Author: PPD Team Date: 28/10/2024
The United Kingdom’s energy sector has undergone a significant transformation in recent years, reaching a notable milestone just a few weeks ago. As of October 2024, the UK has officially closed its last coal-fired power plant, marking the end of a 142-year era of coal power generation. This milestone reflects the UK’s commitment to transitioning towards cleaner energy sources, aiming to reach net-zero emissions by 2050.
Institutional structure
The United Kingdom’s energy sector is governed by the Department for Energy Security and Net Zero (DESNZ), which oversees an institutional framework designed to ensure efficient energy generation, transmission, and distribution. Key regulatory bodies include the Office of Gas and Electricity Markets (Ofgem), which serves as the independent regulator for electricity and gas markets, and the National Grid Electricity System Operator (ESO), responsible for managing the electricity system in real time. The Nuclear Decommissioning Authority (NDA) oversees nuclear cleanup and waste management. Advisory bodies complement the institutional structure, such as the Climate Change Committee (CCC), which provides independent advice on climate policies and emissions targets. Major energy companies, including EDF, E.ON, British Gas, and SSE, play a crucial role in the market by providing diverse energy sources to consumers across the country.
Generation
In 2023, the UK’s total net electricity generation was 292.7 TWh, a 9.9% decline from 2022. The UK returned to being a net electricity importer, with total imports rising to a record 33.3 TWh and total exports falling to 9.5 TWh, resulting in net imports of 23.8 TWh. Electricity demand also decreased in 2023 to 316.8 TWh, down by 1.1% from 2022. This decline was likely driven by a continuation of high prices and warmer-than-average temperatures, reducing demand for heating.
Renewable generation in 2023 reached a record 135.8 TWh, up 0.3% from 2022. Wind generation increased by 2.2% to a record 82.3 TWh, while solar generation rose 4.1% to a record 13.9 TWh. These increases in wind and solar capacity offset slightly less favourable weather conditions. Bioenergy generation, however, decreased by 4.9% to 34.1 TWh due to outages at key bioenergy sites.
Total de-rated generation capacity fell to 74.8 GW in 2023, a 2.6% drop from 2022. Renewable energy capacity grew by 4.0% to 25.6 GW, while fossil fuel capacity decreased by 6.8% to 40.5 GW. Domestic users accounted for the largest share of total electricity demand at 29.2%, a slight drop from the 29.8% share in 2022. Industrial consumption rose slightly to 27.2%, and commercial consumption decreased to 19.3%.
Transmission and Distribution
The UK’s transmission network, operated by National Grid Electricity Transmission (NGET), consists of approximately 7,200 km of overhead lines and 1,400 km of underground cables, with voltage levels of 275 kV and 400 kV. The network has a capacity of around 85 GW, connecting power stations to the grid and supplying electricity to the distribution network.
The distribution network is managed by 14 Distribution Network Operators (DNOs), each covering a specific region. This network includes around 134,000 km of overhead lines and 450,000 km of underground cables, with voltage levels from 132 kV to low voltage (400/230 V) and a total capacity of approximately 140 GW.
Recent Developments
In January 2024, Aggreko acquired RenEnergy, a UK and South Africa-based business specializing in solar energy and storage systems, enhancing their ability to offer comprehensive renewable solutions. In February 2024, the UAE and UK ministers signed a Clean Energy Memorandum of Understanding, setting joint clean energy ambitions and fostering significant investment in UK firms. The same month, battery energy storage systems secured 3.6 GW of capacity in the UK’s latest Capacity Market auction, accounting for 44% of total awarded capacity, underscoring a shift towards energy storage.
March 2024 saw a £16.6 million UK government investment in developing advanced chips for EVs and green energy. NatPower pledged to invest £10 billion in UK green energy, with plans for over 60 GWh of battery storage by 2040. The government also announced a £1 billion budget for its renewable energy auction, a historic boost for its renewables program, along with the ESO’s £58 billion “Beyond 2030” investment plan to achieve a fully decarbonized electricity system by 2035.
In April 2024, Octopus Energy announced plans to enter the US offshore wind market, aligning with the Biden administration’s goal of 30 GW of offshore wind by 2030. In May 2024, the UK and Ukraine launched InnovateUkraine, a £16 million partnership to support Ukraine’s energy transition, with an additional £5 million in private sector co-investment.
August 2024 saw EDF Renewables identifying over 300 MW of potential battery storage in the UK. In September, the UK’s renewable energy auction secured contracts for 11 new projects to power over 4 million homes. Iberdrola planned a £24 billion investment in the UK electricity sector through 2028, with a focus on expanding transmission networks and offshore wind, crucial for meeting climate and energy security goals.
Challenges and Future Outlook
The UK’s electricity system planning is guided by National Grid ESO’s Future Energy Scenarios (FES) and the Network Options Assessment (NOA), outlining pathways to 2050. Current plans emphasize renewable expansion, particularly offshore wind, backed by enabling technologies like grid-scale storage, interconnectors, and advanced grid management. The UK’s strategy includes integrating hydrogen-ready turbines and developing carbon capture to provide firm capacity while advancing toward net zero.
Under the British Energy Security Strategy, the UK targets 50 GW of offshore wind by 2030 (5 GW from floating wind), alongside expanding solar, nuclear, and low-carbon hydrogen production. Despite significant infrastructure costs, private investment mechanisms, such as Contracts for Difference, have effectively lowered renewable energy costs. Large-scale renewable projects by Scottish Power Renewables and SSE are underway, supported by a £40 billion grid modernization program through the RIIO-T2 framework, incorporating smart grid technologies to manage growing renewable penetration.
Key challenges include upgrading ageing infrastructure, ensuring system stability with higher renewable input, and coordinating the integration of diverse new technologies.
Conclusion
The United Kingdom stands at a pivotal point in its energy journey, marked by the closure of its last coal power plant and a steadfast commitment to achieving net-zero emissions by 2050. Despite global energy market challenges, the UK demonstrates leadership in renewable deployment and policy innovation.
Going forward, the UK must strategically balance priorities to sustain momentum in energy transition. The country’s rich offshore wind resources, combined with emerging opportunities in floating solar, tidal, and green hydrogen, hold significant growth potential. Continued grid modernization, expansion of interconnectors, and storage are essential to manage renewable generation effectively. Strengthening energy security through diverse supply chains and domestic production capabilities will also become critical as the energy landscape evolves. Robust monitoring frameworks and progress reviews will be key to maintaining momentum and adjusting strategies in response to technological advancements and market shifts.