will be available. When there is plenty of wind or sun there is an abundance of generation on the system, which is cheaper to produce than electricity from fossil fuels.
If this occurs when demand is low, the ESO may need to pay renewable generators to reduce their output. This can happen in the day time and at night, where a large surplus of wind generation output may be available when demand has tailed off. During December 2019, generation at night was so high at some points that there was a negative Imbalance Price for a record 13 hours, you can read more in our sub-zero electricity prices in December article.
At times of peak demand, renewable sources may not be available to generate and therefore fossil fuel generation has to be increased. As an industry we need to encourage development of electricity storage which can absorb excess renewable generation and export it back to the networks when it is needed.
Conclusions
The 2010s have been filled with rapid change for the electricity system and data such as this provides important insights which both Elexon and the industry can apply, as we work together to help deliver on the commitment to ‘Net Zero’ carbon emissions
It is difficult to predict exactly how the electricity system will develop. So together with the industry we work to anticipate changes to rules and process that will be needed to support a smarter, greener system and deliver reforms.
This includes our work on the Target Operating Model for moving to Market-wide Half Hourly Settlement which would allow consumers to take up a wider range of ‘time of use’ tariffs. We are also proposing that nationwide electricity ‘flexibility platforms’ are set up so offers of demand-side response, output from electricity storage facilities, and spare network capacity can be traded easily.