The business leader's guide to the low carbon economy

One of the key environmental commitments of the UK’s new coalition government is to implement a smart electricity grid. But what exactly is a smart grid?

A small power station

Our present electricity grid is pretty stupid in at least two significant ways. Firstly it regulates supply, but not demand. Since demand fluctuates wildly day by day and week by week, we need quite a few power stations idle for much of the time, but ready to come on line at very short notice. Secondly, the electricity flows only one way – from big, inefficient power stations to end users.

A smart grid addresses these problems. A smart grid regulates demand as well as supply: here’s how.  Instead of the price of electricity being fixed for long periods of time, the price varies second by second in line with demand. This information would be sent down the cables with the electricity itself. When electricity happens to be very expensive, some devices, like fridges or battery rechargers would turn themselves off for a bit until the price fell or they really needed to be on. Other devices such washing machines would wait for cheap electricity before turning themselves on at all.

Secondly, electricity would flow both ways. When you plug in your electric car to recharge, it would generally be drawing power from the grid. But if there were a sudden demand for power, you might want to sell the power in your car’s batteries back to the grid. You’d be happy because your car would be buying electricity when it was cheap, and selling it when it was expensive. The power generation companies would be happy because you’d be providing them with the infrastructure to deal with peak demand, instead of their having to build extra power stations to cope with such surges.

When will we have a smart grid in the UK? This is where the government is a bit vague. But if we don’t do something soon to reduce demand or increase supply we’re going to run short of electricity in the UK by the end of this decade.

Our new conservative/Liberal Democrat coalition government is committed to supporting the low carbon economy. But what does Prime Minister Cameron mean by that phrase?

In 2009 David Cameron set out his plan for the low carbon economy in a webcast and policy document, which you can find here. His key points were:

An electricity internet

A smart grid and smart meters in homes. This will allow demand and supply to be intelligently managed, and pave the way for large-scale use of renewable energy sources.

A system of feed-in tariffs

Decentralised energy production by paying people who produce energy from renewable resources.

A new national recharging network

This will enable Britain to lead the world in replacing traditional cars with electric and plug-in hybrid vehicles.

New low carbon energy sources

Biogas – methane produced from farm and food wastes – to replace up to 50% of our residential gas heating.

Low carbon buildings, transport and commerce

Including a new entitlement for every home to be fitted with up to £6,500 of energy efficient improvements.

It’s likely that the coalition with the Liberals will strengthen Cameron’s hand in his dealings with the back bench climate sceptics in his party. Time will tell how much support his government is willing to give to the low carbon economy.

This graph first appeared in a report to the UK House of Lords Economic Affairs committee, published in 2008. It shows that peak demand for electricity in the UK will exceed supply sometime in 2015.

The main reason for this is that a number of coal fired power stations – including Drax, which supplies 7%of the UK’s total electricity – will have to close as they fail to comply with EU emissions regulation due to come into force in 2016.

However, thanks to some recent wheeling and dealing by the power companies and the British government, the EU has now agreed to give the UK a further three years grace before enforcing the regulations. We now won’t run out of power until 2019 – unless significant new sources of nuclear and renewable energy come on stream by then.

As the UK general election campaign draws to a close in its own inimitable way, all three main parties are committed to reducing CO2 emissions and promoting a low carbon economy. One policy difference between the Liberal Democrats and the other two involve nuclear power. The Lib Dems are against it; the Tories and Labour are all for it. Who’s right?

The three arguments against nuclear power are that it’s expensive, dangerous and unnecessary. Taking each issue in turn:

One nuclear power station costs about £3bn and delivers about 1GW of power. An offshore windfarm delivering the same amount of power would cost about £6bn.

Since the Chernobyl accident in 1986 there have been 443 nuclear power stations producing 16% of the entire world’s electricity with no significant accidents. The World Health Organisation estimates that a total of 4000 people will eventually die prematurely as a result of the Chernobyl disaster.  While this is a terrible toll, it is less than the 4000 miners who die every year in Chinese coal mines, or 24,000 people who die every year as a result of pollution from coal fired power stations.

We could generate all the electricity we need in the UK from wind – if we were prepared to cover an area the size of Wales with windmills. If not, we’re going to need an alternative source, and that’s probably going to be nuclear. For a well informed discussion on how the numbers for electricity generation add up, and why nuclear is probably going to be part of the mix, see David MacKay’s excellent book and website Sustainable Energy without the Hot Air.

According to the International Energy Agency one megawatt-hour of electricity costs around $10 from a coal fired power stations, $60 from an offshore wind farm and $400 from a solar photovoltaic (PV) system, which is why some environmentalists argue that we should focus our energy on wind and wave power, not solar.

But prices have started to drop, partly because silicon has become cheaper, but mainly because of low cost Chinese companies entering the market. Half the world’s production capacity of solar PV panels is now in China, and this proportion is set to increase.

Now that the UK has joined Germany and Spain to provide generous feed in tariffs for domestic PV, expect this market to continue to grow.

Imagine this frightening, but plausible, scenario. Sometime in the next twenty or thirty years CO2 levels in the atmosphere have reached 450 ppm and triggered runaway global warming. The Greenland ice sheets are melting, sea levels are rising rapidly, and millions of the earth’s population are in peril. Even if CO2 emissions fell to zero, the accumulated CO2 in the atmosphere would continue to drive temperatures upwards. What do we do then?

