Guernsey: energy policy considerations for small markets

Last week I had the pleasure of being one of the keynote speakers at the Institute of Directors Guernsey Branch annual convention, speaking about energy policy options for the Bailiwick in the context of climate ambitions.

The day before, the States had published a Statement of Intent signposting some of the work that is going on to define the new energy policy which is expected in the New Year. The Statement sets out four key pillars for the energy policy, being the traditional elements of the trilemma plus an additional objective of promoting renewable generation.

The Statement was greeted with some disappointment in the local press, with a critical editorial bemoaning the lack of clear progress on the issue. This is in part due to the rather convoluted system of governance on the island where consensus-based decision making is by its very nature slow, and in part due to an early focus on process rather than vision.

The second part of the evening focused on green finance initiatives, and area that fits with Guernsey’s core strengths as a centre of financial innovation, which concluded that Guernsey has the opportunity to take the lead on innovating green finance products but that credibility will be undermined if the island is not pursuing consistent internal energy policies.

In preparing my remarks, I was guided that renewable projects had been examined in the past. That a study into developing a large windfarm had reached positive conclusions but met with some local resistance, and that the question of tidal energy was frequently mooted as a potential solution to the island’s long-term energy needs…indeed I have received follow-up questions on that subject since the event.

My views on tidal are no different in the Guernsey context than for the wider GB market – that is that the cost of the technology is simply too high and that other forms of generation are more cost effective.

My views on large-scale renewables in the Guernsey context more broadly are set out in my speech below, but essentially, I believe the opportunity lies in developing projects off the island. This would allow Guernsey to demonstrate a tangible contribution to the de-carbonisation of the European energy market, while participating in the economics of the electricity it consumes.

The island has no domestic renewable energy industry, so at some point, something needs to be imported. It is likely that importing electricity would be more cost effective than importing turbines, or the steel to produce turbines, or the ores to produce the steel and so on.

Building grid-scale renewables elsewhere in the interconnected European market would allow Guernsey to release the benefits of renewable energy without the additional costs of integrating it into the small island electricity grid. This is a key consideration, since when considering de-carbonising a small electricity system with few customers, the costs of greating balancing markets need to be considered, and these can be significant.

An early option I considered was the building of a link with Alderney, where the FAB Link is planned to connect the island with both GB and France, however that is to be a dc link and the cost of a dc to ac converter would be prohibitive. A cost effective solution must work with existing infrastructure and not require major replacement of the grid architecture.

Rather than pursuing grid scale renewables locally, Guernsey has the opportunity to facilitate the development of new business models on the retail side. There is a need to move away from oil for heating due to aging import infrastructure, and this provides an opportunity for service providers to bundle combinations of heating systems, retrofit efficiency measures, micro-generation, storage, EV charging and load optimisation along with the electricity itself. Aggregated at the community level, these services can also support the wider electricity network, reducing the need for major grid reinforcements as electrification drives up electricity demand.

I would like to thank the Guernsey Branch of the Institute of Directors for inviting me to address its members on this subject, and for arranging an interesting and thoughtful exploration of these topics.

THE BUSINESS OF CLIMATE CHANGE

Can Guernsey Clean Up?

Good evening everyone, I’m delighted to be here this evening to discuss energy policy options for Guernsey, in the context of climate ambitions.

I like numbers. Numbers tell stories. Sometimes they might need to be taken with a pinch of salt…

and sometimes they might be ones we don’t want to hear!

Numbers from the IPCC and others have driven major changes in energy policy around the world, and have led to rapid growth in the use of new renewable energy sources, in particular wind and solar.

As we move along the experience curve and realise economies of scale, renewables  are becoming economic without subsidies, and while there will be winners from this progress, there will also be losers – in Spain the amount of permit applications for new solar projects is now multiples of the country’s entire annual electricity demand.

Alongside this we are seeing the emergence of new energy storage approaches, with grid-scale battery projects being developed. This is an area of technological change, and although lithium-ion batteries were quick out of the blocks, this is not really a technology well suited to grid-level applications, and other forms of energy storage are emerging.

We’re also seeing changes in the way we consume energy. Engaged consumers use smart meters to manage and optimise their energy consumption, while the growing use of electric vehicles and heating is causing a shift in the types of energy use.

These changes can be described in terms of three key trends:

De-carbonisation: the emergence of low-carbon energy sources (and I say low-carbon rather than carbon-free as no form of generation is truly carbon free when supply chains are taken into account)

De-centralisation: moving away from the traditional centralised model of energy production to one where energy is generated closer to sources of demand, with increasing own-use production;

And a parallel trend of Digitisation, which is seen as an enabler of the energy transition through the delivery of smart energy systems.

