Booker: showdown time for insane "green" energy policy


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Regular readers may get a sense of déjà vu reading the Booker column this week, with the story headlined: "It's showdown time for our insane green energy policy". Politicians, he writes, "are complaining about rises in fuel bills that are largely the result of their own actions".

Three events last week, all recorded on this blog, brought nearer the showdown that will have to come over the multiple green insanities that in recent years have hijacked Britain's energy policy. Although two left our excitable media and politicians largely at sea, few even noticed the insidious implications of the third event, which threatens to slam the door on the possibility that we could all be enjoying much cheaper gas and electricity for decades to come.

One event was the hysteria that erupted over that further eight percent price hike by SSE, which tried to explain that two-thirds of the 13 percent increase in its costs, making that price rise inevitable, were due to "green" taxes and the soaring cost of connecting new wind farms to the grid.

While SSE called for a curb on these green levies – such as the crazy "carbon tax", designed eventually to double the cost of electricity from fossil fuels, which still supply 70 percent of our needs – the only official response was a fatuous call from our energy minister, Michael Fallon, for consumers to boycott SSE. Mr Fallon was oblivious to the fact that his Government's policies will soon force all other energy companies to follow suit.

Before that we also had those hysterical predictions that this winter we could face serious power cuts (as one paper's front page had it, "the winter of blackouts"). This followed a warning from National Grid that, thanks to the closure of several large power stations under EU anti-pollution laws, the safety reserve of our power supplies has shrunk to two gigawatts, its lowest margin for years.

What the BBC and everyone else seemed to miss was the small print in which National Grid insisted that the lights wouldn't be going out, because it now has "the tools" to cover any shortfall. One reason for its confidence was the story of how National Grid has been quietly signing up thousands of diesel generators, linked by computers to the grid, which can be automatically switched on at a moment's notice to cover for any power shortage.

And their main purpose, although National Grid tries to deny it, is to make up for the unreliability of that ever-increasing number of heavily subsidised wind farms the Government wants to see built, in its efforts to "de-carbonise" our electricity supply.

Although National Grid may try to keep quiet about it, the companies piling in to sign up for this scheme – attracted by the colossal sums it is offering to build up its "Short Term Operating Reserve" – make no secret on their websites and planning applications of the fact that it is designed to cover for the disastrous intermittencies of wind power.

Even National Grid admits that, within six years, it hopes to have expanded its emergency reserve from 3.5GW to 8GW, equivalent to the output of four large conventional power plants. This is why firms such as Green Frog, Fulcrum Power and Power Balancing Services are pouring millions into building "mini-power stations" – container parks full of diesel generators – to qualify for "availability payments" so lavish that, in proportion, that they make the subsidy bonanza enjoyed by wind-farm operators look like chicken feed.

Mad though it might seem to cover for the deficiencies of wind turbines by pouring a fortune into diesel generators creating the very CO2 the wind farms are meant to save, even this pales into insignificance compared with the implications of an amendment narrowly passed last week by the European Parliament, designed to prevent the EU sharing in the cheap energy revolution made possible by fracking for shale gas.

The powerful "green" movement was exultant at the passing of this amendment, which – if it gets through the EU's tortuous legislative process – will force energy companies to pay for cripplingly expensive "environmental impact assessments" – even for test drilling to ascertain whether there is gas in the shale.

Furthermore, the MEPs voted to bring even the smallest test-drilling site under the control of a system that makes green lobby groups a key part of the regulatory process, enabling them to put every kind of obstacle in its way.

Their openly declared aim is that Europe must not be allowed to join the energy revolution which, in the US, has halved gas prices in just five years. Instead of this, the only effect of our Government's policy will be, before long, to double our energy costs, just when the average household energy bill already equates to a fifth of a pensioner’s income.

Yet all our brainless politicians can do is complain about rises in those bills, which are largely being made inevitable by their own actions. Truly, we are looking here at the maddest and most self-deceiving web of idiocies any generation of politicians can ever have put their hands to.


Richard North 13/10/2013 link

Energy: million-pound government windfall when no wind blows


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The Government is set to make a windfall profit of hundreds of millions of pounds out of a lucrative scheme to sell power from thousands of the emergency diesel generators it owns to the National Grid. The cash will come from using them to guard against the times when the wind is too low to drive the expanding fleet of wind turbines, so staving off widespread blackouts. 

Public buildings, including NHS hospitals, prisons, Army barracks and RAF bases, police and fire headquarters, schools and council offices equipped with emergency generators are to be asked to make them available on 20-minute standby to back-up the grid when supply is short. For this, they will be paid premium rates, soon to rise to the equivalent of £600 per Megawatt hour (MWh) of electricity produced. 

This is more than 12 times the rate currently paid to ordinary power station operators, and six times the rate paid to inshore wind farm owners. Potentially, this makes Government-owed generators worth hundreds of millions to George Osborne. But it also represents another "stealth tax" on hard-pressed electricity consumers, brought about by the increasing reliance on wind power which is already heavily subsidised. 

The scheme, managed by National Grid, is known as the Short Term Operational Reserve (STOR).  It is better known in the private sector, where it is part of what is sometimes called "Demand Response" or even "Demand Side Response" (DSR). But the Government involvement is the real explanation behind our report on the Guardian finding that four NHS hospitals had "signed up to a deal under which they will reduce demand at peak times by using diesel-fired generators".