One answer is geo-engineering – combating the effects of climate change without actually reducing emissions.

We know it works

The most popular approach would be to inject sulphur into the atmosphere, mimicking the effects of volcanic eruptions which block out the sunlight and so reduce global temperatures. Ten kilogramme of sulphur could offset the warming effects of a million tonnes of carbon dioxide. You could get it into the atmosphere by balloon, from military air-to-air refuelling aircraft, or even by adding it to conventional aircraft fuel.

If you don’t like the idea of adding more gunk into the atmosphere, how about launching millions of tiny mirrors into space, and having them reflect some of the sun’s light directly away from earth? Much more expensive, but somehow more environmentally friendly.

Alternatively, how about encouraging the growth of CO2 absorbing plankton in the world’s oceans, by feeding them more iron?

None of these methods is currently feasible, for ethical, political and financial reasons, but in a few decades time we might be more desperate. Watch this space.

This week Environment Secretary Hilary Benn announced more government support for Anaerobic Digestion (AD) a process which essentially mimics the action of a cow’s stomach.  AD turns food waste and manure into methane gas, which can then be used for transport, local generation of heat and power, or even injected back into the national gas grid. The government is spending £10m to support a series of demonstration sites across the country.

A pilot plant in Ludlow, Shropshire, not only generates electricity, but also keeps waste food out of landfill, where it eventually decomposes into methane anyway. When released into the atmosphere methane is eight times as potent a greenhouse gas as CO2, as a contributor to global warming.

The UK currently operates 10 AD plants, with another 10 under construction.

The UK government announced this week that licences had been awarded for ten wave and tidal power projects off the coast of Scotland. Scottish First Minister Alex Salmond described the choppy Scottish waters as the ‘Saudi Arabia of marine energy.’ Hardly: when the six wave and four tidal projects are fully operational they’ll generate around 1.2GW of power, about the same as one average sized conventional power station. The 10 million barrels of oil which pours out of Saudi Arabia each day is enough to supply 1000 power stations. Even so, this investment in wave and tidal is significant, because the power it will provide is secure, low carbon and – if you exclude the huge capital costs – essentially free.

Unlike solar photovoltaic power, which is quite a high tech business, wave and tidal power is quite low tech. You just need to be able to weld together big chunks of metal that will withstand the battering of the violent Scottish seas, and find ways of turning movement into electricity. It should provide some good opportunities for engineering firms that were once involved in shipbuilding and the declining North Sea oil and gas industry.

A good rail network is an essential part of a low carbon economy. A train uses roughly a tenth of the energy of a car or plane to transport a given number of people a given distance. That’s why it’s shameful that the UK currently has only 100 km of high speed rail – from London to the Channel Tunnel – compared to France’s 1700 km or Japan’s 2500km. Though compared to the US, which has no high speed rail at all, we don’t look so bad.

Yesterday’s announcement by the curiously named Transport Secretary, Lord Adonis, may change all that. He says that if re-elected, a Labour government will begin construction of a new fast rail route – High Speed Two – from London to Birmingham in 2017, with possible future extensions to Leeds and Manchester. Conservative transport shadow Theresa Villiers responded by saying that if the Tories take the reigns of power in a few month’s time, they’ll begin building High Speed Two in 2015, all the way to Leeds and Manchester, with an extension to Scotland to follow.

More on High Speed Two

An interesting spat has broken out between eco warrior George Monbiot, and businessman Jeremy Leggett, founder and CEO of Solar Century, a company which produces solar panels for electricity and hot water.

The government recently announced that anyone who puts a solar photovoltaic (PV) panel on the roof of their house will be paid 41p for every kilowatt hour of electricity they produce – even if they use the electricity themselves. This subsidy, known as a feed in tariff or FIT is guaranteed for 25 years, making the purchase of a solar PV panel a very appealing investment. For an outlay of around £12,000, you can probably expect a guaranteed tax free return of about 5-8% a year. No other risk free investment on offer at the moment comes anywhere close to that.

It’s probably clear why Jeremy is a fan – his company makes solar panels. But why doesn’t George think much of it? According to Mr Monbiot, the scheme (a) won’t make much of a difference to the total amount of power generated by renewables (b) will generate power at the wrong time (in the UK we don’t use much power on sunny days – peak usage is dark winter evenings) and (c) will make the middle classes who can afford the upfront investment better off while doing nothing to address fuel poverty.

Of course he’s right on all three counts, but this won’t stop the government continuing with the scheme, and neither should it.  In a low carbon economy, most electricity will be generated from renewables and nuclear, and much of it will be generated locally rather than in big centralised power stations. The sooner we move to a low carbon economy the better, and that means trying a lot of things to see what works. Domestic photovoltaics may or may not be a significant source of Britain’s energy in 2020, when we have to reduce CO2 emissions by 34%, or by 2050, when we have to reduce them by 80%. But we won’t know unless we try, and that means getting started now.

For more about Monbiot and Leggett, see http://www.monbiot.com/ and http://www.jeremyleggett.net