Ageing computers pose obstacle on the UK’s path to decarbonisation

Welcome to Energy Source, coming to you today from London where energy executives, traders and reporters are all studying tanker traffic in the Red Sea for signs of disruption.

This morning AP Møller-Mærsk became the latest company to reroute its vessels around Africa via the Cape of Hope. This came after Iran-backed Houthi rebels intensified their campaign against ships passing through the Suez canal following the outbreak of the Israel-Hamas war. Mærsk operates the world’s second-largest container shipping fleet.

BP took a similar decision yesterday, pausing all shipments through the Red Sea. In response, Brent crude, the international benchmark, rose 1.8 per cent, while European gas prices closed up 6.8 per cent.

This morning Brent is flat and gas prices have retreated a little, but the FT’s energy team is monitoring the developing story closely. Check www.ft.com for updates.

In today’s newsletter our clean energy correspondent investigates a question a little closer to home: how to decarbonise the UK energy grid? Do we need millions of tonnes of “green” hydrogen or just some better computers?

Thanks for reading. – Tom

P.S. Have we reached peak coal? Read to the end.

Unlocking UK’s decarbonised power system

The road to net zero carbon dioxide emissions is paved with many fancy, new technologies — some more likely to be deployed at scale than others. 

Investors have poured billions into areas including small nuclear reactors, “green” hydrogen and nuclear fusion in the hope of delivering the holy grail of cheap, reliable, low carbon energy. 

But Britain’s electricity system operator (ESO), owned by the FTSE 100 company National Grid, has also been looking at a more prosaic solution: overhauling ageing computer systems. 

Faster computer systems might not seem like the most obvious key to unlocking Britain’s goal of a decarbonised power system by 2035, but bear with me . . . 

Electricity supply and demand needs to be constantly matched to avoid power cuts. Any surpluses or shortfalls in the wholesale market are smoothed out by the ESO’s team at their control centre in Warwick, England, which can pay power stations to dial up or down accordingly.  

In previous decades, this has been a relatively straightforward task. Like others around the world, Britain’s electricity system has been dominated by relatively few large, lumbering coal- and gas-fired stations with operators on the ground.  

It is becoming far more complicated as more renewable energy is deployed. Since output from the wind and the sun cannot be controlled, the system requires far greater involvement of batteries and other storage assets, as well as quick-cycle gas-fired power plants and cables to neighbouring countries to balance out intermittent supplies. 

(To find out just how complicated, try this addictive game in which you can pretend to be a control room operator — I couldn’t keep the lights on beyond 2pm.) 

In Britain and elsewhere, entrepreneurs have tried to meet this need with available technology, building hundreds of small batteries, small gas-fired power plants, and other flexible assets dotted around the country. 

Needless to say, the ESO’s communication and control system has not caught up with this added complexity. Workers in the control room often have to write up individualised instructions to generators or batteries, sometimes needing to make phone calls to deliver each set of instructions.

The slow, cumbersome process can mean that some smaller, available assets are not picked to help balance the market because it would take too long to secure them. “If you do that [cumbersome system] with 300 batteries at the same time, that’s going to take you a whole day just to do one short period of instructions,” said James Bustin, investment manager at Gresham House.  

The upshot is that sometimes large gas-fired plants are picked instead of batteries, or grid operators tell renewables to switch off when they wouldn’t otherwise need to. This is bad for the carbon tally and costs but can also dampen investors’ enthusiasm in sectors that need to scale up to meet net zero targets. 

This week, the ESO took the first steps to address such issues, with changes that Craig Dyke, director of system operations, said are “critical to delivering the balancing system that we need to meet net zero”.

The first stage of its new computer system (the “Open Balancing Platform”) includes “bulk dispatch”. Unlike the cumbersome process described above, this allows operators to send hundreds of instructions “at the press of a single button”. It should mean making far greater use of hundreds of smaller assets that than can help a renewables-based power system run effectively. 

“It’s a more optimal, efficient solution,” said Shivam Malhotra, senior consultant at the consultancy LCP Delta. “They’ll be using flexible assets more than they were before, which will reduce carbon dioxide emissions.” 

The system is still at an early stage, and hiccups are likely. But it is a reminder that sometimes progress is made in the most unglamorous of ways. With grid operators around the world facing similar challenges, others are likely to be watching closely. 

“We are not going to be able to move to a renewables-based energy system without using flexibility,” said Bustin. “This new system enables National Grid to balance the system on a more cost-effective and lower carbon basis.”

Have we hit peak coal?

Speaking of cleaner electricity: The gas crisis provoked by Russia’s war on Ukraine triggered worries about a comeback for coal, as countries including Germany and Britain turned to ageing coal-fired power stations to help keep the lights on. 

Research from the International Energy Agency suggests it may have been more of a last gasp: The IEA’s latest projections indicate coal’s share of the global electricity mix is set to fall from next year, helped by renewables growth in China.

The IEA projects that coal-fired generation will fall 5 per cent between 2024 and 2026 to make up a total of just over 30 per cent of the global electricity mix, its lowest ever. This means coal demand may have peaked in 2023, according to the IEA. “A historic turning point could arrive soon,” it said.

Power Points

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Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and David Sheppard, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.