What the Guardian was seeing was the front end of a contract agreed earlier this year between the Government Procurement Service (GPS) and five leading electricity demand management companies called  "aggregators". These highly specialist companies are ready to exploit the huge back-up bonanza created by the wind industry, turning the Government, potentially, into one of the largest providers of reserve electricity in the country. This turns privatisation on its head. 

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One of the aggregators which featured in the Guardian piece was KiWi Power. To administer the contract, it is working alongside another of Britain's leading aggregators, Flexitricty, which appeared in the Financial Times on 6 September 2010, claiming that private industry "can make millions of pounds annually, and help reduce the UK's carbon footprint, by selling spare electricity to the National Grid".

Now, Government is getting in on the act, alongside private sector firms, all part of what is called "Demand Side Response" of which the National Grid's "Short Term Operating Reserve" (STOR) is part.

In particular, the Government and the aggregators are benefiting from the National Grid's Aggegrator Model in STOR, introduced in December 2010, a new set of rules which effectively kick-started a new and highly lucrative electricity back-up  industry. 

The rules, approved by the Coalition Government, were designed to encourage new entrants into the "reserve" market, to meet the desperate need to compensate for the intermittency of wind farms and their unpredictable performance. This ups the reserve capacity available from about 2GW to 8GW by 2020 - equivalent to five nuclear power plants. Without it, the system will be destabilised by the wind power, leading to localised and general collapse and prolonged blackouts.

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Previously, National Grid would  only take units of 3MW or more, and there was no provision to use smaller amounts of power. But, under the new rules, aggregators can collect units as low as 500KW generated by individual clients, such as a single hospital (a 1MW generator fitted in Chelsea and Westminster Hospital is illustrated immediately above), or an RAF base (pictured at the very top of this piece are newly installed CAT generators at RAF Valley). The "aggregated" power can then be sold to the grid. 

Traditionally, only large industrial users could send power to the Grid. But this Government contract will rely on "smart grid" technology, which makes it possible to manage multiple small inputs from thousands of different suppliers. Remote generators are fitted with computer controls which are linked to the internet to form a network or "virtual power station". Aggregators' own control centres communicate with the equipment, using basic laptops, to turn generators on when needed - sometimes from hundreds of miles away. No action is needed by local operators.

The power is usually supplied for short periods when the grid is under stress and needs immediate capacity to replace power lost when the wind dies. This gives time for conventional power stations to be started up and brought online. Typically, the so-called STOR equipment will remain online for an hour to an hour-and-a-half during each "call". Short-lived peaks can also be "shaved", reducing the need to start up conventional power stations.

The system mirrors US experience where the giant energy management company EnerNoc - which now operates in the UK – was in 2010 already controlling 5.1GW of power from 8,200 American locations - more power than is produced by Drax power station in Yorkshire, Britain's largest, rated at nearly 4GW.  

Potentially, there is 20-30GW available from standby emergency generators in Britain, much of it under Government control - which compares with the national peak winter load of 55GW and a typical daily load of 35GW. 

For Alastair Martin, managing director of Flexitricity, the Government contract is the opportunity of a lifetime. His Edinburgh-based company started up in 2008 and, for every six months in the business has doubled the amount of capacity under its management.

In 2011, it was hoping to grow enough to replace one coal-fired power station and, by 2014, to manage the capacity equivalent to that consumed by the City of Manchester. Now, with this four-year government "framework" contract under its belt, Martin's company is well on its way to achieving its goal.

The power coming from Government buildings will mostly be used for the short-term balancing. But, says Martin, when it comes to dealing with the daily peaks, "there is more than enough unexploited capacity in the hands of industrial and commercial energy users. They can provide all of the reserve electricity that National Grid requires until 2020 without building a single additional power station".

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As to, KiWi Power, it is also well aware of the contract's potential. On 20 September 2010, its cynicial message to the Financial Times was that selling capacity to the grid was "Money for nothing".

Disguising the fact that it was seeking to sell "dirty" diesel-generated electricity, it concentrated on making a "green" pitch. Renewable energy technologies such as wind and solar may make more headlines, "but energy efficiency" could make "a bigger contribution to cutting emissions", it told the paper. 

A holistic approach to energy management according to McKinsey, the consultants, could yield savings worth $1,200bn by 2020 in the US. Kiwi Power wanted to work with the National Grid, to exploit the potential in Britain, for a market that will be worth £1 billion by 2015, equivalent to five percent on electricity bills.

Instead of supplying more power, daily peaks can be reduced by cutting non-essential energy consumption – typically lighting, air conditioning, air circulation and bulk refrigeration. This is part of the Demand Response system, and operations which promise to cut their consumption to order during peaks could make £5,000 to £50,000 a year, said KiWi Power's director, Ziko Abram. But that was never to be the major part of the company's business. Even at that time, he revealed that the real money was in larger sites with back-up diesel generators, selling dirty electricity to the grid.