Energy policy in much of the world is now framed in terms of de-carbonisation, and indeed aiming for carbon neutrality. However, the focus on carbon dioxide is extraordinarily narrow and runs the risk of unintended consequences:

• The desire to de-carbonise transport led to policies to incentivise diesel car ownership in the UK, yet now nitrous oxides and particulate pollution are recognised as harmful leading, to a policy U-turn. In fact you could make a coherent argument that  Nox and PMs are MORE harmful since they cause immediate health impacts which is simply not the case with carbon dioxide
• The drive towards biofuels is now leading to concerns about reduced biodiversity and adverse impacts on habitats.
• It’s not inconceivable that in the next few years, policymakers will decide that the environmental damage from the extraction of lithium and cobalt for battery production is simply too great, leading to restrictions on the sale of new lithium-ion batteries.

Carbon neutrality is also not technically feasible at this point in time, and there are no credible roadmaps for countries to reach net zero emissions except in some very specific circumstances such as Iceland. For those of us without a convenient geothermal hotspot to hand, the talk is about carbon capture or offsetting. However, there are currently no large-scale carbon capture projects anywhere in the world that do not rely on hydrocarbon fuel production for their economics.

This is clearly incompatible with a carbon-neutral agenda, meaning that based on currently available technologies the financial costs of carbon neutrality using CCS would be extremely, and probably unacceptably, high.

Offsetting can also be problematic because it discourages real reductions in emissions, and is often a zero-sum game, in which the burden of real carbon reduction is passed from more affluent nations to developing nations.

So I would like to re-frame the headline question and instead ask:

What are the low-regret investments Guernsey can make to achieve a sustainable and environmentally responsible energy market

The main sources of energy on Guernsey are electricity imported from France via a 60 MW interconnector routed through Jersey; fuel oil for on-island electricity generation; and kerosene and a form of liquified petroleum gas for heating. There are also some smaller supplies of solid fuels, such as coal and wood, also used mainly for heating. Liquid fuels are imported by sea, however the ships used for this purpose are approaching the end of their useful lives so strategic decisions will be needed around the future physical logistics of oil imports, and how the costs of those necessary investments would be met.

Irrespective of climate ambitions, these considerations are likely to drive a degree of electrification of heating and transport, so I’m going to focus on the electricity market, and address the key considerations for Guernsey in shaping its future energy policy.

Generally speaking, around 80% of Guernsey’s electricity is imported, with the rest being generated on-island with oil-fired generators or solar PV. Guernsey Electricity is developing a new 100 million pound, 100 MW interconnector that would connect the island directly to France, however no investment decision has yet been made for this project. Guernsey Electricity also owns a 100 kW solar array which is supplemented by 500 kW of private behind the meter PV, where customers inject surplus energy back into the grid.

Many countries are developing renewables and storage infrastructure to support their climate goals, and similar approaches have been mooted for Guernsey. There are two approaches that could be taken, independently or in combination: grid-scale energy assets and distributed, behind-the-meter energy assets.

There is a temptation to look to the example of other countries and assume that those solutions can be applied in the Guernsey context. If a large windfarm can be built in the Thames estuary, surely a similar facility can be installed off the north coast of Guernsey?

To answer this question, I’d like to briefly speak about how electricity grids work.

Despite advances in battery storage, practically speaking it’s still difficult to store electricity in enough quantities to make a difference at the grid level, so electricity system operators need to balance supply and demand in real time. This means that when you press a light switch, the light will come on, and this will be true regardless of the time of day, how many other people are also pressing light switches, or if there are any disruptions to grid infrastructure or generating assets. This is known as security of supply.

In Guernsey, electricity demand ranges from about 20 MW on a summer’s night to almost 90 MW on a cold winter’s day. To ensure security of supply, you need quite a lot of redundancy, which needs to be paid for, and can be thought of as a type of insurance where you pay a premium to ensure that electricity is available up to a pre-determined level of potential disruption.

Electricity grids run on alternating current. You can think of this as waves, where the frequency of the current is created by the rotations of the turbines generating the electricity, and all turbines turn in synchronicity with each other. In a 50 Hz system, such as the ones in Europe, turbines in thermal power stations turn at 3,000 RPM and nuclear turbines rotate at 1,500 RPM in order to achieve the 50 Hz frequency.

If supply and demand go out of balance, the frequency will change:

• If the demand exceeds supply, the system frequency will fall
• If the supply exceeds demand, the system frequency will rise

Electricity grids are sensitive to changes in frequency, and typically deviations of more than around 1% will trigger load shedding – this was seen in GB over the summer, when a lightning strike caused two power stations and a large amount of embedded generation to trip.

