In this short video, Philip Kent highlights his chart of the month looking at UK electricity demand and generation capacity.

The transcript is below

What this chart shows is, in the grey bars, the peak UK electricity demand. That's the maximum demand on our electricity grid in any [given] year. And then we show two lines, one of which is the installed generation capacity, so that's the capacity, the volume of our power stations across the country across a range of different technologies. And that's a red line. We also show, in the green line, the derated capacity. What that means is we've adjusted that installed capacity recognising that wind farms, solar projects, and other intermittent generators will only be generating for a proportion of the year. So that's effective capacity adjusting for intermittency.

I think this chart shows a few really interesting things. The first of which, if we look at what's happened historically, (looking at the ‘actual’ side of the chart), electricity demand has generally come down over the last few years, and that trend has lasted a decade or so. That's because this country has been de-industrialising, and [we’ve] also become more efficient about how we use electricity.

I think what's interesting is that installed capacity generally has gone up, but the effective installed capacity - the de-rated capacity - has come down, and that's because there's been an increase in penetration of wind and solar on the network that's intermittent and renewable. So historically, demand going down, installed capacity going up, but actually a component of that is intermittent.

I think the other interesting thing on this chart is if we look forward we see a really material increase in electricity demand over the next 25 years. Out to 2050, electricity demand is effectively doubling. We've shown the range of forecaster estimates for this, and the forecasters are pretty consistent in where they see demand evolving over time, and that's driven by electrification of vehicles, electrification of heat, and the growth of digitalisation and the electricity needed for data centres.

If we then look at what's happening to the capacity, or the forecast of the capacity that's going to supply that, we also see a more than doubling in the installed capacity. So going from just over 100 gigawatts where we are today to well over 230 or so, and that's because we expect the majority of the new generation that's going to be built to be intermittent renewables. So actually installed capacity needs to be higher in terms of the increase versus the de-rated capacity increase that we see.

So what I think summarises this chart is the real challenge this country has over the next 25 years to do what is a pretty structural change to the electricity system that we haven't seen, certainly if we look back over the last 25 years, which has been pretty stable. And actually, if we look at it, probably electricity demand has come down somewhat over that period.

That's going into reverse and going into reverse pretty quickly, where we're going to see a doubling of electricity demand and that requires a real change to the electricity system in terms of how we generate that power. The type of generation is different, so capacity has to go up much more to compensate for intermittency and then the result of this, and what's not shown in this chart, is a change that's needed to our grid infrastructure to get all this power from where it's generated to where it's needed.

I think this will add to some of the challenges that we've seen in the last couple of weeks with energy markets. A lot of the discussion has been on energy security and the exposure that we have to global commodity prices such as gas and oil. Unless we start investing significant amounts in our energy system to respond to that increase in demand that is likely to happen, then that system is going to be even tighter and more volatile to changes to external factors that we can't control.

So, from an investment perspective, I think what this chart points to for me is the importance of energy security and investing to make sure that we've got sufficient generation across both intermittent sources and baseload sources to meet the country's increased demand requirements, but also the need to do that in a way that doesn't prejudice our climate change objectives. And looking out to 2050, the net zero goal to decarbonise needs to be balanced with our security supply. I think we can do both, and that comes down to what we're investing in and how we're establishing our electricity system moving forward.

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