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Usually, generators in public buildings are usually kept only for emergencies, and stand idle unless there is a power cut.  With occasional test runs, they may not be used for more than 200 hours in a 20-year life. But they can now be used to earn £100,000 a year, just for being available to the grid and producing between 50 and 400 hours of electricity each year. They are only used when not needed by their operators. 

The cash potential is well known to KiWi Power. In 2010 when it was just starting out, in "almost five months" and with just 10 staff, it saved 50MW, the amount needed to power 10,000 houses. At today's inflated prices, that amount of capacity placed on the reserve market could earn fees of more than £1 million.

Then, the company had only twelve clients in the UK, including the Reuben Brothers, a privately property investor, Cleveland Potash Mining, the only potash mine in the UK, Eden Shopping Centre and London Oxford Airport. But even then the potential was apparent. Payments for large, energy intensive operators with backup generators can amount to "millions of pounds" the company told Mining News back in 2010. 

By October 2012, KiWi Power had moved into the public sector and had signed up Lister Hospital, part of the East and North Hertfordshire NHS Trust. At the hospital, four new diesel generators had been installed (one illustrated below), giving it 4.5MW capacity to send to the grid. The machinery is controlled via KiWi Power's centre in London, when it is not needed by the hospital, and is expected to earn more than £100,000 a year. 

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Such earnings are now to be multiplied hundred and possibly thousand-fold, as more and more generators are brought into the scheme. Leading the way will be NHS hospitals like Lister. Perhaps the one consolation for weary consumers struggling under the burden of yet another "stealth tax" on electricity, is that, if the NHS can't keep its patients alive, at least it can help keep the lights on and earn enough money to pay its chief executives' generous pensions.

Richard North 12/07/2013 link

Energy: STOR – the birth of a rip-off


For several days now, we have been putting most of our resources into researching the story of STOR, the National Grid's Short Term Operational Reserve, and the only thing that is stopping the increasing volume of wind-generated electricity destabilising the grid and bringing the whole system down.

There has always been something like STOR, a system for balancing out the fluctuations in the grid supply – dealing with the sudden peaks that the big power stations cannot deal with. This used to be called the "standing reserve", the operation of which is exemplified in the 2008 BBC video extract above.

Mainly, as can be seen from that video, balancing has been the job of "pumped storage", hydroelectric power that can be switched on at a moment's notice, with the reservoirs replenished by pumping the water back, using off-peak electricity.

However, even with that, there was always a need for fine-tuning the system but, in the days of publicly-owned utilities, the electricity suppliers tended to run their own (small) fleet of generators to top up the system when needed, to save having to start up another big power station, just for a few megawatts over an hour or so.

However, with the privatisation of the electricity industry also came restructring, following which much of the grid balancing was farmed out to private suppliers - just as wind energy started to make an impact, confronting the industry with its next great challenge, the supposed "decarbonisation".  The inherent intermittency and the unpredictability was to impose huge demands on the balancing system. 

The challenge was met in a novel way. With the advent of reliable broadband internet connections and the wider availability of computer control technology, it became possible to buy up unused capacity from remote standby generators. This could be switched on and off by a computer in the grid control centre. All it needed was the technology packages to be prepared and the contract structure devised, and STOR was born, coming into operation on 1 April 2007.

Yet, after less than a full year of operation, though, it was clear that the system wasn't working and, in 2008, the National Grid undertook a comprehensive review, then introducing 10 year-contracts to incentivise potential service providers to join the system.

By October 2009, however, the National Grid was back in the review business, noting with alarm forecasts of a significant rise in the Short Term Operating Reserve Requirement (STORR). This was driven in the main, by "a greater penetration of intermittent generation and a higher infrequent loss risk of 1,800MW (up from the current value of 1,320MW) ". Wind power was beginning to exert its influence on the system.

Amongst the changes proposed were even longer service periods, of up to 15 years and guaranteed utilisation volumes. In the pipeline were much higher prices. Also to come was a new system of "aggregators", firms which could assemble small packages of power and send them up to the Grid in useable lumps of more than 3MW.

So a new industry was born. So lucrative had become the business opportunity that it was now viable to buy and run equipment specifically to serve the balancing market. 

This is an industry that markets "phantom megawatts" in transactions that have been described as "Money for Nothing". The market is now set to increase to £1 billion a year, the cost set to add five percent to the average electricity bill, passed on to the consumer through Balancing Use of System Charges (BSUoS) operated by the National Grid.

The system keeps running, but at a huge price. 

Richard North 10/07/2013 link

Energy: the back-up bonanza


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For some many years, as wind turbines have proliferated through the land, Booker and I have been asking the same question: where is the back-up to cover for the many periods when the wind does not blow?

With no apparent evidence of conventional back-up plants being built, little did we imagine that, under our very noses, the capacity was being provided in a form undreamed of. Standby diesel generators are being bought up on a colossal scale, by a growing band of companies set up to exploit what is turning out to be a huge "back-up bonanza".

This is the Short-Term Operating Reserve (STOR), and entrepreneurs have not been slow in recognising what has been described as "Money for Nothing".

The first entrant into this new market, though, was an American, David Walters, former governor Democratic of Oklahoma. In 1995, he had formed his own energy company, Walters Power International, then in 2009 forming a UK subidiary, Walters Power UK. Its task was to capitalise on the "standing reserve" capacity being encouraged by the country's "progressive energy policy".