Demand therefore exceeded supply and the system frequency fell outside its stable tolerance levels, requiring selected load shedding in order to avoid an uncontrolled cascading grid failure.

In a conventional electricity network, the generators all turn in synchronicity with each other and as they are large heavy objects which resist changes to their speed, they also resist changes to the grid frequency. This is known as inertia.

This works fine until you start introducing intermittent generation into the system.

Although wind is generated using turbines, the variability of wind speeds means that wind turbines do not rotate at a constant rate are therefore not synchronised to the electricity grid. Clearly there are no turbines at all with solar.

The variability of wind and solar OUTPUT causes fluctuations in the supply and demand balance that are difficult to manage moment to moment, both in terms of matching supply and demand, and also in terms of keeping the grid frequency within the safe operating range.

In large electricity systems, this intermittency is managed through the creation of additional markets for balancing and ancillary services. In GB, there is a wholesale electricity market where market participants buy and sell megawatts of electricity to each other in half hourly intervals, but alongside this, National Grid runs a number of other markets.

There is the Balancing Mechanism which is primarily a means of balancing supply and demand in real time. Generators will be paid to come on line, for example, if National Grid expects there to be more consumption at a point in time than there is planned supply.

There is a capacity market, which is currently suspended due to legal action, but which normally ensures that enough power stations have been built to meet expected future capacity needs.

And there are ancillary services, where National Grid will procure frequency support and other types of grid stability services from market participants. For example, a battery might be contracted to supply the grid within fractions of a second if a local disruption threatens grid frequency.

On top of all of this, there are times when National Grid pays renewable generators to reduce their output in order to maintain system stability and manage grid constraints. In markets where renewable generators receive subsidies for their output, they expect compensation if they are curtailed.

Were grid-scale renewable generation to be introduced in Guernsey, the system operator would need to find a way to manage the intermittency that would be introduced. The market is too small to support the types of mechanisms used in GB, so the problem would be technically difficult to solve.

And how would people feel if Guernsey Electricity was paying a 30 MW windfarm to curtail its production so that interconnector imports could be used to maintain a stable system frequency? Or worse still, if they were curtailed in order that the oil-fired generators could be run? This means that although large-scale renewable generation might appear to be economically feasible when considered in isolation, when the costs of integrating them into the electricity grid are taken into account, they may well become both financially and politically unattractive.

However, that is not to say that renewables couldn’t have a role in the future of the Guernsey electricity market. The electricity Guernsey buys from France is low carbon, being derived primarily from nuclear and hydro sources. Rather than investing in on-island generation, Guernsey could invest in renewable generation in France, to have a direct economic stake in the electricity it buys.

Closer to home, behind-the-meter energy is likely to offer advantages over grid-level solutions. Homes and businesses can install solar and storage technologies as demand reduction approaches, lowering the overall electricity that is supplied through the grid.

So this takes us to the demand side of the equation.

Demand for energy in Guernsey is dominated by space and water heating and by transport. Heating accounts for around half of Guernsey’s total energy demand and so it makes sense to look at ways in which the energy needs of buildings can be reduced.

The question is which are the measures to adopt, both for existing buildings and new construction. Before legislating to encourage or mandate certain types of efficiency measures it is useful to understand what actually works in practice – that might sound obvious but it is ACTUALLY rarely done.

There is a well-known phenomenon in the construction industry called the “Performance Gap” where building energy efficiency is up to an order of magnitude worse in use than was expected pre-construction. A recent UK study found that nearly every non-domestic building had higher carbon emissions than predicted during the design phase. In some cases, total emissions were 10 times the Emission Rate calculated for Building Regulations compliance. Of the domestic buildings studied, carbon emissions were two or three times higher.

Although the modelling professionals responsible for forecasting a building’s energy efficiency are required to demonstrate a minimum level of competence, this largely focuses on the calculations and adherence to the legislative framework – there is no obligation to check if the predictions match realised performance post construction.

A study carried out in 2017 by the University of Bath found that:

• there was poor agreement among these professionals on which factors were important for building energy efficiency;
• there was low correlation between the views of professionals and the control data in a test house;
• and the level of qualifications or experience of the professionals had no bearing on the accuracy of their responses…in other words they were no better than the man in the street at predicting which features of a building would in fact improve its efficiency.

The Bath researchers identified a school in Plymouth which replaced an old 1950s building with a new, supposedly energy efficient construction and found that in a single month their energy bills were the same as they had been over a whole year in the old building.

If we’re serious about de-carbonising the heating sector, we need to look again at the whole question of building energy efficiency standards.

