Enterprise in the Energy Sector Mike Colechin 2016 Energy Technologies Institute LLP The information in this document is the property of Energy Technologies Institute LLP and may not be copied or communicated to a third party, or used for any purpose other than that for which it is supplied without the express written consent of Energy Technologies Institute LLP. This 2016 information Energy is given Technologies in good faith based Institute upon the latest LLP information - Subject available to to notes Energy on Technologies page 1Institute LLP, no warranty or representation is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Energy Technologies Institute LLP or any of its subsidiary or associated companies.
The UK energy challenge... Tensions are increasing...
The UK energy challenge... Demand is growing, assets are aging, prices are rising... irrespective of a CO2 reduction target 62m people... growing to 77m by 2050 24m cars... growing to 40m by 2050 24m domestic dwellings... 80% will still be in use in 2050 total dwellings 38m by 2050 Final users spent 124bn on energy in 2010... 9% of GDP 2.4m English households in fuel poverty... average fuel poverty gap 438 and increasing Over 90GW generation capacity... from 1MW to 3.9GW Over 200 significant power stations... average age >20 years 50% of power generation capacity.. in 30 power plants average age 30 years
What is the ETI? The ETI is a public-private partnership between global energy and engineering companies and the UK Government. ETI members Targeted development, demonstration and de-risking of new technologies for affordable and secure energy Shared risk ETI programme associate
What we do... System level strategic planning Technology development & demonstration Delivering knowledge & innovation
No emissions targets and -80% CO 2 in 2050 are very different worlds 140 No targets -80% CO2 No targets -80% CO2 UK electricity generation capacity GW 120 100 80 60 40 20 0 Renewables Nuclear Gas Coal 2010 2020 2030 2040 2050 Coal Gas Renewables Hydrogen Nuclear Gas + CCS Coal + CCS
As long as we prepare NOW, decisions on 2050 can wait but not for long 140 No targets -80% CO2 No targets -80% CO2 UK electricity generation capacity GW 120 100 80 60 40 20 0 Renewables Nuclear Gas Coal 2010 2020 2030 2040 2050 Coal Gas Renewables Hydrogen Nuclear Gas + CCS Coal + CCS
Key decisions and cost implications Direction change between no targets and -80% CO2 polarises in mid 2020s Key electricity decisions are national policy led programmes Nuclear new build CCS plus local and individual consumer decisions on other critical areas - with major implications for distribution level infrastructure Heat delivery (gas, electricity, biomass, district heating) Transport (liquid fuels, electricity, hydrogen) Delay in launch of major build programmes beyond mid 2020s leads to cost increases of ~ 5bn p.a. as more costly alternatives are built There are logical asset replacements (technically and financially) that ensure security, sustainability and lowest system cost Efficiency improvement (transport and buildings) Offshore renewables Nuclear Gas Bioenergy feedstock's (for heat and power) CCS (fossil and biomass fuels) all no regrets choices for the next 10 years
What we need... Understanding of the drivers on future development Costs Supply capability and capacity (in a global market) Infrastructure decisions Investor requirements Consumer needs/desires Clear market and value opportunities for investors and consumers Supportive and stable policy Consumer support But... the future remains uncertain and we need an energy system design that allows for this Ready to make informed choices A system that creates and retains optionality Prepared for investment in a wide scale infrastructure roll-out Innovate to drive down cost (technology and business models) We need innovative incentives for industry to invest in the UK
Feedback of R&D needs Research & Development Demonstration Underpinning R&D to mitigate perceived technical, market & financial risks Deployment Applied R&D to address technical issues Basic R&D: speculative, science led industry needs led Pre-Commercial Full- Scale Implementation Technology Considered Commercially Proven & Economies of Scale Achieved New Ideas Pilot Scale Demonstrator Technology Push... Market Pull
Evolution of Innovation Models 1950 Linear models Technology push / market pull Successful innovation is open and iterative 1970 Non-linear models Coupling Chain linked Innovation is complex and non-linear 1990 Integrated models Networking Open innovation Collaboration is vital 2000 Systems models Evolutionary models National/regional Sectoral Technological Cyclic Expectations Multi-level perspective Socio-technical transitions You have to take risks Linear models still have a place (provided they are recognised for what they are)
It takes time for innovation systems, networks, relationships and expectations to form, evolve and mature. A new technology will pass through distinct stages in its evolution but the process is seldom linear. Weak or immature innovation systems may delay progress and decrease the likelihood of success.
Innovations may be idea-led and/or demand-led. The forces of technologypush and market-pull combine to provide continuous challenge to develop costeffective technologies. Promising technologies may fail to attract sufficient risk capital and/or the resources needed to support demonstration due to significant market uncertainty.
Useful technologies and ideas are exchanged and may be spun in or out at any stage Organisations pursue multiple pathways to advance their ideas
The critical components : sustainable innovation requires routes to market, access to finance, a supportive policy environment, and widespread innovation capabilities within companies and the system
A large scale solution (CCS) illustrates the policy journey
Policy journey... Key Issues: Systems approach Overcoming technological roadblocks Building innovation capability Strategic collaboration Promoting entrepreneurship Demand-side policies
Mass market solution (electric vehicles) - illustrates the market journey
Market journey... Key Issues: Missing markets Multiple risk factors Novel technologies Finance to support demonstrators Consumer acceptance
Medium scale solution (distributed energy) illustrates the capability journey
Capability journey... Key Issues: Disruptive innovation New business models Skills gap Dependence on environmental policy Commercialisation skills
Medium scale solution (fault current limiter) illustrates the company journey
Company journey... Key Issues: Externalities Path dependency Coordination failures Risk and uncertainty Long time horizons Leverage vs crowding in
Summary The low carbon energy sector faces multiple challenges It will not be possible to meet these challenges without innovation Innovation in the energy space is immature and complex This all makes it a very rewarding place to work
Registered Office Energy Technologies Institute Holywell Building Holywell Park Loughborough LE11 3UZ For all general enquiries telephone the ETI on 01509 202020. For more information about the ETI visit www.eti.co.uk For the latest ETI news and announcements email info@eti.co.uk The ETI can also be followed on Twitter @the_eti
BACKUP
Individual energy consumption in the UK*... Other Refrigeration IT, etc Ventilation / AC Compressed air Motors Appliances Lighting 4,250 Goods Te km (Th) 14,000 passenger km (Th) Cooking - commercial (Th) Cooking - domestic (Th) Process heating (Th) Water heating - commercial (Th) Water heating - domestic (Th) Space heating - commercial (Th) Space heating - domestic (Th) 0 1000 2000 3000 4000 5000 6000 Energy kwh p.a. * 2010 UK consumption divided by 60M Notes: 1. Passenger transport figure excludes international air travel (people in the UK) 2. Data excludes heavy industry
GB heat and electricity demand variability (commercial & domestic - 2010) 250 GB heat delivery system design point 200 Heat Electricity Heat / Electricity (GW) 150 100 50 GB electricity delivery system design point 0 Jan 10 Apr 10 July 10 Oct 10 Source: UKERC (2011)
Road traffic density peaks at around 8am and 3pm 300 250 200 150 Other personal Entertainment Holidays/day trips Shopping Education Business Commuting Average hour = 100 100 50 0 00:00 01:00 02:00 03:00 04:00 05:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 Time of Day Data source: Department for Transport (2005-2009 data, weekday journeys only)