At its formation in 2009, the UK company was completing the final arrangements to initiate a 10MW power plant and, as the UK transitioned from high-carbon generation plants (primarily coal), it planned to develop a number of power plants to address "anticipated peak power shortages", the company PR said..

"Walters Power is exploring putting in renewable energy plants in the future, since one can get paid more than $200/MWH for such generation in the UK. In comparison, California gets $100/MWH, while Oklahoma renewable gets paid $30/MWH. So the UK is a prime market for us for renewable energy plants", said David Walters. 

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What turned out to be the very first purpose-built STOR plant in the UK was commissioned in April 2010. Walters Power UK chose a remote site surrounded by agricultural land between the villages of Thorpe in Balne and Trumfleet, about six miles north of Doncaster in South Yorkshire (pictured above).

Originally, it had been developed in 1998 by Warwick Energy to exploit the tiny Trumfleet gas field. It was equipped with natural gas-powered generators, producing up to 8MW of electricity for the grid.

Following depletion of the gas reserves, however, the site and associated infrastructure was sold to Walters in 2009, who has since transferred it to a Walters associate, UK Power Reserve (Trumfleet) Ltd, part of UK Power Reserve, formed in late 2010, "to provide niche services to the UK power sector". The CEO and Chairman of the Board is David Walters.

The gas sets were stripped out and replaced with four second-hand 12V200 Wartsila-Cummins diesel generators, each rated at 2.2MW, previously bought by Yorkshire Electricity in 2000 for peak shaving, until its plant was sold in 2005 and dismantled, the sets being acquired by Walters, now hidden behind a screen of trees, invisible to the passer-by (below). 

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In late October 2011, it was reported that the operator had requested has requested an upgrade in the capacity of their connector to the grid, to bring it up to 20MW – what seems now to be the industry standard for STOR blocks.

Another company quick to take advantage of the STOR bonaza was Green Frog Power 214 Limited. It was originally set up to invest in and develop "new green technologies", collecting used cooking oil and turning it into "environmentally friendly biofuel" for generating electricity in their own green electricity generators. This electricity was "100 percent renewable" and supplied to Green Energy UK through the National Grid.

Now, the company has been seduced by "the dark side", claiming to have "a pipeline" to build 500MW of power generation across the UK, using red diesel as a fuel. The National Grid, it explained by way of justification, "needs our power to alleviate stresses on the transmission systems, for example when other power stations shut down or when the wind stops blowing".

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The UK, it added, "is entering a period of power instability as old coal and nuclear-powered stations close and their replacements are delayed. Power cuts are predicted within five years by energy regulator Ofgem", later arguing that the STOR capacity had been calculated to double in the coming decade from 4GW to 8GW (National Grid "Future Balancing Services Requirements: Response" 2009). 

Until there is a breakthrough in non intermittent green energy or people are prepared to accept power cuts, the company said, it is essential to have back-up for wind power. The greenest and simplest back-up is provided by reciprocating engines, with 100 years of proven history. This enabling technology is low carbon and provides the flexibility to allow the proliferation of wind and other intermittent generation.

On 5 July 2010, the company asked Redcar and Cleveland District Council to approve to approve a 20MW "standby small scale embedded power plant" near Grangetown. It was to employ 52 diesel generators. Approval was given on 2 September 2010.

A month later, the Birmingham-based company was awarded a 15-year Short Term Operating Reserve (STOR) contract with National Grid to develop a series of twelve, diesel-powered 20MW generating plants. In conjunction with equity partners, InfraRed Capital, it then secured a £60m finance from the Royal Bank of Scotland (RBS), for a project with a value of £75 million. 

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Already, it had identified as site in North Lincolnshire and was seeking other sites in the North East, Yorkshire, South Wales and Devon. In March 2010, it was telling the Yorkshire Evening Post that it planned to build 21 mini power stations at sites across Yorkshire. Known as "Embedded Generation Stations", the standard model was a 6MW unit, located adjacent to an existing sub-station, operating for less than 150 hours a year.

A 52-generator, 20MW Green Frog site was approved, this one at Neath, near Port Talbot, on 5 January 2012. Then, in March 2012, the Company applied for planning permission for another embedded 20MW distributed standby power plant, comprising 52 diesel generators, within the Plymouth Main substation near Plymouth. The permission was granted in May 2012. A 20MW unit has also been completed at the Garnoch Site in Swansea, and a smaller 6MW units had been installed in Tregaron, Wales.

The generating equipment had been manufactured by FG Wilson which claimed that, in November 2011, within hours of Green Frog opening its site in Somerden Road, Hull, a sudden surge in electricity demand had prompted the National Grid to call them for emergency back-up. An output of 20MW had been produced continuously for seventy minutes without incident, proving the success of the project. 

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On 14 February 2012, a planning application was approved by Newark and Sherwood District Council, made on behalf of Abbey Powergen PLC, by the Pegasus Planning Group, based in Leeds. This covered the siting of eight containers each containing a diesel generator, the site capable of providing 24MW for STOR, on the land adjacent Quarry Farm, Balderton, near Newark On Trent, Nottinghamshire. A maximum demand of 300 hours was specified.