There are not many policy areas where Guernsey could adopt a market-leading position without a fairly high degree of risk, but this is one:

require building designers to base their designs on evidence, require post-construction testing of building energy performance, and make building designers accountable for the outcomes.

More challenging and potentially more disruptive are changes to fuel mix and consumption patterns, and here there are two avenues: changing the primary fuel for space and water heating to make it more sustainable, and adopting new technologies that will both reduce the need for input fuels, and allow for more dynamic management of peak demand.

The use of photovoltaics and batteries can be considered at the building level. In single occupancy buildings there is obvious freedom to install solar panels and batteries, however in multi-occupancy buildings, particularly those with a small footprint relative to the occupancy level, different, potentially more innovative measures can be considered.

Thermal energy storage can easily form a part of this solution, whether it is simply in terms of using the natural thermal capacity of buildings to avoid running heating systems during times of peak demand, or the installation of thermal energy storage systems such as latent heat or thermo-chemical technologies, although these are not yet commercially mature.

Further down the experience curve is building-integrated PV. There are products on the market that enable the walls and even windows of buildings to be used for electricity generation. Studies have shown that PV glazing systems which preserve high transparency can replace conventional glazing materials, and even at sub-optimal tilt angles, reduce building energy costs by 20 or even 30%.

Changing the underling energy source for heating will be more difficult. Currently more than half of the energy used for heating comes from oil, with gas contributing about 10% and electricity 30%. The issues with maintaining liquid fuel supplies will likely drive electrification. Alongside this other low-carbon heating solutions such as heat pumps might be viable.

The other major contributor of energy demand is transport. Both the UK and France have banned the sale of new conventional cars and vans from 2040 in favour of low carbon vehicles run on electricity or hydrogen.

Guernsey would seem to be ideally suited to a transition to electric vehicles – the size of the island means many of the general concerns surrounding EVs such as range anxiety would not be a problem, and despite the limited availability of off-street parking, wherever people park now could likely be adapted for EVs.

Innovative solutions combine parking facilities with solar power and batteries to reduce the additional burden on the electricity network, while offering the potential for the provision of grid support.

Marine and aviation fuels are far more complex to change. The key challenge relates to energy density – the need to move heavy boats or aeroplanes while transporting the relevant fuel on board, means the fuel must have a high energy content and a small physical volume and low mass.

Of course very small planes or boats could be powered with renewables – wind has a long history in marine propulsion, and there are some developments in electric light aircraft that might have the range to serve Guernsey, for short hops at least, in the next decade, but these cannot easily be scaled to larger vehicles.

To give an idea of the current technology gap, the energy density of a top-of-the-range Tesla car battery is 250 Wh/kg which is the equivalent of 22 Cal/100g. That’s just less than boiled cabbage which is 23 Cal/100g.

An average height (5’4”) healthy weight (125lb) woman with a sedentary lifestyle needs to consume about 1500 Cal per day to maintain her weight – that would be 6.5 kg of boiled cabbage. Mars bars on the other hand contain 449 Cal/100g, so our woman could alternatively get her daily energy needs from 3.9 jumbo (85g) mars bars. Ignoring the other nutritional aspects of these diets, it’s pretty clear that the on the cabbage diet, our unfortunate woman would spend most of the day eating and would need a large amount of space to keep her food. The mars bar diet would be quick and portable.

Gasoline has an energy density of just over 1,000 Cal/100g, more than 45 times higher than the best available EV batteries, and our lady’s daily calorie needs could theoretically be met with less than one cup of gasoline (85% of a standard US cup)… so it’s pretty easy to see why electrification isn’t currently viable for heavy transport, and there are currently no technologies that solve this energy density problem that are likely to be available over the medium term.

So to try and bring this together into some conclusions…

The aging oil infrastructure on the island presents Guernsey with a perfect opportunity to reshape its energy system, since the status quo involves major investments over the medium term – there is no “do nothing” option available if energy supplies are to be secure and safe.

In deciding which are the right approaches, decisions need to be made about the type of market you want to have.

• Whether you are happy to rely on France for supplies or build grid-scale on-island renewable energy capabilities with everything that would entail;
• How should security of supply and grid infrastructure be paid for?
• To what extent should behind-the-meter generation and storage be incentivised as part of a demand reduction strategy?
• How can buildings be made more efficient in order to reduce energy demand?
• How can the transition to electric cars and vans be managed?

Investing in demand reduction is likely to be both low regret and sustainable, while on the supply side the simplest solution is likely to focus on imports of low carbon electricity, together with behind the meter renewable generation. Guernsey’s path may be different to that of larger markets, but with the foundations of a low carbon electricity market already in place, achieving a sustainable, secure and affordable energy system for the long term is within reach.