British energy policy rests on three pillars: decarbonisation, energy security and affordability. Our report Liquid Air in the energy and transport systems has demonstrated that liquid air could provide huge benefits under all three headings – quite apart from the economic potential of an entire new industry to UK PLC. However, the projected benefits may never be realised without appropriate policy support.
The Government’s support for low carbon technologies is already extensive, yet there remains a gap. While policy supports renewable electricity generation on the one hand, and EVs and heat pumps on the other – all of which will put increasing strain on electricity networks as their capacity grows – the same level of support is not available to energy vectors such as liquid air, which could help resolve those problems. Grid storage can help balance intermittent wind generation and peak demand, for example, while liquid air transport fuel would inevitably be produced overnight, so capturing surplus wind generation and smoothing peak demand. Yet policy is currently geared to maximising the development of intermittent renewables and promoting demand-side technologies that could exacerbate the daily peaks.
In the UK we pay millions of pounds in ‘constraint payments’ to wind farms to switch off when the wind is blowing but their power cannot be used; we then pay again for high emitting diesel or open cycle gas generators to remain on standby to manage demand peaks, and to run coal or gas fired power stations inefficiently as spinning reserve. Critically no explicit value is attributed to firming the output of intermittent renewables, nor to reducing the carbon cost of providing the reserve. The value of storage is therefore largely unrecognised in the current system.
The eventual consequences of failing to value the system flexibility that storage can bring are already beginning to unfold in Germany, where the rapid expansion of wind and solar power combined with the early closure of the nuclear fleet is starting to threaten the integrity of the electricity grid. The problem in Britain is not yet as severe, but wind constraint payments are rising fast, and Ofgem has warned of extremely tight capacity margins by the middle of the decade, coinciding with a squeeze on global gas supplies.
We would never argue for special treatment for liquid air, but the case for supporting any technology that can absorb excess renewable energy and warehouse it to displace high carbon generation is strong. These technologies could be the key to making the rest of the system work at lowest cost, and have the potential to deliver huge value in the coming decades. But like all early stage technologies they need support until they can stand on their own two feet – and a level playing field.
For reasons explored in the Policy Review of our Summary Report, the Government’s proposed Capacity Mechanism fails to recognise the full benefits of storage, and looks likely overwhelmingly to favour new gas fired plant. Therefore there is a strong case for supporting storage through a bespoke mechanism that specifically rewards the ability to absorb ‘wrong time’ energy and deliver it back at times of high demand or for use as low carbon transport fuel. Storage technologies also need the revision or repeal of a number of specific regulations that hamper their development.
In summary, the following changes to energy policy should be considered:
1. Electricity storage should be given at least equal support to other low carbon grid technologies through a specifically targeted mechanism such as one modelled on the Non Fossil Fuels Obligation (NFFO).
2. The support mechanism should reward a storage plant according to its ability to both absorb and discharge energy, flexibility, speed of response, power rating, energy storage capacity and location.
3. Transmission and distribution licences should explicitly allow operators to own and operate electricity storage and receive capacity payments for these services.
4. Imposing electricity network charges on storage devices when both charging and discharging is disproportionate and should be halved.
5. Energy storage devices should be able to integrate with other renewable and low carbon generation solutions – including biomass, energy from waste and waste heat – without compromising their subsidies.
6. The Renewable Heat Incentive (RHI) should be amended to include devices that generate power using waste heat from non-renewable sources, such as commercial and industrial process heat, if it can be shown the electricity would displace fossil generation.
7. Initial capital grants should be extended to large-scale commercial demonstrators where appropriate, as planned for CCS.
In transport, where liquid air technologies are not yet as mature, the issues are different.
It has long been recognised that high levels of decarbonisation will be harder to achieve in transport than other sectors such as electricity generation. At the same time, it is increasingly clear (chapter 1 of the Full Report) that existing technology approaches to cutting transport emissions are not delivering quickly enough, and do not adequately address the needs of the heavy duty sector. Lorries account for 60% of global diesel demand, and the IEA has forecast that 40% of the growth in global oil demand to 2035 will come from road freight alone. Since batteries cannot currently provide the energy density required for heavy goods vehicles, alternative approaches are required to raise their efficiency and cut emissions.
Our report Liquid Air in the energy and transport systems has shown that liquid air could help achieve major fuel and emissions savings through a variety of approaches – especially in heavy vehicles and refrigeration. These approaches are complementary to other medium-term measures such as use of natural gas as a haulage fuel.
Yet policy support for early stage transport technologies such as liquid air remains somewhat insensitive to the potential of real disruptors and the needs of the small companies that typically develop them. In this context, the following changes to transport technology policy should be considered:
1. Grant funding calls should offer appropriate opportunities for disruptive technologies, and make allowance in their structure for a less widespread level of understanding of those technologies; objectives should be set but the means should be technology agnostic where possible.
2. New technologies should be supported by a process of ‘pre-clearance’, to establish their basic scientific feasibility. This pre-clearance should then be publicly available, so that fund assessors can quickly verify the unfamiliar technology’s credibility. The costs of ‘preclearance’ should be grant funded, perhaps by adapting the SMART award ‘proof of market/concept’ scheme.
3. A rigorous review should be undertaken periodically of existing visions for longer term CO2 abatement, to quantify progress against targets and identify emerging roles for disruptors. In the context of liquid air or nitrogen, this would need to embrace not only its role as a main or supplementary ‘fuel’ in some applications, but also its energy-chain interaction with electricity grid buffering and with bulk LNG evaporation.
4. Support mechanisms such as research and infrastructure grants should evolve to embrace the increasingly complex interaction of energy systems – for example, some of the liquid air vehicle-fuel systems described could involve vehicles, refrigeration, grid buffering, the industrial gas industry, and bulk LNG supply within a single concept. This opportunity may not be realised if initiatives do not ‘join up’.
5. A specific programme should be developed to support the field trial and deployment of technologies that replace or reduce diesel use in refrigerated food transport, which would be equally open to batteries and hydrogen fuel cells.