In August 2012, the newly formed Nottingham-based Power Balancing Services Limited submitted a scheme for planning approval to Amber Valley District Council, on waste ground close to an industrial estate near Heanor, in Derbyshire. The completed unit was to provide 17MW to the National Grid for STOR, using ten containerised Broadcrown 1.68MW diesel generators. Combined fuel consumption was stated at 437 litres of diesel per hour. The scheme was approved on 30 October 2012.

In January of this year, Dover District Council received a planning application for the redevelopment of a 3.02 acre part of the former Richborough Power Station site, near Sandwich. It was to create a 42.4 MW capacity "Peaking Plant Facility", comprising 51 diesel generator sets and associated equipment, operating for up to 720 hours a year - an untypically long period for a STOR site.

The site is to be managed by Glasgow-based Aggreko PLC, the "world leader in the supply of temporary power solutions" and, according to the local newspaper, the company that provided all power generation to the London Olympics, much to the dismay of local environmentalists. Approval has been given and work is expected to start shortly.

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Another Green Frog 20MW-52 generator STOR unit, again described as a "small scale standby embedded power plant", was proposed in March 2013. The site was located on green belt land, the outskirts of Letchworth Garden City between a grid substation and the busy A1 and Baldock Road. It was designed to have a 24 hour full load, i.e. all sets running, fuel storage capacity. The scheme was approved by North Hertfordshire District Council on 12 June 2013.

Also in June 2013, it was back to Plymouth, where another application was made for a similar 20MW unit, this time by a different company, Fulcrum Power Limited, working with Armstrong Energy. The company was well-practiced. In the February, it had successfully applied to Mendip District Council for permission to install 24 diesel powered generators for the generation of STOR electricity of up to 100MW, at Whatley Quarry, near Frome, Somerset, on land owned by Hanson Aggregates. Permission was granted on 15 March 2013.

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Another 20MW unit, the operator unknown, is located in Flatworth, Tynemouth, and is due for completion in the fourth quarter of 2013. The unit was been identified by UESL, but no client was named. 

Then, specialist installer, Ocktcom boasts of having completing their customer's first four STOR power plants in 2011. The company says it is now well underway with supplying and installing SDMO generators and ancillary equipment for the latest 20MW site.

The client appears to be the secretive Peak Gen Power Ltd, identified by its trade association. Its first new-build plant was commissioned in October 2011 and handed over to National Grid for STOR service.

The company's most recent scheme was submitted to Peterborough Council for planning permission in October 2012, relating to a site at Woodston, and approved in the following December. 

Details given in the various applications vary, the number of generators varying from 18 to ten, the capacity of the site being rated at 20MW when completed. The locations of other identified Peak Gen sites include a 22MW site at Llandarcy, near Cardiff, running 11 diesel generators, Didcot, Leamington Spa and Portland.

By now, UK Power Reserve, had become an aggregator, offering STOR services "to industry partners and participants who have an asset base but power generation is not their core business". Nevertheless, on its own behalf, it sought and obtained in July 2011 planning permission for a 20 diesel generator site in Melton Mobray, capable of delivering 20MW.

When seeking planning permission for this operation, the company assured the Council of the low level of the utilisation of the Trumfleet operation. Within the past year, it had been called upon 73 times with the average running time of 83 minutes totalling to 100 hours per annum - less than the requested allowance of 300 hours per annum.

In late October 2011, it was reported that the it was requesting an upgrade in the capacity of their connector to the grid for the Trumfleet site, to bring it up to 20MW – what seemed now to be the industry standard for STOR blocks.

The company then submitted a "screening application" in March 2013 to North East Lincolnshire Council for a unit in Immingham, with a go-ahead given in April, clearing the way to apply for permission to install 12 2MW gas-powered generators, delivering 24MW to the grid.

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There are many much smaller operators, such as Renewable Energy Generation which operates 8MW STOR generators, using biodiesel, to augment its fleet of wind turbines. As of 30 June 2012, though, it had over 40MW of STOR projects available for construction.

There is the publishing giant DC Thomson, which has had two STOR-compliant HV 2500-1 KVA diesel generator sets installed in its printing plant in Dundee, Scotland, and Wadswick Energy which has been operating a 1MW STOR diesel generator on-site for over a year. 

The installation of STOR-compliant equipment was becoming more generalised. In November 2011, supermarket chain Wm Morrisons took possession of yet another 1500kVA generating plant (pictured immediately above) - another anonymous steel box. The infrastructure to allow for STOR controlled energy export had been built into the system.

In May 2013 the company took delivery of three generators for its distribution centre in Bridgwater, Somerset. These comprised a dual purpose 2MV generator and two 150KV units, together with an 11,000 litre fuel tank that permitted 24-hour running on full load.

The larger dual-purpose generator was configured for remote start to export 1.4MW of power back to the grid under the STOR scheme, earning around £7,000/MW per annum, for what otherwise would have been a net cost to the company.

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In addition, there are companies such as UPS Systems PLC, this one operating the "GENsmart STOR scheme", which allows operators to recover the complete costs of new generators through participation in their STOR scheme.

Industry consultants, Generator Power Systems, on the other hand, offer to guide companies through the certification process, including the initial engineering and equipment surveys, upgrading existing equipment, new generator installations, ongoing maintenance and the final contract with National Grid.

What we are seeing, therefore, is a major change in the STOR concept. Originally, the system was devised to use spare capacity, through running unused standby generators. Now, it is dragging new capacity into the system, with dedicated generators installed solely to service the reserve market. 

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Driving this change is money. As Autonomous Mind points out, billions of pounds are on offer. Energy company npower has estimated that the STOR price paid when stand-by generation capacity was called for was £180-280/MWh in 2010. There was also a payment of around £7-10/MWh. This was worth around £30,000-45,000/MW per annum to an owner of stand-by generation.

That, already, was roughly eight times the industrial tariff for power. But, as the demand for operating reserve increases, the price is expected to rise and the incentive to participate will grow stronger, pulling more capacity into the market.

By 2015, National Grid estimates that the utilisation payment will have risen to an average of £544/MWh. By 2020, the figure is expected to be £685/MWh, all in real terms in 2010/11 money. That is an increase of 96 percent in ten years.

Across the whole market, the total payments for being available and for generating could reach £945 million per annum by 2020, up from £205 million in 2010. That is an increase of 350 per cent in ten years, representing a massive additional levy on hard-pressed consumers.

Bizarrely, this is still cheaper than the cost of providing the same capacity through spinning reserve, but it still represents a £1 billion premium for backing up wind turbine fleet. The industry is thus complimenting itself on having found "the cheapest way to maintain an uninterrupted power supply" for the scenario the UK finds itself in. Perversely, it believes the massive extra cost is "to the benefit of all consumers".

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When the National Grid is then prepared to offer long-term contracts to players who can then go to equity financiers to fund new generators, investors are rubbing their hands at the prospect of a guaranteed nine percent return on their capital, with no risk.

So lucrative has the business become that even a renewable energy company OST Energy is now looking to construct four STOR power stations, nominally two 16MW, one 12MW and one 8MW rated plants in South Yorkshire – where the industry first laid down its roots.

Money might be driving the change, but greed is driving our energy policy, with the ultimate absurdity of having tens of thousand diesel generators keeping "low carbon" wind turbines in business - greed, compounded by utter insanity.


Richard North 08/07/2013 link

Booker: high prices in STOR


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Power cuts are no longer the issue. Despite the media furore over possible blackouts, barring the most exceptional of circumstances, it is most unlikely that we will see extensive or even significant power cuts over the next few years. But, there is a price to pay – up to an eight-fold increase in the price of the electricity the National Grid is forced to buy in order to keep the lights on.

This is, as explained by Booker in his column today, because of the emergence of a "secret weapon", known by the acronym STOR (Short Term Operating Reserve). Thanks to smart computer management, this will enable the National Grid to call on a vast network of standby diesel generators – amongst other measures - to keep the electricity supply running.

Because of the complexity of the issue and its novelty to most readers, I have agreed to publish this longer post alongside the Booker column, explaining the issues more fully than space allows in the column, including the referencing links which are absent from his online piece and the print version.

Our assertion that power cuts are no longer an issue does, of course, represent something of a change of heart for both of us. Separately and together, we have both been warning of possible power cuts, myself since the first days of this blog, and consistently thereafter.

In those early days, though, the expectation was of increasing demand which, with the need to provide back-up plants for the growing wind estate, meant that we could in the future be looking at an overall requirement of as much as 120GW by 2020 and very substantial shortfalls.

However, the lending crisis triggered a recession that brought with it a substantial fall in demand, which now peaks at about 60GW and shows no signs of immediate increase. Thus, by September 2009, I was cooling the rhetoric, and cautiously predicting that there was little real risk of power outages. Rather, as supplies grew even tighter, there was to be rationing by price.

However, with the earlier than expected retirement of so many coal-fired power stations and the delay in replacing the nuclear estate, that prediction was beginning to look a bit optimistic, and this year others were beginning to trigger media concerns about power cuts.

Having followed the politics of energy for so long, though, we were starting to pick up the growing body of evidence, indicating that novel measures being considered to address the coming shortfall, and in particular to deal with intermittency issues associated with wind-generated electricity.

As we looked further, we found considerable sophistication in what was the expanding field of demand management and demand-side response (DSR), along with the use of smart meters and smart appliances.

The complexity of some of the measures was alluded to during the debate on the Energy Bill, where we saw the concept of "negawatts" aired in Parliament, together with the concept of "electricity demand reduction" (EDR) and "route to market".

Just as we were beginning to get to grips with this, however, up popped the Ofgem Electricity Capacity Assessment Report 2013 which purported to tell us that were in greater danger than ever before of suffering blackouts, as early as 2015.

This, predictably, had newspapers such as the Daily Mail predicting imminent rationing and even worse.

These dire predictions were repeated by broadcasters, numerous bloggers, facebook commenters and forum pundits. But what was painfully evident was that few had taken the trouble to read the original Ofgem report. Had they done so, they would have realised that the regulator had been carrying out predictive modelling, and the media had picked up a worst-case scenario based on assumptions which were hardly likely to materialise.

Nevertheless, after neglecting the subject for so long, numerous media pundits suddenly seemed to acquire an expertise on energy policy that was belied only by the superficiality of their writing. Meanwhile, the bandwagons started rolling, as interest groups sought to exploit the issues for their own purposes.

Meanwhile, a particularly egregious report in The Guardian had the antennae twitching. This had the paper's "energy editor", Terry Macalister, writing about hospitals "being asked to cut their power demand from the National Grid as part of a government attempt to stave off power blackouts. 

Unwittingly, the author was describing an aspect of the (STOR) programme, which was then hinted at on the BBC TV Sunday Politics show. The pieces were starting to fall into place.

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On the programme, Andrew Neil interviewed energy minister, Michael Fallon on "the latest on fears of power blackouts" (extracts published here). Under strong attack from Neil, who is determined to get an admission that the lights are about to go out, the minister should have been on the back foot. But Fallon was untroubled, calmly assuring Neil that: "We're organising new reserve capacity to come on-stream in a few year's time".

When charged directly to estimate the chance of blackouts, Fallon told Neil that they were low. "We're going to make sure they don't happen. I can absolutely tell you", he said. Asked to guarantee that there would not be blackouts, Fallon goes on to say:
We're not going to have industrial blackouts, factories shut at lunchtime and people sent home, or anything like that. We have Ofgem, the regulator, and the National Grid who are charged with making sure that in two to three year's time that doesn't happen and they have plenty of tools at their disposal to make sure it doesn't …

Let's be clear what tools they have at their disposal, they've always had at their disposal. They've always had an operating reserve; there are companies that have their own generators who can contract to Ofgem to turn down their power or switch over to their private generators for a certain period if there's a completely unexpected spike in demand. There's nothing new about that. That's existed for twenty years.
Then, towards the end of the intgerview, when challenged that he was presiding over "a mess of an energy policy", Fallon reiterated his position. Among other things, Ofgem, he said, was "ensuring that companies manage their demand where they're able to use private generators if there's an unexpected peak".

This relaxed performance, plus the reference to "operating reserve" and "private generators" gave the final clues as to the existence of the "secret weapon". Fallon was alluding to STOR. He could only have been so confident in the security of the electricity supply if he had known that this is going to keep the lights on – which indeed it is.

As it stands, therefore, although we are running down our conventional power sources, and the gap between our electricity supplies and the 60GW required at times of peak demand seems to have become dangerously narrow, this is not the case. There is this hidden reserve that does not show up on the typical presentations – as was seen during the Sunday Politics show. 

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There, Fallon was confronted with a chart (above) showing the percentages of power provided by coal, gas, nuclear, wind, and hydro. Not shown is this hidden reserve, which potentially offers more capacity than either coal or gas can currently supply. In most discussions, it does not exist.

And, contrary to Fallon's claims, the system has not existed for "twenty years". Previously, there had been a form of standing reserve but, as a system, STOR was formally launched by the National Grid on 1 April 2007 and even then over the last three years has been further developed to accommodate more easily what are known as "aggregators", of which British Gas is but one example.

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Illustrated above, taken from an aggregator's brochure, is a stylised network, using a "smart grid" which feeds power into the National Grid from a variety of sources, and also manages power reductions in a process known as "demand reduction", this itself known as Frequency Control by Demand Management (FCDM).

Shown are these two broad components of the system – the power suppliers taking the form of standby generators, usually diesel powered (illustrated below), of the type installed in thousands of hospitals and commercial and industrial concerns, such as banks, data centres and water companies.

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All of these can be linked to aggregators via theor own "smart" networks (the smart grids), whence they can be centrally controlled by the aggregators' control systems. Units able to provide more than 3MW can link directly to the Grid, whence they are managed by National Grid control centres.

In addition to the standby generators, though, there are also the Combined Heat and Power (CHP) units, equipment which is most often optimised to supply heating for office blocks and the like, but which also generate electricity.

Both the standby generators and the CHP units can contribute in different ways. They can either send power to the grid, directly or via an aggregator, they can supply electricity to their operators, thereby reducing the demand on the grid, or they can be used to reduce demand, with any surplus electricity sent to the grid.

Then there is the "demand reduction" (FCDM). By way of examples, on a signal from the grid, scheduled production processes in a factory can be switched off or delayed, non-essential air conditioning in offices or retail centres can be turned off, or refrigeration in commercial cold storage units can be shut down for a short period.

What will stagger most people though is the scale of the operations. A recent report for Ofgem indicated that the 2011 requirement for STOR was 3.5GW and, by 2020, the demand could rise to 8GW, equivalent to five large nuclear power stations. Technically-compliant capacity, currently available to the grid if the price is right, is in the order of 6GW.

Not included in the STOR system is the bulk of the CHP capacity. This stands at approximately 6GW, (2011) rising to 18GW by 2020.  It serves to reduce overall demand on the grid.  And, in the period of a year or so, about 4GW is available through reactivating mothballed gas plants, while at 1GW or more may be available from under-used assets such as the Peterhead gas plant.

Collectively, these assets and systems add the equivalent of 18-19GW or more to grid capacity, This effectively matches the power provided by all our remaining major coal-fired power stations, and amounts to a massive hidden reserve amounting to nearly 30 percent of current peak demand. It is this reserve which can be relied on to keep Britain's lights on. 

Nor does it stop there. Although no firm figures are available, it is estimated that the total capacity of diesel generation installed in the UK is around 20GW – although it may be 30GW or higher. Much of that, through the activities of the aggregators, could become available to the grid.

However, all this comes at a price. The average contracted utilisation payment for STOR paid by National Grid in 2011 was around £225/MWh, in addition to an availability payment of around £22,000 per MW of firm reserve. A hospital offering its standby generators to the grid can make as much as £100,000 profit before even supplying any electricity.

The prices compare with a typical price seen by commercial consumers of around £100/MWh (10p/kWh). The National Grid will pay around £50/MWh for conventionally generated electricity, £100 for onshore wind generated power and £155 for offshore. Yet bids submitted to the Grid on the annual STOR tender have reached £400/MWh. While these have been rejected, a sellers' market could force the Grid to pay that much and more.

Under normal circumstances using this back-up capacity is not an economically competitive form of generation; it is generally only called upon in emergencies when price rises can cover the costs of generation. But as we lose power stations from the system, there will be no option but to use it as replacement capacity and, in particular, as back-up when the wind is not blowing.

So lucrative is this option that diesel generators are being installed specifically to service the reserve market. It is being regarded as a major investment opportunity, "anticipated to experience significant growth due to increased reliance on reserve sources of power to meet fluctuations in electricity.

Investors are told that the "significant upward trend in the requirement for reserve services" is due to "decreased power supply following from the decommissioning of ageing nuclear power plants" and "increased volatility of power supply caused by increased reliance on renewables (due to the high proportion of wind power, renewables are not a consistent source of power) ".

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One company alone recently gained planning permission to install 52 diesel generators supplying 20 MW, in a factory unit in Plymouth. (news report above). In 2010, the company, Green Frog was looking for £75 million to fund 200MW of standby power, which it has subsequently upped to 500MW.

The 52 generators in Plymouth would consume more than 1.1 million litres of diesel a year, or about one tanker a week, producing emissions at a similar level to that of coal, yet their primary purpose is to provide back-up for "green" wind energy. Thus, as Booker observes, not only will we be bankrupted by this idiocy. It won't even help to save the planet either.


Richard North 07/07/2013 link

Energy: EDR comes to town - in disguise


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You might have thought that the low-circulation Guardian, being so much in favour of windmills and other renewables, might actually understand something about our electricity supply and the way the system is being tailored to accommodate the intermittency of most of the renewable sources.

But the moment we get an example of Electricity Demand Reduction (EDR) in action, the paper's "energy editor", Terry Macalister, goes hurtling in the wrong direction, squeaking about hospitals "being asked to cut their power demand from the National Grid as part of a government attempt to stave off power blackouts".

What we are actually seeing is a programme that has been operational for about six years and, in its current form, since April 2012. It is called the Short Term Operating Reserve (STOR), managed by the National Grid and operated by a number of contractors such as Flexitricity, NPower and KiWiPower.  In part, it has been developed to provide back-up to the system when the wind fails to blow.

The theory behind the system is that, instead of operating extremely expensive and inefficient spinning reserve and back-up power stations, operators of large generators are recruited to a scheme where their equipment can be automatically switched on to supply power to the grid during peak periods. The minimum capability to qualify is 3 MW and units must be able to come into action no later than 240 minutes after instruction. The power must be deliverable for no less than two hours.

For institutions such as large hospitals, the scheme is a bonanza. Their back-up generators have to be test-run anyway, and running them occasionally on-load, delivering power to the grid, is one of the most effective ways of ensuring system reliability. Keeping their equipment available to the grid is also highly profitable, earning as much as £100,000 for a full season.

Nor is this penny-ante stuff. According to the National Grid, for part of year six (2012/3), 147 units were contracted, representing a potential maximum capacity of 3.2GW. For year seven (this current year), bids of 2.2GW capacity have been submitted from 64 units, most of it available on less than 20 minute notice. With existing, long-term commitments, the grid has available 3.5 GW if it needs it.

Thus, the four hospitals reported by the Guardian are only the tip of the iceberg, the paper having only just noticed what has been going on for years. Much more capacity is rejected by the grid than is accepted. As prices increase, more capacity can be dragged into the system. Over 6 GW is potentially available – albeit with a trebling of the price.

Add to this the possibility of recommissioning mothballed power plants and potentially another 4 GW becomes available – if the price is right. Reuters certainly thinks that some plants could be returned to service quite quickly. That puts 10 GW in the hands of the National Grid, on top of currently rated capacity.

Thus, despite the failure of our energy policy, the possibility of the lights going out all over England is actually receding. But, as we have been reporting since 2008, the price of keeping the system running will be massively increased prices. This, we actually wrote in 2009, remarking that "price and not capacity" would most likely be the issue of the future. 

The wickedness of rationing power by price rather than availability means that the poorest will be hit hardest, more so as the impact will be concealed. Suppliers are replacing defaulting customers' meters with pre-payment units, so they do not need to be cut off for non-payment. Those who cannot afford the higher prices will simply "self-disconnect" - their own personal "choice". 

Power cuts will, by this means, become very private affairs - invisible to policy-makers and the media. And as long as the street lights keep burning, this will be a crisis the politicians can ignore. 

Richard North 29/06/2013 link

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